Subject NOT available

after sub-section (9), the following sub-sectiona shall be inserted namely:—

*S "(9A) If any person has deposited any amount under the provisions of sub-section (3) or sub-section (4) which is In excess of the amount of additional surcharge payable by him, such excess shall, on an application made by that person, be refunded to him with interest due thereon, in such manner as the Central Government thinks fit.

30 (9B) If any person who is liable to pay advance tax under the Income-tax Act has made a deposit under the provisions of sub-section (5) in the financial year commencing on the first day of April, 1963, the amount of such deposit shall, on an application made by that person, be refunded to him with interest due thereon, in such manner as the Central Government thinks fit"

Declaration under the Provisional Collection of Taxes Act, 1931

35

It is hereby declared that it is expedient in the public interest that

16"f 1S81.

the provisions of clauses 56, 57, 59, 60, 61 and 64 of this Bill shall have immediate effect under the Provisional Collection of Taxes Act, 1931.

THE FIRST SCHEDULE

(See section 2)

PART I

Income-tux and surcharge on incomv-iax

Paragraph A

(i) In the case of every individual who is married and every Hindu undivided family whose total income does not exceed Rs. 20,000 in either case—

Rat*$ of Income-tax

10 When the Individual hu no

child wholly or mainly depen-

dent on him or where the

f Hindu undivided family hu

* no minor coparcener.

Where the Individual hit

more than one child whojly

or mainly dependent on him

or where the Hindu undivid-

ed family has more than on*

minor coparcener.

Where the Individual his

one child wholly or mainly

dependent on him or where

the Hindu undivided fami-

ly hag one minor coparce-

ner.

Rs.

IU.

3,600 of total Income NO.

3,300 of total lMMtt

(i) Ontht flrtt 3,000 of totml

Income

1,400 „ €%

t,7co u

(a) Onth"n"xt 3,000 „

3,500 „ 10%

3,500 „!

30 (3) On tha next 3,500 "

5,000 „

(4) On the next 5,000 „

3,oeo „ 15%

7,500 „ 30%

(5) Onthtnext 7,500 n

7"5<"

(ii) In the case of every individual who is not married and every individual or Hindu undivided family whose total income in either ²5 case exceeds Rs. 20,000 and in the case of every unregistered firm or other association of persons or body of individuals, whether incorpo- rated or not, or every artificial juridical person referred to in sub- clause (vii) of clause (31) of section 2 of the Income-tax Act, not being a case to which any other Paragraph of this Part applies:—

3O (1) On the flrtt R". 1,000 of total Inoom*

Ntt

(l) On the next Rs. 4,000 of total Income

.    .    •       "%
•    •    •       io"

($) On tht next Rs.9,500 oftowllncome

(4i On tlw next R". 5>ooo of total income

•   •    •     15%
•   •    •     *>%

(5) On tho next R". 7> 500 of total inooM

55 (•)" OB tktb"1enc"eft"al !"""••

• • • 35%

Provided that for the purposes of this Paragraph—

(i) no income-tax shall be payable on a total income which

does not exceed the limit specified below;

(ii) the income-tax payable shall in no case exceed half the

amount by which the total income exceeds the said limit;

5

(iii) the income-tax payable by an individual who is married or a Hindu undivided family whose total income exceeds in either case Rs. 20,000 shall not exceed the aggregate of—

(a) the income-tax which would have been payable if the

total income had been Rs. 20,000;

10

(b) half the amount by which the total income exceeds

Rs. 20,000.

The limit aforesaid shall be—

15

(i) Rs. 6,000 jn the case of every Hindu undivided family which as at the end of the previous year satisfies either of the following conditions, namely: —

(a) that it has at least two members entitled to claim

partition who are not less than eighteen years of age; or

20

(b) that it has at least two members entitled to claim partition who are not lineally descended one from the other and who are not lineally descended from any other living member of the family;

(ii) Rs. 3,000 in every other case.

Surcharge on income-tax

25

The amount of income-tax computed at the rates hereinbefore specified shall be increased by a surcharge for purposes of the Union, which shall be equal to the aggregate of the sums computed at hereunder: —

3O

(a) where the amount of the income other than earnec income, if any, included in the total income exceeds Rs. 10,000, e sum calculated on the difference between the amount of income. tax on the total income and the amount of income-tax on tht

whole ol the earned income, if any, included in the total income if such earned income had been the total income, at the following rate, namely: —

(i) where the amount of the at the rate of 12-5%:

5

income other than the earned income, if any, included in the total income exceeds Rs. 10,000 but does not exceed Rs. 25,000.

IO

Provided that the amount of surcharge payable under this clause shall in no case exceed one-tenth of the amount by which the income other than the earned income exceeds Rs. 10,000;

(ii) where the amount of the at the rate of 15%:

15

income other than the earned income, if any, included in the total income exceeds Rs. 25,000 but does not exceed Rs. 75,000,

20

Provided that the surcharge payable under this clause shall in no case exceed the aggregate of the following sums, namely: —

25

(1) an amount calculated at the rate of twelve and a half per cent, on the amount of income-tax on an income of Rs. 25,000, if such income had been the total income (the income of Rs. 25,000 for this purpose being computed as if such income included income from various sources in the same proportion as the total income of the person concerned);

(2) one-tenth of the amount by which the income other than the earned income exceeds Rs. 25,000;

30

(iii) where the amount of the at the rate of 17-5%:

Income other than the earned Income, if any, included in the total income exceeds Rs. 75,000.

35

Provided that the surcharge payabla under this clause shall in no case exceed the aggregate of the following sums, namely: —

(1) an amount calculated at the rate of fifteen per cent, on the amount of incomt-tax on an income

R". 75,000, if such income had been the total Income (the income of Rs. 75,000 for this purpose being com- puted as if such income included Income from various sourceg in the same proportion as the total income of the person concerned);

I

(2) one-tenth of the amount by which the income other than the earned income exceeds Ra. 75,000;

10 (b) where the earned income included in the total Income exceeds Rs. 1,00,000, a sum calculated at ten per cent, of the difference between the amount of income-tax which would have been payable on the whole" of the earned income included in the total income, if such earned income had been the total income and the amount of income-tax payable on a total income of Rs. 1,00,000.

Paragraph B

In the case of every local authority,—

*5

Rate of income-tax

On the whole of the total income .. .. .. 30%

Surcharge on income-tax

20 The amount of income-tax computed at the rate hereinbefore spe- cified shall be increased by a surcharge for purposes of the Union of five per cent, of the amount of income-tax.

Paragraph C

In every case in which under the provisions of the Income-tax Act income-tax ia fo be charged at the maximum rate,—

25

Rate of income-tax

On the whole of the total income ... ... 25%

Surcharge on income-fax

The amount of Income-tax computed at the rate hereinbefore specified shall be increased by a surcharge for purposes of the Union of 17-5 per cent, of the amount of income-tax.

3*

Paragraph D

fit the case of every company,—

Rate of income-tax

On the whole of the total income .. .. ,. Vi%:

35 Provided that a rebate at the rate of ten per cent, on so much of tht total income as consists of dividends from an Indian c mpany whieh is nof such a company as is referred to In section 108 of th"

5

Income-tax Act and which is wholly or mainly engaged in the business of generation and distribution of electricity or of manu- facture or production of any one or more of the articles specified In the list in Part IV of this Schedule, shall be allowed in the case of a company which has not made the prescribed arrangements for the declaration and payment of dividends within India,

Paragraph E

In the caae of every registered firm,—

Rates of income-tax

10     (1)  On  the  first  Rs.  25,000  of  total  income     ..        ..       Nil
       (2)  On  the  next  Rs.  25,000  of  total  income      ..       ..        6%
       (3)  On  the  next  Rs.  50,000  of  total  income      ...       ...      8%
       (4)  On  the  balance  of  total  income                ...      • ••      12%

Surcharge on Income-tax

15 The amount of income-tax computed at the rales hereinbefore spe- cified shall be increased by a surcharge for purposes of the Union equal to the sum of—

20

({) twenty per cent, of the amount of income-tax payable by the firm on its income from any business carried on by it calcu- lated at the average rate of income-tax applicable to ita total income; and

({{) ten per cent, of the amount of income-tax payable by if on its income from all sources other than from any business carried on by it calculated at the average rate of income-tax applicablt to Its total income.

35

PART II

Super-tax and surcharge on super-tax

Paragraph A

3O

In the case of every individual, Hindu undivided family, unregis- tered Ilrm or other association of persons or body of individuals, whe- ther incorporated or not. or every artificial juridical person referred to In sub-clause (vii) of clause (31) of section 2 of the Income-tax Act, not being a case to which any other Paragraph of this Part applies,—

Rates of super-tax

35

40

(1) On the first Rs. 20,000 of Total income ... ••• Ml (2) On the next Rs. 5,000 of total income ... ... 10% (3) On the next Rs. 5,000 of total income ... ... 15% (4) On the next Rs. 20,000 of total incomt .. ... 30% (5) On the next Rs. 20,000 of Total Income ... ••- 45% (IJ) On the balance of Sotal income .- ••• W%

Surcharge on super-tax

The amount of super-tax computed at the rates hereinbefore speci- fied shall be increased by a surcharge for purposes of the Union, which •hall be equal to the aggregate of the sums computed as hereunder: —

5 (a) where the amount of income other than earned income, if any, included in the total income exceeds Rs. 10,000, a sum cal- culated on the difference between the amount of super-tax on the total income and the amount of super-tax on the whole of the earned income, if any, included in the total income if such earned income had been the total income, at the following rate, namely: —

10

("} where the amount of tho income other than^the at the rate of 12 5%

earned income, if any, included in the total income exceeds Rs. 10,000 but does not exceed Rs. 25,000 :

15 Provided that the amount of surcharge payable under this clause shall in no case exceed one-clghth of the amount by which the income other than the earned income exceeds Rs. 10,000 ;

(ft) where the amount of income other than the earned at the rate of 15%

Incomcj if any, included in the total income exceeds Rs. 25,000 but does not exceed Rs. 75,000:

20

Provided that the surcharge payable under this clause

shall in nu case exceed Che aggregate of the following sums, namely :—

25 (1) an amourt calculated at the rate of twelve and a half per cent, on the amount of super-tax on an income of Rs. 25,000, if such income had been the total income (the income of Rs. 25,000 for this purpose being computed as if such income included income from various sources in the Bame proportion as the total income of the person concerned);

30

(ij one-eighth of the amount by which the income other than the earned income exceeds Rs. 25,000 ;

(Hi) where the amount of the income other than the it the rate of 17-5%

35 eamca income, if any, included In the total income exceeds Rs. 75,000!

Provided that the surcharge payable under this clause shall in no case exceed the aggregate of the following sumi, namely :—

40 (1) an amount calculated at the rate of fifteen per cent, on the amount of super-tax on an income of Rs. 75,000, if such income had been the total income (the income of Rs. 75,000 for this purpose being com- puted an if such income included income from various sources in the same proportion as the total income of the person concerned);

45

(2) one-eighth of the amount by which the income other than the earned income exceeds R9.7J)0O0 ;

50 (b) where the earned income included in the total income exceeds Rs. 1,00,000, a sum calculated at ten per cent, of the differ- ence between the amount of super-tax which would have bwn

payable on the whole of the earned income included in the total income, if such earned income had been the total income and the amount of super-tax payable on a total income of Rs. 1,00,000.

Paragraph B

In the case of every local authority,—

5

Rate of super-tax

On the whole of the total income 16%

Surcharge on super-tax

10

The amount of super-tax computed at the rate hereinbefore speci- fied shall be increased by a surcharge for purposes of the Union of 124 per cent, of the amount of super-tax.

Paragraph C

In the case of every association of persons being a co-operative society as denned in clause (19) of section 2 of the Income-tax Act,—

Rates of super-tax

15

(1) On the first Ks. 25,000 of total income .. Nil

(2) On the balance of total income

.. 16%

Surcharge on super-tax

20

The amount of super-tax computed at the rates hereinbefore speci- fied shall be increased by a surcharge for purposes of the Union of 124 per cent, of the amount of super-tax.

Paragraph D

In the case of every company, other than the Life Insurance Cor- poration of India established under the Life Insurance Corporation Act, 1956,—

31 of 956. 25

Rates of super-tax

On the whole of the total income

.. 55%:

Provided that—

(i) a rebate at the rate of 37-5 per cent, on the total income shall be allowed in the case of any company which—

3O

35

(a) in respect of its profits liable to tax under the Income-tax Act for the assessment year commencing on the 1st day of April, 1964, has made the prescribed arrangements for the declaration and payment within India of the dividends payable out of such profits in accordance with the provisions of section 194 of that Act; and

i

[O (b) is such a company as is referred to in uection 108 ol the Income-tax Act with a total Income not exceeding Rs. 25,000; (ii) a rebate at the rate of 35 per cent, on so much of the total income as consists of profits and gains attributable to the busmen of generation and distribution of electricity or of manufacture or production of any one or more of the articles specified in the list in Part TV of this Schedule; and at the rate of 30 per cent, on the balance of the total income shall be allowed in the cane of a company which satisfies condition (a) of the preceding clause and which is such a company as is referred to in section 108 of the Income-tax Act with a total income exceeding Bs. 25,000;

15

1O (iii) a rebate at the rate of 26 per cent, on BO much of the total income as consists of profits and gains attributable to th" business of generation and distribution of electricity or of manufacture or production of any one or more of the articles specified in the list in Part IV of this Schedule; and at the rat" of 20 per cent, on the balance of the total income shall be allowed in the case of a company which satisfies condition (a) of clause ({) and which is not such a company as Is referred to in section 108 of the Income-tax Act;

15

|O (iu) a rebate at the rate of 30 per cent, on so much of the total income as consists of royalties received from an Indian con- cern in pursuance of an agreement made by it with the Indian concern on or after the 1st day of April, 1961 and which has been approved by the Central Government; at the rate of 30 per cent on so much of the total Income as consists of fees for rendering technical services received from an Indian concern In pursuance of an agreement made by It with the Indian concern after the 29th day of February, 1964 and which has been approved by the Central Government; and at the rate of 15 per cent, on the balance of the total income shall be allowed in the case of any company not entitled to a rebate under any of the preceding clauses:

Provided further that—

55 (1) the amount of the rebate under clause (i) or clause (ii) or clause (Hi) of the preceding proviso shall be reduced by the sum, if any, equal to the amount or the aggregate of the amounta; as the case may be, computed as hereunder:—

•• (*) on "the a^renate of the sums computed In th" tt the rate of ioo%

13 of IBM,

\5 manner tirovided in clime (i> of the second proyiso to Para- graph O of Part II "of the First Schedule to the Finance "^ Act, iqfii as reduced by the amount. If any, which h deemed^ ^ to have been Taken into account, fn'accordance with cUuw TI (it) of the laid'nroviso, for the purpose of reducing the rebate mcntlond In claui" (0 of tht "*ld proviso to ml;

(4) on the amount representing the face value of any it the rate ef ia^% bonus aharei or the amount of any bonus issued to it* lhaieholders during the previous year with a view to increasing the paid-up capital ,^and

5

10

(c) in addition, In the case of a company referred to In clause (i) or clause (ii) or clause (iii) of the preceding proviio (being such an Indian company as is not referred to in section 108 of the Income-tax Act and whose business consists wholly in the manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other form of power or any company as is referred to in section 108 of the said Act) which has declared or distributed to its shareholders during the previous year any dividends other than dividends on preference shares—

15

(A) in the case of a company which since the date of the commencement of its activities has declared or distributed any dividends for the first time during the previous year or any one of the four previous years imme- diately preceding such previous year —

20

on that part.of the dividends other than divi-^at th" rait of 7 3% dends on preference shares whichexceeda fo per cent, of the paid-up capital

(B) in any other case — on the whole amount of the dividend* other at the rate of 7*5% than dividend! onprefejrence sh"re" _

25

30

(ii) where the sum arrived at in accordance with clause (i) of this proviso exceeds the amount of the rebate arrived at in accordance with clause (i) or clause (ii) or clause {Hi), as the case may be, of the preceding proviso, only so much of the amounts of reduction mentioned in sub-clauses (a), (b) and (c) of clause (i) of this proviso as is sufficient, in that order, to reduce the rebate to nil shall be deemed to have been taken into account for the purpose:

35

Provided further that the super-tax payable by a company, the total income of which exceeds rupees twenty-five thousand, ahall not exceed the aggregate of—

40

(a) the super-tax which would have been payable by the company if its total income had been Rs. 25,000 (the income of Rs. 25,000 for this purpose being computed as if ouch income included income from various sources in the same proportion as the total income of the company); and

(b) fifty-five per cent, of the amount by which iti total Income exceeds rupees twenty-five thousand.

45

Explanation.—For the purposes of this paragraph, where a part of he income of a company is not included in its total income because

Super-tax

Income-tax

Rute of Rate of super-tax surcharge

Rate of surcharge

Rate of income- tax

5

10

(ii) on any other income (excluding interest payable on any security of the Central Govern- ment issued or declared 'to be in- come-tax free, and interest payable on any security of a State Govern- ment issued ¹ income-tax free, the income-tax whereon is payable by the State Government);

, Nil Nil

4 37°/

2 ?%

(b) where the person is not resident

in India—

15

' 4 37%

20

Super-tax and sur- charge on super-tax in accordance with the provisions of clause (6) of sub- section (1) of section T13 of the Income- tax Act.

("; on the whole income (excluding interest payable on any security of the Central Govern- ment issued'or declared to be in- come-tax free, and Interest payable on any security of a State Govern- ment issued income-lax free, the income-tax whereon is payable by the State Government) ;

25

Mil.

Mil.

30

(it) on the income from inte- rest payable on any security of the Central Government issued or declared to be income-tax free and interest payable on any security of a Siate Government issued income- tax free, the income-tax'whereon is payable by the State Government.

Super-tax and sur- charge on super-tax in accordance with the provisions of clause (t) of sub- section (I) of "cctlDn T13 of the Income-tax Act.

I

Rate of Income-tax

Rate of wiper-tax

2. In the case of a company—

35

(a) where the company is etrher an Indian company or a com- pany which has made the prescribed arrangements for the declaration and payment of dividends within India,—

40

(0 on the whole income (excluding interest payable on any security of the Central Government issued or declared to be income-tax free, and interest payable on any security of a State Government issued income-tax free, the income-tax whereon in payable by the State Government); and . . . . ..

25%

•9,;

45

S /n

•(.ii) on the whole Income (excluding dividends payable by an Indian company or nny other company which P has made the prescribed arrangements for the declare- '" tion and payment of dividends within India);

50

(M whereithe company is neither an Indian company nor a company which has made the prescribed arrangements for the declaration and payment of dividends ^within India,— '

(0 on the income from dividends payable by an Indian company which is'not such H company asTb referred to in section 108 of the Income-tax Act,and%which

55

Kate of income-tax

Rate of luper-tax

5 ii wholly or mainly engaged in the business of generation and distribution of electricity or of manufacture or production of any ono or more of tht articles specified in the liat m PartlVofthis.Schedule;

Wfl.

15%

on the income from dividends payable by any of her

'udwn company or any company which has made Jit

prescribed arrangements foi the declaration ind pay-

ment of dividends within India;

Nfi. 10

on the income rrom royalties payable by an Indian

concern in pursuance ol an agreement which is nude

by it with the Indian concern on or after the ist day of

April, 1961 and which has been approved by the Cen-

u a] Government;

%s%

15

<*) on the Income from fees for rendering technical "tr- vicet received from an Indian concern in pursuance of an agreement made by it with the Indian concern after the 29th day of February, 1964 and which has been approved by the Central Government;

1% ao

25 on the income from interest payable on any security of the Central Government issued or declared to be income-tax free and interest payabii on any security of a State Government issued income-tax free, the income-tax whereon 11 payable by tht State Govern- ment; and

Ntib

on any other income

33%

("0

PAHTIV

List of articles

(2) Iron and steel (metal), ferro-alloys and special stweb.

30

(2) Aluminium, copper, lead and zino.

(3) Coal, lignite, iron ore and bauxite.

m (4) Industrial machinery specified under the heading "8. Industrial Machinery", sub-heading "A. Major items of specialised equipment used in specific industries", of the First Schedule to the Industries (Development and Regulation) Act, 1951.

S3 of 1031

(5) Boilers and steam generating plants, steam engines and

turbines and internal combustion engines.

(6) Equipment for the generation, transmission and distribution of

electricity, including transformers.

40

(7) Machine tools, precision tools, dies and jigf.

(8) Tractors and earth-moving machinery.

(9) Steel castings and forgings.

(10) Cament and refractories.

(11) Fertilisers.

(12) Paper and pulp.

(13) Tea, coffee and rubber.

(14) Component parts of the articles mentioned in items Nos. (4), 5 (5), (6) and (8), that is to say, such parts as are essential for the working of the machinery referred to in items aforesaid and have been given for that purpose some special shape or quality which would not be essential for their use for any other purpose and are in complete finished form and ready for fitment.

10

THE SECOND SCHEDULE

(See section 8)

Rates of Annuity Deposits

({) In the case of any depositor whose total income does

not exceed Rs. 15,000.

.. Nil 15

(ii) In the case of any depositor whose total income exceeds Rs. 15,000 but does not exceed Rs. 20,000—

5 per cent, of the adjusted total income :

30

Provided that the annuity deposit to be made shall In no case exceed half the amount by which the total income exceeds Rs. 15,000.

(Hi) In the case of a depositor whose total income exceeds Rs. 20,000 but does not exceed Rs. 40,000—

7i per cent, of the adjusted total income :

Provided that the annuity deposit to be made shall in no case 35 exceed the aggregate of the following sums, namely :—

(a) an amount calculated at five per cent, on so much of the adjusted total income as does not exceed Rs. 20,000;

(b) one-half of the amount by which the total income exceeds Rs. 20,000.

(iv) In the case of a depositor whose total income exceeds 30

Rs. 40,000 but does not exceed Rs. 70,000—

10 per cent, of the adjusted total Income:

Provided that the annuity deposit to be made shall in no ease sxeeed the aggregate of the following sums, namely:—

35

(*) an amount calculated at seven and a half per cent, on so much of the adjusted total income as does not exceed Rs. 40,000;

(b) one-half of the amount by which the total income ex"""d3 Rs. 40,091.

(v) In the case of a depositor whose total income exceeds Rs. 70,000—

124 per cent, of the adjusted total income :

Provided that the annuity deposit to be made shall in no case

5 exceed the aggregate of the following sums, namely :—

(a) an amount calculated at ten per cent, on so much of the adjusted total income as does not exceed Rs. 70,000;

(b) one-half of the amount by which the total income exceeds Rs. 70,000.

10 Explanation.—In this Schedule, "total income" means total income computed in the manner laid down in the Income-tax Act without jnaking any allowance under section 280O of that Act.

THE THIRD SCHEDULE

(See section 56)

PART I

15

In the First Schedule to the Tariff Act,—

(i) in Item No. 28 (34) ,—

(1) for the entry in the fourth column against sub-item (a), the entry "70 per cent, ad valorem" shall be substituted;

20 (2) for the entry in the fourth column against sub-item (b), the entry "80 per cent, ad valorem" shall be substituted; and

(ii) in Item No. 63 (32) ,—

².s (1) for the entry in the fourth column against sub-item (a), the entry "Rs. 50-00 per tonne plus 25 per cent, ad valorem" shall be substituted;

PART II

Preferential rate of duty if the article is the

produce or mahufac- Duration 5

ture of of Name of article Naiurc of Standard

duty^JI ^ rate of

Item No.

duly

The A British ''tive [ United Colony rates

King- of duty

dom

10

2

1

5 6 7

3

4

for Item No.

In the First Schedule to the Tariff Act,

8(2), the following Item shall be •ubstituted, namely:—

"812)

15

Fruits, dried (salted and all other kinds) not otherwise specified—

Mmonds—

(4)'

(a) without shell ,

Rs. 430-00 per quintal.

20

Preferen- tial Revenue.

Rs. 430-00 per quintal less ro per cent ad va- lorem.

(i) in the shell—

(1) soft shell.

Rs. 250-00 per quintal.

25

Preferen- tial Revenue.

Rs. 25000 per quintal less 10 per cent, ad valorem.

(u) hardshell. .

RB. 140-00 per quintal.

Preferen- tial Re- venue.3

Rs. 140-00 per quintaJ less 10 per cent, ad valorem.

(S) Dates, dry, excluding seedless—

35

(a) Shekra or Shakcria,

• • R9.75-00

Sakina and Brami.

R". 7500 per quintal.

Preferen- tial Re- venue,

per quintal less 10 per cent, ad va- lorem.

40

(6) Kapkapa, Chharra> Prefcrcn-

j Rs. 30-00per .,

Rs. 50-00 pc quintal.

Chupchap, Sarki, Sori3 tial Re- Omani and Bhatni. venue.

quintal less 10 per cent. ad valorem.

45

(c) AH other qualities. Preferen- Rs. 35-00 per quintal.

tial Re- venue.

Rs. 35-00 per quintal Jess 10 per cent, ad valorem.

50

I I

3

4

5

6 7

Rs. 15 oo] per quintal.

Preferen- tial Revenue.

(C) Datesj wet, excluding] seedless, in bags, bas- kets, gunny cloth or matting bundle*.

Rs. 1500 per quintal Ustio per cent, ad vaiortm.

5

(D) Pistachio nuts—

(a) with shell.

Rj. 200'00 per quintal.

Preferen- tial Re- venue.

10

Rs. 200-00 per quintal Uss 10 per cent, ad va* lorem.

(b) without shell.

Preferen- Rs. 300-00 per quintal,

tial Revenue.

IS

Rs. 50000 per quintal fojioper cent, ad vaiortm.

(£) Raisins—

* *

Rs. ioo-oo per quintal.

Preferen- tial Revenue.

20 (a) Red, including Gul- dani and Lalmcwaj in all packings and contai- ners.

Rs. ico-oo per quintal itu 10 per , cent, ad valorem.

Preferen- tial

Rs. 130-00 per quintal.

(i) Black , including black Monacca, in all packings and containers. Revenue.

43

Rs. 130-00 ., per quintal Uss 10 per cent, ad valorem.

Rs. 200-00 per quintal.

Preferen- tial Revenue.

30 (c) All other Borts, inclu- ding Monacca and Abiosh, in all packings and containers.

Rs. 20000 per quintal lest iojier cent, ad vaiortm.

(F) Other sorts

60 per cent. ad valorem.

50 per cent .. .**. ad valorem.

Preferen- tial Revenue.

35

STATEMENT OF OBJECTS AND REASONS

The object of this Bill is to give effect to the financial proposals of the Central Government for the financial year 1964-65 and to provide for certain, connected matters. The Bill, inter alia, proposes to make certain categories of assessees liable to annuity deposit. This is with a view to augment the resources of the nation for national development. The Notes on clauses explain the various provisions contained in the Bill.

T. T. KRISHNAMACHABI.

NEW DELHI; The 29th February, 1964.

PRESIDENT'S RECOMMENDATION UNDER ARTICLES 117 AND 274 OF THE CONSTITUTION OF INDIA

[Copy of letter No. F. 3(16)-B/64, dated the 29th February, 1964 from Shri T. T. Krishnamachari, Minister of Finance to the Secre- tary, Lok Sabha.]

The President having been informed of the subject matter of the proposed Bill, recommends under article 117(1) and (3) read with article 274(1) of the Constitution of India, the introduction of the Finance Bill, 1964 to the Lok Sabha and also recommends to the Lok Sabha the consideration of the Bill.

Notes on clauses

Clause 2 prescribes the rates of income-tax, super-tax and surcharge thereon for the assessment year 1964-65 and also the rates at which tax is to be deducted at source from salaries, interest on securities, dividends and other income during the financial year 1964-65. In the case of individuals, Hindu undivided families, unregistered firms, associations of persons, etc., the slab structure and the basic rates of income-tax and super-tax applicable for the assessment year 1963-64 have been replaced by a new slab structure and rates of tax. The various surcharges on income-tax and super- tax (including the additional surcharge on income-tax) leviable for the assessment year 1963-64 have also been substituted by a single surcharge on income-tax and on super-tax for purposes of the Union, which will be leviable where the earned income exceeds Rs. 1 lakh or where the unearned income exceeds Rs. 10,000.

In the case of registered firms also, a single revised rate schedule of income-tax has been prescribed for all registered firms, irrespec- tive of the number of partners in such a firm. However, the rate of Union surcharge on income-tax payable by registered firms remains the same as for the assessment year 1963-64.

In the case of companies, the rate of income-tax remains the same as for the assessment year 1963-64. However, companies which declare and pay their dividends outside India, i.e., foreign companies will be entitled to a rebate of income-tax of 10 per cent, of the amount of dividends received by them from an Indian company in which the public is not substantially interested and which is carrying on the business of generation and distribution of electricity or is wholly or mainly engaged in the manufacture or production of any one or more of the articles specified in the list in Part IV of the First Schedule to the BUI.

Some changes have been made in the rates at which super-tax will be payable by companies. In the case of Indian companies and other companies Which declare and pay dividends in India, the changes are, briefly, as follows. Companies in which the public are substantially interested and whose total income does not exceed Rs. 25,000 will be charged to super-tax at 17 5 per cent, as compared with the rate of 20 per cent, for the assessment year 1963-64. In the case of companies in which the public are substantially interested and whose total income exceeds Rs. 25,000. the normal effective rate of roper-tax will be 25 per cent, ai; for the assessment year 1963-64.

However, if such a company derives any income from the generation and distribution of electricity or from the production of any one or more of the articles in the basic industries specified in Part IV of the First Schedule to the Bill, the super-tax payable by it in respect of such income will be 20 per cent. only. In the case of companies in which the public is not substantially interested, the effective rate of super-tax is proposed to be increased from 25 per cent, (which was applicable for the assessment year 1963-64) to 35 per cent. However, if any such company derives income from the generation and distribution of electricity or from the production of any of the articles specified in the list in Part IV of the First Schedule to the Bill, the super-tax payable on such income will be only 29 per cent. Further, in the case of companies other than those which are required to make a compulsory distribution of dividends under terms of section 104 of the Income-tax Act, a provision has been made for charging an extra amount of super-tax calculated at 7-5 per cent, of the whole amount of dividends on equity capital, distributed by them during the previous year relevant to the assessment year 1964-65. However, in the case of a new company which since the commencement of its activities declared its first dividend not earlier than the period of five consecutive previous years (including the relevant previous year), this super-tax will be calculated only on that amount of the dividends which exceeds 10 per cent, of its paid up equity capital.

In the case "of companies which have not made the prescribed arrangements for the declaration and payment of dividends within India, the rate of super-tax has been increased from 38 per cent, (applicable for assessment year 1963-64) to 40 per cent. However, it has been provided that on their income by way of royalties and fees for rendering technical services, received from an Indian concern under an agreement approved by the Central Government, the rate of super-tax will be only 25 per cent.

Rome changes have also been made in the rates of deduction of fax at source, specified in Part III of the First Schedule to the Bill. In the case of shareholders who are resident In India, the rate of deduction of income-tax will be 20 per cent, as compared with 25 per cent, for the financial year 1963-64. In the case of companies, there will be no deduction of super-tax from their income by way of dividends, as it is proposed to introduce a provision in the Income-tax Act exempting inter-corporate dividends from super-tax.

The provision in the Finance Act, 1963 for a rebate of 10 per cent. of the income-tax and super-tax on income derived from the export

of goods or merchandise outside India and also the rebate of income- tax and super-tax to manufacturers on 2 per cent, of their exports or sales in India for export is proposed to be continued. However, the second-mentioned concession would not apply In respect of export of certain articles such as arms and ammunition, photographic films, newsprint, etc., and would be newly extended to exports made after the 29th day of February, 1964 of non-jute textiles.

Clause 3 prescribes the rates at which annuity deposits in respect of the assessment year 1964-65 and advance annuity deposits for the financial year 1964-65 will be required to be made by individuals, Hindu undivided families, unregistered firms, associations of persons, etc. under the provisions sought to be introduced by clause 44 of the Bill.

Clause 4 seeks to amend clause (24) of section 2 of the Income-tax Act. These amendments are consequential to the amendments to the Income-tax Act under clauses 7 and 44 of the Bill.

Clause 5 seeks to omit the proviso to clause (b) of the Explanation to sub-section (1) of section 9 of the Income-tax Act. The effect of this will be that a non-resident who derives any Income from purchasing goods in India and exporting them will not be liable to tax on such income.

Clause 6 seeks to amend section 10 of the Income-tax Act. The effect of these amendments will be aa follows : A non-resident will be exempt from tax on his income from interest on such securities as have been approved in this behalf by the Central Government.

A foreign technician will be eligible for exemption from tax on his salary income even though his contract of service has been approved by the Central Government after the date of his arrival in India within a period of one year from such date.

Visiting professors and teachers of foreign nationality teaching in any university or educational Institution in India under an approved programme will also be entitled to exemption from tax on their salary income under the same conditions as foreign technicians.

Hitherto, a non-resident could be exempted from tax on the Interest received by him from an industrial undertaking in India in respect of loans or credit facilities granted by the non-resident to the said industrial undertaking for purchase of capital plant and machinery, etc. abroad, only if the full rate of Interest stipulated in the agreement between the two parties was approved by the Central

Government. The proposed amendment, will enable the grant of exemption to the non-resident where the Central Government has approved in this behalf a lower rate of interest than that which has been stipulated in the agreement. The amount of interest to be exempted will be the sum calculated at the lower rate of interest approved by the Central Government.

Assessees who derive income from a business of livestock breeding or poultry or dairy farming will be exempt from tax in respect of any such income assessable for the three assessment years 1965-66, 1966-67 and 1967-68.

Clause 7 seeks to amend section 28 of the Income-tax Act to provide that the value of any benefit or perquisite, whether con- vertible into money or not, received by an assessee from any person in exercise of his business or profession will be assessable as the assessee's income under the head "profits and gains of business or profession".

Clause 8 seeks to amend section 33 of the Income-tax Act. The effect of these amendments will be as follows : Assessees who acquire a second hand ship from a person not resident in India or import second hand machinery from a country outside India, for the purpose of their business, after 31st March, 1964, will, subject to certain conditions, be entitled to development rebate in respect of such assets at such rate or rates as may be prescribed by the Central Board of Direct Taxes in the Income-tax Rules. The Board Is also authorised to lay down any other conditions for the grant of such development rebate in the said rules.

It will also be open to the Central Government to direct by issue of a notification in the Official Gazette, that the deduction of development rebate shall not be admissible In respect of a ship acquired or machinery or plant installed after the period specified in the notification,—such period being not less than three years from the date of issue of the notification.

Clause 9 seeks to insert a new provision in section 37 of the Income-tax Act to the effect that any expenditure incurred by an assessee after 31st March, 1964 on advertisement, maintenance of any residential accommodation, travelling (including hotel expenses or allowances paid in connection with travelling) shall be allowed only to the extent and subject to such conditions as may be prescribed by the Central Board of Direct Taxes in the Income-tax Rules.

Clause 10 seeks to substitute sub-clause (Hi) of clause (c) of section 40 of the Income-tax Act by a new provision. It provides

for the disallowance in the assessment of a company, of any expendi- ture incurred by It after 29th February, 1964 on the provision of any perquisite for its employees to the extent such expenditure exceeds one-fifth of the salary of an employee. It has been provided that certain payments such as contributions by a company to an approved superannuation fund or gratuity fund or to a recognised provident fund will not be taken into account in computing such expenditure.

Clause 11 seeks to Insert a new section 44A in Chapter TV of the Income-tax Act, providing that in the case of a trade, professional or similar association which doe3 not distribute any part of its income to its members, the amount of any deficit (excess of expendi- ture incurred for th* advancement of the common interest of the mpmbers of the association concerned over receipts from the members) will be allowed to be deducted from the assessable income of the association to the extent of 50 per cent, of such income.

Clause 12 seeks to introduce a new provision in section 45 of the Income-tax Act under which an assessee who holds anv equttv sharev as an investment and receives anv bonus shares will be liable to be charged to income-tax under the head "Capital pains" in respect of S"ch bcnus shares, as if he had transferred the said shares at their fair market value after the expiry of 30 days from the date of issue of the said shares.

Clause 13 seeks to introduce a new -provision in section 5? of the Income-tax Act providing that if in the opinion of the Income-tax Officer th? fair market value of a capital asset as on the date of its transfer by an assessee exceeds the full value of consideration for it as declared by the assessee by an amount not less than 15 per cent, of such declared value, the capital gains in resp°ct of such asset shall be computed with reference to such fair market value. Before inking action in accordance with this provision, th? Income-tax Officer is required to obtain the approval of the Inspecting Assistant Commissioner of Income-tax concerned.

Clause 14 seek3 to amend section 55 of the Income-tax Act. Under one of the new provisions (which is consequential to the amendment of section 45 of the Income-tax Act by clause 12 of this Bill), the 'cost of acquisition' of bonus shares in the case of an equity share- holder who transfers such shares after the expiry of 30 days from the date of their issue will (for the purpose of computing any capital ga;ns arising on such transfer) be taken to be their fair market value as nn the 31st day from the date on which the said shares were issued to him.

Under the other new provision, tha 'cost ol acquisition' to nn assessee of any share received by him from a company in lieu of hii original holdings on tha reorganisation of its share capital, or con- version or reconversion of its stock or shares into shares or stock or conversion of one kind of shares into another kind, etc. will be calculated with reference to the cost to the assessee of the original shares or stock held by the assessee.

Clause 15 seeks to amend section 66 of the Income-tax Act. This amendment is consequential to the introduction by clause 19 of this BUI of a new section 87A in the Income-tax Act.

Clause 16 seeks to introduce a new section 69A In the Inccme-tax Act providing that if an assessee is not able to explain satisfactorily the source of any money, bullion, jewellery or valuable article found to be owned by him in any financial year, the money and the value of such jewellery, etc. may ba deemed to be his income for such financial year.

Clause 17 seeks to amend section 86 of the Income-tax Act. The amendment is of a clarificatory nature.

Clause IS seeks to amend section 87 of the Income-tax Act. On* of the new provisions is that in the case of musicians, playwrights, artists, etc. the higher limits of the sums paid as life insurance premia, contributions to provident fund, etc. qualifying tor rebate of tax will be applicable only to parsons who have taken a life insurance policy prior to 1st March, 1964. In any other case, the usual limits laid down tor individuals will apply.

Another provision is that the amount of the rebate of income-tax together with the amount of rebate of super-tax (sought to be provided under clause '11 of this Bill) in respect of sums paid by an assessee as life insurance pramia, contributions to provident fund, etc., shall, cumulatively, be limited to 50 per cent, of the total amount of the sums qualifying for the rebate.

Clause 19 seeks to introduce a new section 87A in Chapter VIII-A of the Income-tax Act. It provides that a resident individual who is not a citizen of lnd.a and whose children (not above 21 years in age) are receiving education in a foreign country will be entitled to a rebate of income-tax on the amount spent by him on the education of such children. The amount qualifying for the rebate is limited to Rs. 4,000 (Rs. 2,000 for each such child up to two children) or 25 per cent, of the total income whichever is less.

Clause 20 seeks to amend clause (ii) of the Explanation to section 91 of the Income-tax Act. The amendment is of a clarificatory nature.

Clause 21 seeks to make two amendments to section 99 of the Income-tax Act, One of the amendments is of a clarificatory nature. The effect of the othar amendment is that companies will not be liable to pay super-tax on any dividends received by them from an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends within India.

Clause 22 seeks to introduce a new section 99A in Chapter XI-C of the Income-tax Act. This provides for the allowance of a rebate of super-tax to individuals and Hindu undivided families on so much of the sums paid by them as life insurance premia, contributions to a provident fund, deposits in the Post Office under the 'Cumulative Time Deposits' Scheme etc. which qualify for a rebate of income-tax under section 87 of the Income-tax Act.

Clause 23 seeks to make three amendments to section 104 of the Income-tax Act.

The first one of these is consequential to the amendment under clause 26 of this Bill. The next one excludes from the requirement of compulsory distribution of dividends such Indian companies (in which the public are not substantially interested) whose business consists wholly in the manufacture or processing of goods or in mining or the generation or distribution of electricity or any other form of power. The third one enables the Central Government to exempt (by Issue of a notification in this behalf) any class of companies in which the public are not substantially interested from the requirement of compulsory distribution of dividends.

Clause 24 seeks to amend section 106 of the Income-tax Act. The amendment is consequential to the insertion of a new section 107A in the Income-tax Act under clause 26 of this Bill.

Clause 25 seeks to amend section 107 of the Income-tax Act. This amendment is consequential to the amendment under clause 26 of this Bill

Clause 26 seeks to introduce a new section 107A in the Income- tax Act. This enables a company in which the public are not substantially interested to make an application to the Central Board of Direct Taxes for a reduction of the minimum amount of compul- •ary distribution of dividends required of it under section 104 of

the Act, if the company considers that due to the current require- ments for the development of its business, it would not be advisable or possible for it to distribute any dividend larger than that which has been declared or is proposed to be declared by it. The Central Board of Direct Taxes are authorised to reduce the minimum amount of compulsory distribution by an amount not exceeding 20 per cent of the statutory percentage of the distributable income of the company.

Clause 27 seeks to amend section 109 of the Income-tax Act. The amendments are consequential to the insertion of section 107A under clause 26, and the exclusion of Indian companies (in which the public are not substantially interested) engaged in the manu- facture or processing of goods, or mining, etc. from the purview of section 104 {vide clause 23 of this Bill).

Clause 28 seeks to amend section 114 of the Income-tax Act. The effect of this is that in respect of long-term capital gains (i.e., gains other than 'short-term' capital gains) relating to lands or buildings, tax will be charged in the case of assessees other than companies at 75 per cent, of the average rate of income-tax and super-tax appli- cable to their total income. In respect of other long-term capital gains, tax will be charged on such assessees at 50 per cent, of the average rate of income-tax and super-tax applicable to their total income.

Clause 29 seeks to amend section 115 of the Income-tax Act. The effect of this amendment is that in the case of a company whose total income includes any long-term capital gains (i,ev capital gains relating to capital assets held for more than one year), super-tax on long-term capital gains relating to any buildings or lands or any rights in buildings or lands will be chargeable at 15 per cent, and on any other long-term capital gains it will be chargeable at 5 per cent.

Clause 30 seeks to substitute the provisions of section 132 of the Income-tax Act. Under the new provisions, if the Commissioner of Income-tax has reason to believe (from information in his possession) that an assessee has failed to produce the books of account or documents required to be produced by him, or is not likely to comply with a requisition for the production of books of account or documents relevant for the proceedings under the Income-tax Act, or has money or any other articles disproportionate to his known sources of income (particulars whereof would he relevant for proceedings under the Income-tax Act), he may then

authorise the Inspecting Assistant Commissioner or the Income-tax Officer to make a search for any such books of account or documents in any premises and seize them and also to make an inventory of the articles or things (including moneys) referred to above.

Clause 31 seeks to introduce a new section 133A in the Income- tax Act, enabling the Income-tax Officer or any Inspector of Income- tax authorised by him in this behalf to enter an assessee's place of business and to inspect any books of account and documents, to make extracts thereof and to place identilication marks thereon.

Clause 32 seeks to omit section 137 of the Income-tax Act, which prohibits the disclosure of any information contained in the assess- ment records of an assessee.

Clause 33 seeks to substitute the provisions of section 138 of the Income-tax Act. Under the new provision, any member of the public may make an application to the Commissioner of Income-tax in the prescribed form, accompanied by the prescribed fee tor the supply to him of inlormation relating to any assessee. The Com- missioner is authorised to supply the information asked for if he is satisfied that there are no circumstances justifying its refusal.

Clause 34 seeks to insert a new section 140A in the Income-tax Act, requiring assessees who have furnished their returns of income to pay the tax due on the basis of that return (as reduced by any tax paid previously) within one month from the date of furnishing the return. The liability to pay the tax on self-assessment bajis arises only where the tax payable on the basis of the return exceeds five hundred rupees. If an assessee does not pay the tax within the said period, he will be liable to a penalty not exceeding 50 per cent, of the tax which was payable.

Clause 35 seeks to omit section 141A of the Income-tax Act.

Clause 36 seeks to amend section 156 of the Income-tax Act. Tho amendment is consequential to the amendment sought to be made under clause 44 of this Bill.

Clause 37 seeks to amend section 209 of the Income-tax Act. Tha amendment is purely of a drafting nature.

Clause 38 seeks to amend section 246 of the Income-tax Act to provide an asiessee the right of an appeal to the Appellate Assistant Commissioner against an order by the Income-tax Officer imposing B penalty for a default in payment of tax due on self-assessment or a default in respect of making an annuity deposit,

Clause 39 seeks to amend section 254 of the Income-tax Act to enable an assessee in whose case capital gains have been computed with reference to the fair market value of a capital asset as on the date of its transfer (vide clause 13 of this Bill) to have any dispute relating to the valuation referred to valuers for arbitration, at the stage of appeal before the Appellate Tribunal.

Clause 40 seeks to amend section 271 of the Income-tax Act to provide that where the income returned by an assessee Is less than 90 per cent, of the assessed income, the assessee shall be deemed to have concealed his income or furnished inaccurate particulars thereof and be liable to penalty accordingly, unless he furnishes evidence to prove hi a bona fides in the matter.

Clause 41 seeks to amend section 277 of the Income-tax Act relating to punishment of a person on conviction for making a false statement in any declaration, etc. made in proceedings under the Income-tax Act. It substitutes for the existing provision for simple imprisonment for 6 months or a fine of R3. 1,000 or both, a provision for rigorous imprisonment for a minimum term of 6 months (unless there are adequate reasons to the contrary recorded in the judg- ment) and a maximum term of two years.

Clause 42 seeks to amend section 278 of the Income-tax Act relating to punishment of a person on conviction for abetment of a false return, etc. on the same lines as stated in t h^ notes on clause 41 of this Bill.

Clause 43 seeks to omit section 280 of the Income-tax Act relating to punishment of a public servant for disclosing any particulars, the disclosure of which is prohibited by section 137 of the Act. This is consequential to omission of section 137 of th* Act under clause 32 of this Bill.

Clause 44 seeks to introduce a new Chapter XXII-A In the Income-tax Act, containing provisions regarding annuity deposits by resident assessees. The persons liable to make the annuity deposits will be individuals who are citizens of India, Hindu undivid- ed families, unregistered firms, associations of persons (other than a company or a co-operative society) and artificial juridical persons excluding corporations established by a Central, State or Provincial Act. Annuity deposits will be required to be made, compulsorily, in respect of the assessment year 1964-65 and subsequent assessment years. Assessees will also be required to make deposits in advance" In each financial year in respect of the Income assessable for the

assessment year next following that financial year. The amount of the annuity deposits will be calculated on the "adjusted total income" of an assessee at the rates prescribed in the Second Schedule to this Bill. The term 'adjusted total income' means the total income reduced by arrears of salaries, balances In a provident fund transferred to the credit of an employee participating in a recognised provident fund and share of income from an unregistered firm or an association of persons where such firm or association is liable to make an annuity deposit. In addition, in respect of the assessment year 1964-65, the full amount of salary income earned during the previous year will be excluded in computing the afore- said 'adjusted total income' for determining the amount of the annuity deposit required to be made for the said assessment year. This is because salary Income earned during the financial year 1963- 64 is assessable for the assessment year 1964-65 under the provisions of the Finance Act, 1963 [vide sub-clau3e (2) of clause 2 of this Bill].

Under the provisions of the Second Schedule to this Bill, an assessee whose total income does not exceed Rs. 15,000 is not liable to make any deposit.

Annuity deposits will be repayable to assessees in 10 equated annual instalments together with interest thereon at the rate or rates notified by the Central Government in the Official Gazette.

The amount of the annuity deposit which an assessee is liable to make for an assessment year will be allowed as a deduction in computing his total income under the Income-tax Act for that assessment year. The amount of annuity due to a depositor in any year will be included in his total income for that year.

In respect of income assessable for the assessment year 1964-65, the deposits are required to be made latest by the 31st March, 1965. Advance annuity deposits are required to be made within the time allowed by the Income-tax Officer In the notice issued by him to the assessee in this behalf.

In deducting tax at source from salary Income, the calculation will be made after deducting from such income the amount of annuity deposit which the assessee is liable to make.

If annuity deposits are not made within due time, the assessee will be liable to a penalty not exceeding 50 per cent, of the amount which he was liable to deposit. Any arrears of this deposit are liable to be recovered under the provisions of the Income-tax Act like any arrears of tax.

The Central Government has been empowered to frame a scheme making detailed provisions for the implementation of the scheme of annuity deposits. The scheme will, inter alia, contain provisions as to the manner in which and intervals at which annuities shall be paid, the authorities by or through whom deposits will be collected or by whom annuities may be issued, etc.

Clause 45 seeks to substitute the provisions of section 287 of the Income-tax Act. It enables the Central Government to publish the names of any assessees or any particulars relating to assessment proceedings in their case if it considers it necessary or expedient, in the public interest, to do so. It provides that such publication as respects imposition of a penalty or a conviction for an offence con- nected with proceedings under the Income-tax Act, can be made only after the expiry of the time for filing or the disposal of the first appeal filed against such penalty or conviction.

Clause 46 seeks to amend section 293 of the Income-tax Act. This amendment is of a drafting nature.

Clause 41 seeks to amend section 295 of the Income-tax Act which enables the Board to frame rules for carrying out the purposes of the Income-tax Act. The amendment is consequential to the proposed amendment to section 37 of the Income-tax Act under clause 9 of this Bill.

Clause 48 seeks to omit the Fifth Schedule to the Income-tax Act. This is consequential to the proposed amendment to section 99 of the Income-tax Act exempting companies from super-tax on their income from dividends (vide clause 21 of this Bill).

Clause 49 seeks to amend the Estate Duty Act, 1953.

Suh-clause (a) seeks to amend section 5A of the Act. The effect of this amendment is that estate duty will be leviable in respect of agricultural lands situate In the territories comprised in the State of Orissa. The amendment is being made in view of the Resolution dated 23rd September, 1963 passed by the State Legislature under terms of article 252 of the Constitution authorising the Parliament to regulate matters specified in the Estate Duty Act in relation to agricultural lands situated in the State of Orissa. The amendment will take effect from 23rd September, 1963.

Sub-clauses (b) and (c) seek to amend sections 33 and 34 of the Act. These amendments will have the effect of exempting from estate duty the principal value of one house or part of a house exclusively used by the deceased for his residence. If such house

is situated in a place with a population exceeding 10,000, the amount to be excluded under these provisions from the principal value of the estate of the deceased will be limited to Rs. 1 lakh.

Sub-clause (d) seeks to amend section 78 of the Act. This amendment is consequential to the amendment under sub-clause

Sub-clause (e) seeks to substitute section 80 of the Act by two sections, namely, sections 80 and 80A, The effect of this amendment is that the prohibition on the disclosure of information contained in the records of estate duty proceedings under the existing section 80 of the Act will be abolished. Any member of the public who makes an application to the Controller for information relating to any assessment made under the Act will be enabled to obtain the infor- mation if the Controller is satisfied that there are no circumstances justifying its refusal. The Central Government will also be enabled to publish the names of any accountable persons and any other particulars relating to any proceedings under the Act if it considers such publication to be necessary or expedient in the public interest. However, the publication under this provision in respect of any penalty imposed under the Act can be made only after the expiry of the time for making an appeal to the Appellate Controller or after the disposal of an appeal presented before him, as the case may be.

Sub-clause (f) seeks to substitute the rate schedule of estate duty contained in Part I of the Second Schedule to the Act by a new rate schedule.

Clause 50 seeks to amend the Wealth-tax Act, 1957.

Sub-clause (a) seeks to exempt from wealth-tax the value of one house or part of a house belonging to the assessee and exclusive- ly used by him for residential purposes. If such house is situated in a place with a population exceeding 10,000 and the value thereof exceeds Rs. 1 lakh, the amount to be exempted will be limited to Rs. 1 lakh.

Sub-clause (b) seeks to omit section 42 of the Act which pro- hibits the disclosure of information contained in any record of pro- ceedings under the Act.

Sub-clause (c) seeks to substitute section 42A of the Act by a new provision enabling the Central Government to publish the name of any assessees and any particulars relating to any proceed- ingsjjnder the^Act in respect of such assessees if it considers it necessary or expedient™ in "the public interest' to do so. However?

the publication of any information as to any penalty imposed or any conviction for any offence relating to any proceedings under the Act can be made only after the expiry of the time-limit for making the first appeal or the disposal of the first appeal, as the case may be.

This clause also seeks to substitute section 42B of the Act by a new provision enabling the Commissioner to supply to any member of the public at his request any information relating to any assessee in respect of any assessment made under the Act, if the Commis- sioner is satisfied that there are no such circumstances justifying the refusal of such information.

Sub-clause (d) seeks to amend section 43 of the Act. The amend-

ment is consequential to the amendment under sub-clause (c).

Sub-clause (e) seeks to substitute the rate schedules of wealth- tax contained in Part I of the Schedule to the Wealth-tax Act by new rate schedules for individuals and Hindu undivided femilies.

Clause 51 seeks to amend the Expenditure-tax Act, 1957.

Sub-clause (i) seeks to omit some of the provisions contained in section 5 of the Act relating to exemptions of certain types or items of expenditure from expenditure-tax.

Sub-clause (ii) seeks to amend section 6 of the Act relating to the deductions to be made in computing the taxable expenditure. Some of the items of deductions under this section, such as expen- diture on marriages and the basic allowance admissible to indivi- duals and Hindu undivided families are sought to be omitted.

Sub-clause (in) seeks to omit section 38 of the Act which prohibits the disclosure of information contained in the record of any proceedings under the Expenditure-tax Act.

Sub-clause (iv) seeks, inter alia, to substitute the provisions contained in section 38A of the Act by new provisions enabling the Central Government to publish the names of any assessees or any particular;; relating to any proceedings in their cases under the Act if it considers it necessary or expedient in the public interest to do so. Such a publication in respect of any penalty imposed or any conviction for any offence under the Act can be made only after the expiry of the time limit for filing the first appeal or the disposal of the first appeal, as the case may be.

It also seeks to substitute the provisions contained in section 38B of the Act by a new provision enabling the Commissioner to supply to any member of the public, at his request, any information relating to any assessee in respect of any assessment made under

the Act. Such information will be supplied if the Commissioner is satisfied that there are no circumstances justifying its refusal.

Sub-clause (v) seeks to amend section 39 of the Act. This amendment is consequential to the amendment under sub-clause (iv).

Sub-clause (in) seeks to substitute the rate scheduln of expendi- ture-tax contained in the Schedule to the Act by a new rate schedule. For the assessment years 1964-65 and 1965-66, the maximum rate of expenditure-tax will be 15 per cent, and it will be attracted on taxable expenditure exceeding Rs. 72,000. From the assessment year 1966-67 onwards, the maximum rate will be 20 per cent, which will be attracted on taxable expenditure exceed- ing Rs. 84,000. Under the revised rate schedule, the first Rs. 36,000 of taxable expenditure will not be chargeable to expenditure-tax. This exemption takes the place of the basic allowance available to individuals and Hindu undivided families under clause Qi) of section 6(1) of the Act which is sought to be withdrawn by the amendment under sub-clause (ii) above.

Clause 52 seeks to amend the Gift-tax Act, 1958.

Sub-clause (a) seeks to amend clause (viii) of section 5(1) of the Act. The effect of this is that the exemption in respect of gifts by an individual to his or her spouse will be reduced irom the existing maximum of Rs. 1 lakh in value in the aggregate in one er more previous years to Rs. 50,000.

Sub-clause (b) seeks to insert a new section 6A in the Act. The effect of this is that where an assessee has made taxable gifts to the same donee during the relevant previous year and during any one or more of the four previous years immediately preceding such previous year, the value of the taxable gifts made to the same donee during the said four years will be aggregated with ihe value of the taxable gifts made by the assessee during the relevant previous year. The value of taxable gifts made to the same donee in the earlier years before 1st April, 1963 will be taken into account in the assessment of the assessee only for rate purposes. Taxable gifts made to the same donee in the earlier years after 1st April, 1963 will be taken into account both for rate purposes and charging gift-tax on the assessee for the relevant assessment year, but any gift-tax paid by the assessee for any earlier assessment year in respect of the value of such taxable gift to the same donee will be allowed as a deduction in computing the assessee's liability to gift-tax.

Sub-clause (c) seeks to amend sub-section (2) of section 32 of the Act relating to the charging of simple interest at 4 per cent, per annum from an assessee who fails to pay the gift tax demanded from him during the period allowed in the notice of demand. The effect of the amendment is that if the amount on which interest was payable under the aforesaid sub-section has been reduced on an appeal, reference or revision or an order of rectification of a mis- take, the interest payable by the assessee shall be reduced accordingly.

Sub'dause (d) seeks to amend sub-sectipn (5) of section 34 of the Act. This amendment is of a drafting nature.

Sub-clause (e) seeks to omit section 41 of the Act which prohibits the disclosure of information contained in any record of any pro- ceedings relating to gift-tax.

Sub-clause (f) seeks, inter alia, to substitute section 41A of the Gift-tax Act by a new provision, enabling the Central Government to publish the names of any assessees and any particulars relating to any proceedings under this Act in respect of such assessees if it considers it necessary or expedient in the public interest to do so. However, such publication as to any penalty imposed or any convic- tion for any offence connected with any proceedings under this Act can be made only after the expiry of the time limit for filing the first appeal against the penalty or conviction or of the disposal of the first appeal, as the case may be.

It also seeks to substitute section 41B of the Act by a new pro- vision enabling the Commissioner to supply to any member of the public at his request any information relating to any assessee in respect of any assessment made under the Act, if the Commissioner is satisfied that there are no circumstances justifying the refusal ol' such information.

Sub-clause (g) seeks to amend section 42 of the Act. This amend- ment is consequential to the amendment under sub-clause (f).

Sub-clause (h) seeks to substitute the Schedule to the Act con-

taining the rate schedule of gift-tax by a new rate schedule.

Clause 53 seeks to revive the levy of expenditure-tax under the

Expenditure-tax Act, 1957 with effect from the 1st April, 1964.

Clause 54 seeks to amend, retrospectively, the provision contain- ed in paragraph A of Part 1 of the First Schedule to the Finance Act, 1963 relating to marginal relief in respect of the levy of addi- tional surcharge on income-tax.

Clause 55 seeks to provide that super profits tax under the Super Profits Tax Act, 1963, shall not be charged for any assessment year commencing on or after 1st April, 1964 in respect of the chargeable profits of any company.

Clause 56, read with the Third Schedule, seeks to increase the basic import duties on certain items. The changes are: —

(i) the duty on caustic soda is proposed to be raised from 40 per cent. (Standard) and 30 per cent. (Preferential) to 80 per cent. (Standard) and 70 per cent. (Preferen- tial). The inLention is to restore the incidence of duty which was reduced with effect from 1st September, 1868 because of a reduction in the tariff value;

(ii) the duty on high carbon or spring steel wire is propoasd to be raised by 20 per cent, ad valorem as a measure of assistance to the indigenous manufacturers; and

(iii) in the case of fruits dried (salted and all other kinds), not otherwise specified, specific rates of duty are being proposed for the major varieties, while maintaining the preferential margin of 10 per cent. This will facilitate their assessment to duty. As regards other varieties, the duty is proposed to be raised from 50 per cent, (Standard) and 40 per cent. (Preferential) to 60 per cent. (Standard) and 50 per cent. (Preferential).

Clause 57 seeks- to continue up to the 31st day of March, 1965 the existing surcharge on customs duties.

Clause 58 seeks to continue up to the 30th day of April, 1966 the existing provision for the levy of a regulatory duty of customs.

Clause 59 seeks to maintain for another year the status quo in regard to commitments under the General Agreement on Tariffs and Trade.

Clause 60—

Sub-clause (1) (i) seeks to make certain changes in the definition of manufacture.

Sub-clause (1) (ii) seeks to bring certain operations in relation to cotton yarn under excise control.

Sub-clause (2) (a) seeks to modify the rates of duty on certain value categories of cigarettes,

Sub-clause (2) (b) seeks to raise the rate of duty on 'Dispersed organic pigments' ordinarily used in textile printing.

Sub-clause (2) (c) seeks to levy duty on 'Sodium silicate'.

Sub-clause (2) (d) makes certain changes in the tariff description

of the item relating to Cosmetics and toilet preparations.

Sub-clause (2) (e) seeks to reduce the number of sub-items under this item to two and also to make consequential changes in the existing rates of duty.

Sub-clause (2) (/) seeks to recast the tariff description of the Item

relating to Plastics to make its scope more precise

Sub-clause (2) (g) seeks to reduce the number of sub-items from ten to four and to re-group the varieties of paper and board accordingly.

Sub-clause (2) (h) seeks to raise the rate of duty on rayon and

synthetic fibres and yarn.

Sub-clause (2) (i) seeks to re-define cotton yarn and to raise the

rate of duty thereon.

Sub-clause (2) (j) seeks to increase the rate of duty on worsted

woollen yarn of higher counts.

Sub-clause (2) (7c) seeks to make some changes in the tariff description of Item 25 relating to Iron making it more comprehensive and also to raise the duty thereon.

Sub-clause (2) (I) seeks to modify the tariff description of Steel Ingots making it more comprehensive and also to raise the rate of duty thereon.

Sub-clause (2) (m) seeks to make some changes in the tariff des- cription and re-grouping of the flat products of Iron and Steel and to increase the duty on semi-finished steel and manufactured steel in the form of bars, rods, plates, sheets, etc.

Sub-cZausc (2) (n) seeks to make the tariff description of Item 27 more comprehensive by including therein extruded shapes and sections of Aluminium.

Sub-clause (2) (o) seeks to make some changes in the tariff des-

cription of electric wires and cables assessable at the higher rate.

Sub-clause (2) (p) seeks to amend Item 34 providing for a separate sub-item for Tractors and clarifying that certain specialised material handling equipment will pay duty only on the chassis.

Sub-clause (2) (q) seeks to make some changes in the tariff des-

cription of Item 36 relating to Footwear.

Clause 61 seeks to levy a special duty of excise up to the 31st day of March, 1965, on certain goods chargeable with a duty of excise under the Central Excises Act.

Clause 62 proposes to re-enact up to the 30th day of April, 1965, the power to levy a regulatory duty of Excise at the rate of 13 per cent, of the value of the goods.

Clause 63 like section 29 of the Finance Act, 1963, provides that salt shall be duty free for another year.

Clause 64 seeks to amend the definition of the terms 'Narcotic drug' and 'Opium' so as to make it self-contained for the purpose of levy of duty under the Medicinal and Toilet Preparations (Excise Duties) Act. It also seeks to replace the existing Schedule to this enactment so as to prescribe higher rates of duty for Allopathic preparations not containing known active ingredients in therapeutic quantities and which are capable of being consumed as ordinary alcoholic beverages in order to treat them on par with certain similar Ayurvedic preparations and to charge to duty all medicinal prepa- rations containing opium, Indian hemp or other narcotic drugs irrespective of whether they are patent or proprietary or not.

Clause 65.—Following the amendment in clause 54 regarding the amount of additional surcharge payable for 1963-64, this clause provides for the refund of the Compulsory Deposit in excess of the additional surcharge payable for that year.

It also allows the option to claim a refund of the Compulsory Deposit relating to the advance tax paid in 1963-64 for the assessment year 1964-65.

FINANCIAL MEMORANDUM

INCOME-TAX

Some of the provisions contained in the Finance Bill, 1964 will result in an increase in the workload on the Income-tax Department. Instances of these provisions are the proposed introduction of the Annuity Deposit Scheme in the case of individuals, Hindu undivided families, unregistered firms, etc. whose total income exceeds Rs. 15,000, charging of tax on capital gains in respect of bonus shares on accrual basis, amendment of certain provisions of the Income-tax Act with a view to strengthening the existing machinery for countering tax evasion, the re-itroduction of the levy of expenditure-tax and the reduction in the basic exemption limit from Rs. 2 lakhs and Rs. 4 lakhs to Rs. 1 lakh and Rs. 2 lakhs in the cases of individuals and Hindu undivided families respectively for the purpose of levy of wealth-tax.

The aforesaid measures will necessitate the employment of ar

additional number of officers and other staff. The expenditure 01

this account together with the incidental expenses on administration

is estimated at about Rs. 10 lakhs as indicated herein below.

Requirement of personnel and -finance:

No. Annual emoluments

Cost

Rs,

I. Officers—

I

1 x Rs. 20,400

20,400

Commissioner of Income-tax

5 x Rs. I4>4oo 40 X Ri. 5,400

72,000

2,16,000

Assistant Commissioners . Income-tix Officers (Cl. 1)

5 40

II. Stqff—

I n s p e c t o rs . . ..

20

S u p e r v i s o rs . . ..

57,600 21,600

20 x Rs. 2,880 5 x Rs. 4,320

5

H c a d c l e r ks . . ..

69,000

23 x Rs. 3,000

23

S t e n o g r a p h e rs . . ..

io,8oo

6

6 x Rs. 1,800

U p p er D i v i s i on C l e r ks

3,06,000

170 170 x Rs. 1,800

S t e n o - t y p i s tB . . ..

67,200

40 40 xRs. 1,680

L o w er D i v i s i on C l e r ks

53 x Rs. 1,500

79,500

53

III. Incidental expenses—

1,00,000 Incidental expenses including Class ; IV staff .

10,20,100

TOTAL .

10,00,000

or sny ,

CENTRAL EXCISE

The Bill seeks to bring certain operations like sizing of cotton yarn with the aid of power or wrapping or winding it on beams, cones, pirns, bobbins, etc. under excise purview. It also seeks to enhance the surcharges leviable on certain varieties of cotton fabrics on account of the different processes undergone by them. These and certain other changes would mean some addition to the volume of work. Further, the Bill seeks to levy a fresh duty on Sodium Silicate of which there are upwards of one hundred factories, all of which would have to be brought under excise control.

All this will necessitate the employment of some additional staff. The increase in staff together with incidental expenses of adminis- tration is estimated to cost Rs. 4 lakhs.

Requirements of personnel and finance:

A. Officers :—

A n n u al e m o l u m e n ts

No.

Cost

R".

Ra.

T. Deputy Collector!

2

2 X 15,000

30,000

3. Assistant Collectors

4 X 8,880

35.520

4

3. Superintendent*—

Cl"ss I

4 x 1,880

4

35>5#o OMM U . . ..

28,224

4 X 7.OJ6

4

Staff—

t ) y. Supdt*. (Executive)

20

20 x 5,775

I.I5>5°" I i p e c t o rs

20

74,920

20 x 3*74<5

D y. S u p d t s. CM) . . ..

18,840

4 x 437io

4

S t e n o - t y p i s ts

10

10 x 2,044

20,440

C. I n c i d e n t al expenses Including Class IV

c o p t i n p e n d e e, e t c, . . ..

40,000

TOTAL

3,98,964

or Rs. 4 lakhs.

MEMORANDUM REGARDING DELEGATED LEGISLATION

New section 280W proposed to be Inserted by clause 44 provides that the Central Government shall, by notification in the Official Gazette, frame one or more schemes to be called annuity deposit scheme or schemes in relation to annuity deposits. The various matters which among others may be provided for in the scheme have been specified in items (a) to (g) of sub-section (2) of that new section. Clause (dd) of sub-section (2) of section 295 inserted by clause 47 empowers the Board to determine the extent to, and the conditions subject to, which any expenditure referred to in sub-section (3) of section 37 may be allowed.

The aforesaid matters are matters of procedure and administrative detail. It is hardly practicable for these matters of detail or proce- dure to be provided in the Bill itself. The delegation of legislative power is of a normal character.

BILL N O. 15 OF 1964

A bill to impose a special tax on the profits oj certain companies.

BE it enacteH by Parliament in the Fifteenth Year of the Republic

of India as follows:—•

1. (J) This Act may be called the Companies (Profits) Surtax Act,

1964.

Short title and •xtent.

5 Deflnltloni

(2) It extends to the whole of India. 2. In this Act, unless the context otherwise requires,—

10 (1) "assessee" means a person by whom surtax or any other sum of money is payable under this Act and includes every person in respect of whom any proceeding under this Act has been taken for the assessment of his chargeable profits or of the amount of refund due to him or of the chargeable profits of any other person in respect of which he is assessable or of the amount of refund due to such other person;

(2) "assessment" includes re-assessment;

(3) "assessment year" means the period of twelve months 15 commencing on the 1st day of April, every year;

(4) "Board" means the Central Board of Direct Taxes

54 of 1963.

constituted under the Central Boards of Revenue Act, 1963;

(5) "chargeable profits" means the total income of an

43 of 1961.

20 assessee computed under the Income-tax Act, 1961 for any pre- vious year or years, as the case may be, and adjusted In accord- ance with the provisions of the First Schedule;

43 of 1961.

(6) "Income-tax Act" means the Income-tax Act, 1961;

(7) "prescribed" means prescribed by rules made under this Act;

25 (8) "statutory deduction" means an amount equal to ten per cent, of the capital of the company as computed in accordance with the provisions of the Second Schedule, or an amount oJ two hundred thousand rupees, whichever Is greater:

Provided that where the previous year is longer or shorter than a period of twelve months, the aforesaid amount of ten per cent, or, as the case may be, of two hundred thousand rupees shall be increased or decreased proportionately:

Provided further that where a company has different previous years in respect of its income, profits and gains, the aforesaid increase or decrease, as the case may be, shall be calculated with reference to the length of the previous year of the longest duration; and

(9) all other words and expressions used herein but not denned and defined in the Income-tax Act shall have the mean- ings respectively assigned to them in that Act.

3. (1) Every Director of Inspection, Commissioner of Income-tax, j Appellate Assistant Commissioner of Income-tax, Inspecting Assistant Commissioner of Income-tax and Income-tax Officer shall have the like powers and perform the like functions, under this Act as he has and performs under the Income-tax Act, and for the exercise of his powers and the performance of his functions, his jurisdiction under this Act will be the same as that he has under the Income-tax Act.

> (2) All officers and persons employed in the execution of this Act shall observe and follow the orders, instructions and directions ol the Board:

Provided that no such orders, instructions or directions shall be given so as to interfere with the discretion of the Appellate Assistant ; Commissioner in the exercise of his appellate functions.

(3) Every Income-tax Officer, employed in the execution of this Act, shall observe and follow the orders, instructions and directions issued for his guidance by the Director of Inspection or by the Com- missioner or by the Inspecting Assistant Commissioner under whose , jurisdiction he performs his functions.

4. Subject to the provisions contained in this Act, there shall be i charged on every company for every assessment year commencing on and from the first day of April, 1964, a tax (in this Act referred to as the surtax) in respect of so much of its chargeable profits of the ; previous year or previous years, as the case may be, as exceed the statutory deduction, at the rate or rates specified in the Third Schedule.

5. (1) In the case of every company whose chargeable profits assessable under this Act exceeded during the previous year the 3 amount of statutory deduction, its principal officer, or where in the case of a non-resident company any person has been treated as Its agent under section 163 of the Income-tax Act, such person, shall

furnish a return of the chargeable profits of the company during the previous year in the prescribed form and verified in the prescribed manner and setting forth such utber particulars as may be prescribed, before the 30th day of September of the assessment year :

5 Provided that on an application made in this behalf, the Income- tax Officer may, in his discretion, extend the date for the furnishing of the return.

10

15 (2) In the case of any company which in the Income-tax Officer's opinion is assessable under this Act, the Income-tax Officer may, before the end of the relevant assessment year, serve a notice upon its principal officer, or where in the case of a non-resident company any person has been treated as its agent under section 163 of the Income-tax Act, upon such person, requiring him to furnish within thirty days from the date of service of the notice a return of the chargeable profits of the company during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed :

2O Provided that on an application made in this behalf, the Income- tax Officer may, in his discretion, extend the date for the furnishing of the return.

25 (3) Any assesses who has not furnished a return during the time allowed under sub-section (1) or sub-section (2), or having furnish- ed a return under sub-section (1) or sub-section (2) discovers any omission or wrong statement therein, may furnish a return or a revised return, as the case may be, at any time before the assessment is made.

Assess- ment

30

35 6. (1) For the purposes of making an assessment under this Act, the Income-tax Officer may serve on any person who has furnished a return under sub-section (1) of section 5 or upon whom a riotice has been served under sub-section (2) of section 5 (whether a return has been furnished or not) a notice requiring him on a date therein to be specified, to produce or cause to be produced such accounts or documents or evidence as the Income-tax Officer may require for the purposes of this Act and may from time to time serve further notices requiring the production of such further accounts or docu- ments or other evidence as he may require.

40 (2) The Income-tax Officer, after considering such accounts, documents or evidence, if any, as he has obtained under sub- section (1) and after taking into account any relevant material which he has gathered, shall, by an order in writing, assess the chargeable

profits and the amount of the surtax payable on the basis of such assessment.

Provisional assess- ment.

5

10

7. (1) The Income-tax Officer, before proceeding to make an assessment under section 6 (in tills section referred to as the regular assessment) may, at any time after the expiry of the period allowed under sub-section (1) or sub-section (2) of section 5 for the furnish- ing of the return and whether the return has or has not been furnished, proceed to make in a summary manner a provisional assessment of the chargeable profits and the amount of the surtax payable thereon.

15

(2) Before making such provisional assessment, the Income-tax Officer shall give notice in the prescribed form to th? person on whom the provisional assessment is to be made of his intention tr do so, and shall with the noiice forward a statement of the amount of the proposed assessment, and the said person shall be entitled to deliver to the Income-tax Officer at any time within fourteen days of the service of the said notice a statement of his objections, if any, to the amount of the proposed assessment.

20

(3) On expiry of the said fourteen days from the date of service of the notice referred to in sub-section (2), or earlier, if the assessee agrees to the proposed provisional assessment, the Income-tax Officer may, aft?r taking into account the objections, if any, made under sub-section (2), make a provisional assessment, and shall furnish a copy of the order of the assessment to the assessee:

25 Provided that assent to the amount of the provisional assessment, or failure to make objection to it, shall in no way prejudice the assessee in relation to the regular assessment.

(4) There shall be ne rifht of appeal against a provisional assess- ment made under this section.

30

35

(5) After a regular assessment has been made, any amount paid or deemed to have been paid towards the provisional assessment made under this section shall be deemed to have been paid towards the regular assessment; find where the amount paid or deemed to have been paid towards the provisional assessment exceeds the amount payable under the regular assessment, the excess shall be refunded to the assessee,

8. If—

Profits escaping assessment.

(a) the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of the assessee to make a return under.section 5 for any assessment year or to

5 disclose fully and truly all material facts necessary for ms assessment for any assessment year, chargeable profits for that year have escaped assessment or have been under-assessed or assessed at too low a rate or have been made the subject of excessive relief under this Act, or

[O (fa) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that chargeable profits assessable for any assessment year have escaped assessment or have been under-assessed or assessed at too low a rate or have been the subject of excessive relief under this- Act,

[5 he may, in cases falling under clause (a) at any time, and in cases falling under clause (b) at any time within four years of the end of that assessment year, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under section 5, and may proceed to assess or re-assess the amount charge- able to surtax, and the provisions of this Act shall, so far as may be, apply as if the notice were a notice issued under that section.

20 Penalties.

25 9. If the Income-tax Officer, in the course of any proceedings under this Act, is satisfied that any person has, without reasonable cause, failed to furnish the return required under section 5, or to produce or cause to be produced the accounts, documents or other evidence required by the Income-tax Officer under sub-section (1) of section 6, or has concealed the particulars of the chargeable profits or has furnished inaccurate particulars of such profits, he may direct that such person shall pay, by way of penalty, in addition to the amount of surtax payable, a sum not exceeding—

(a) where the person has failed to furnish the return required under section 5, the amount of surtax payable;

30

(b) in any other case, the amount of surtax which would have been avoided if the return made had been accepted as correct:

35 Provided that the Income-tax Officer shall not impose any penalty under this section without the previous authority of the Inspecting Assistant Commissioner.

Oppor- tunity of being heard.

10. No order imposing a penalty under section 9 shall be made unless the assessee has been given a reasonable opportunity of being heard.

Appeal* to the Appellate Assistant Commlt- tlonar.

5

10 11. (1) Any person objecting to the amount of surtax for which he is liable as assessed by the Income-tax Officer or denying his liability to be assessed under this Act, or objecting to any penalty or fine imposed by the Income-tax Officer, or to the amount allowed by the Income-tax Officer by way of any relief under any provisions of this Act, or to any refusal by the Income-tax Officer to grant relief or to an order of rectification or amendment having the effect of enhancing the assessment or reducing the refund, or to an order refusing to allow the claim made by the assessee for a rectification under section 13 or amendment under section 14 may appeal to the Appellate Assistant Commissioner.

(2) Every appeal shall be in the prescribed form and shall be verified in the prescribed manner.

(3) An appeal shall be presented within thirty days of the follow-

15 ing date, that is to say—

(a) where the appeal relates to assessment or penalty or fine, the date of service of the notice of demand relating to the assessment or penalty or fine, or

(b) in any other case, the date on which the intimation of

20 the order sought to be appealed against is served :

Provided that the Appellate Assistant Commissioner may admit an appeal after the expiration of the said period if he is satisfied that the appellant had sufficient cause for not presenting it within that period.

²5 (4) The Appellate Assistant Commissioner shall hear and deter- mine the appeal ani, subject to the provisions of this Act, pass such orders as he thinks fit and such orders may include an order enhancing the assessment or penalty:

30 Provided that an order enhancing the assessment or penalty shall not be made unless the person aflected thereby has been given a reasonable opportunity of showing cause against such enhancement.

(5) The procedure to be adopted In the hearing and determination of the appeals shall, with any necessary modification, be in accord- ance with the procedure applicable in relation to income-tax.

35 Appaals tc Appellate Tribunal.

12. (1) Any assessee aggrieved by an order passed by a Commis- sioner under section 16, or an order passed by an Appellate Assistant Commissioner under any provision of this Act, may appeal to tha Appellate Tribunal against such order.

(2) The Commissioner may, if he objects to any order passed by the Appellate Assistant Commissioner under any provision of this Act, direct the Income-tax Officer to appeal to the Appellate Tribunal against the order.

5 (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 communicated to the assessee or to the Commis- sioner, as the case may be.

to

15 (4) The Income-tax Officer or the assessee, as the case may be, on receipt of notice that an appeal against the order of the Appellate Assistant Commissioner has been preferred under sub-section (1) or sub-section (2) by the other party may, notwithstanding that he may not have appealed against such order or any part thereof, within thirty days of the receipt of the notice, file a memorandum of cross- objections, verified in the prescribed manner, against any part of the order of the Appellate Assistant Commissioner, and such memoran- dum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in sub-section (3).

20 (5) The Appellate Tribunal may admit an appeal or permit the filing of a memorandum of cross-objections after the expiry of the relevant period referred to in sub-section (3) or sub-section (4), if it is satisfied that there was sufficient cause for not presenting it within that period.

25 (6) An appeal to the Appellate Tribunal shall be in the prescribed form and shall be verified in the prescribed manner and, shall, except in the case of an appeal referred to in sub-section (2) or a memorandum of cross-objections referred to in sub-section (4), be accompanied by a fee of one hundrad rupees.

30 (7) Subject to the provisions of this Act, in hearing and making an order on any appeal under this section, the Appellate Tribunal shall exercise the same powers and follow the same procedure as it exercises and follows in hearing and making an order on any appeal under the Income-tax Act.

35 Recti- fication of mistakes

13. (1) With a view to rectifying any mistake apparent from the record, the Commissioner, the Income-tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal may, of his, or its, own motion or on an application by the assessee in this behalf, amend any order passed by him or it in any proceeding under this Act within four years of the date on which such order was passed.

(2) An amendment which has the effect of enhancing the assess- ment or reducing a refund or otherwise increasing the liability of the assessee shall not be made under this section unhss the authority concerned has given notice to the assessee of its intention so to do and has allowed the assesses a reasonable opportunity of being hoard.

(3) Where an amendment is made under this section, the order shall be pass3d in writing by the authority concerned.

(4) Subject to the other provisions of this Act, where any such amendment has the effect of reducing the assessment, the Income-tax

t⁰ Officer shall make any refund which may be due to such assessee

(5) Where any such amendment has the effect of enhancing the assessment or reducing the refund already made, the Income-tax Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable.

Other amend- ments.

[5 14. Where as a result of any order made under section 154 or section 155 of the Income-tax Act, it is necessary to recompute the chargeable profits determined in any assessment under this Act, the Income-tax Officer may proceed to recompute the chargeable profits, and determine the surtax payable or refundable on the basis of such ¹⁰ recomputation and make the necessary amendment and the provisions of section 13 shall, so far as may be, apply thereto, the period of four years specified in sub-sect:on (1) of that section being reckoned from the date of the order passed under the aforesaid sections of the Income-tax Act.

!5 13. Notwithstanding anvthmg contained In clans? (i) of section 109 of the Income-tax Act, in computing the distributable income of a companv for the purposes of Chapter XI-D of that Act, ths surtax payable bv the company for any assessment year shall be deductible from the total income of the company assessable for that

⁵⁰ assessment year.

Surtax deductible In computing distribut- able incrno under Income-tax Act.

Revision of order* prejudicial to revenue.

16. (1) The Commissioner may call for and examine the record of anv proceeding under this Act, and if he considers that ?ny order passed therein by th~ Income-tax Officer is erroneous in so far ns It is preiudicial to the interests of the revenue, he may, after giving 55 the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems neres^ary, paj=; su^h order thereon as the rirmmstanc"s of the case -justify, including nn order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment

(2) No order shall be made under sub-section (1) —

(a) to revise an order of re-assessment made under section 8, or

(b) after the expiry of two years from the date of the order sought to be revised.

5

(3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the casa of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court. Io

Explanation.—In computing the period of limitation for the purposes of sub-section (2), any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded.

17. (1) The Commissioner may, either of his own motion or on T5 Revision of orders by Com- missioner

an application by the assessee for revis'on, call for the record of any proceeding under this Act which has been taken by an Income-tax Officer or Appellate Assistant CommissionBr subordinate to him and may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act, may pass such order thereon, 20 not being an order prejudicial to the assessee, as he thinks fit.

(2) The Commissioner shall not of his own motion revise any order under this section if the order has been made more than one year previously.

25 (3) In the case of an application for revision under this section by the as3sssee, the application shall be made within one year from the date on which the order in question was communicated to him or the date on which he otherwise came to know of it, whichever is earlier:

30 Provided that the Commissioner may, if he is satisfied that the assessee was prevented by sufficient cause from making the applica- tion within that period, admit an application made after the expiry of that nerlod.

(4) The Commissioner shall not revise any order under this section in the following cases— J5

(a) where an appeal against the order lies to the Appellate Assistant Commissioner or to the Appellate Tribunal but has rmi been made and the time within which such appeal may be mada has not expired, or, in the case of an appeal to the Appellate Tribunal, the assessee has not waived his right of appeal; or 4°

(b) where the order is pending on an appeal before tha

Appellate Assistant Commissioner; or

(c) where the order has been made the subject of an appoal

to the Appellate Tribunal.

5 (5) Every application by an assessee for revision under this

section shall be accompanied by a fee of twenty-five rupees.

Explanation 1.—An order by the Commissioner declining to interfere shall, for the purposes of this section, be deemed not to be an order prejudicial to the assessee,

IL Explanation 2.—For the purposes of this section, the Appellate Assistant Commissioner shall be deemed to be an authority sub- ordinate to the Commissioner.

18. The provisions of the following sections and Schedules of the Income-tax Act and the Income-tax (Certificats Proceedings) Rules,

Appli- cation of provisions

Income-tax Act. 15 1962, as in force from time to time, shall apply with such modifica- tions, if any, as may be prescribed, as if the said provisions and the rules referred to surtax instead of to income-tax and suuer-tax :—

2(44), 131 to 136 (both inclusive), 138, 140, 156, 160, 161, 162, 163, 166, 167, 170, 173, 175, 176, 178, 179, 220 to 229 (both inclusive), 20 231, 232, 233, 237 to 242 (both inclusive), 244, 245, 254 to 262 (both inclusive), 265, 266, 268, 269, 281, 282, 284, 287 to 293 (both Inclusive), the Second Schedule and the Third Schedule :

Provided that references in the said provisions and the rules to the "assessee" shall be construed as references to an assessee as

²5 defined In this Act.

Income-tax papers to be avallabls [or the purposes of this Act 19. (1) Notwithstanding anything contained in the Income-tax Act, all information contained in any statement or return made or furnished under the provisions of that Act or obtain3d or collected for the purposes of that Act may be used for the purposes of this Act. 3° (2) All information contained in any statement or return made or furnished under the provisions of this Act or obtained or collected for the purposes of this Act may be us^d for the purposes of the Income-tax Act.

Failure to deliver returns, etc 20. If any person fails without reasonable cause to furnish In due time any return under sub-section (2) of section 5, or to produce, 35 or cause to be produced, any accounts or documents required to be produced under section 6, he shall be punishable with fine which may extend to five hundred rupees, and with a further fine which may extend to ten rupees for every day dur;ng which the default

4° continues.

Fain state- ment*.

21. If a person makes in any return furnished under section 5, any statement which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable with simple imprisonment which may extend to six months, or with fine which may extend to one thousand rupees, or with both. 5

Abetment of false returni, etc.

10 22. If a person makes or induces in any manner another person to make and deliver any account, statement or declaration relating to chargeable profits liable to surtax which is false and which he either knows to be false or does not believe to be true, he shall bs punishable with simple imprisonment which may extend to six months, or with fine which may extend to one thousand rupees, or with both.

[5 45 of I860 23. (1) A person shall not be proceeded against for an offenre under section 20 or section 21 or section 22 or under the Indian Penal Code except at the instance of the Commissioner.

Institution of proceed- ings and compoil- tion ot offences.

(2) The Commissioner may, either before or after the institution of proceedings, compound any offence punishable under section 20 or section 21 or section 22.

:o Power to make exemp- tion, etc., in relation to certain Union terriu)ii"".

=5 24. If the Central Government considers it necessary or expedient so to do for avoiding any hardship or anomaly or removing any difficulty that may arise as a result of the application of this Act to the Union t3rritor.es of Dadra and Nagar Haveli, Goa, Daman and Diu and Pondicherry, the Central Government may, by general or special order, make an exemption, reduction in rate or other modification in respect of surtax in favour of any class of assessees or in regard to the whole or any part of the chargeable profits of any class of assessees.

Power t" make rules.

30 25. (1) The Board may, subject to the control of the Central Government, by notification in the Official Gazette, make rules for carry-ng out the purposes of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely :—

(a) the form in which returns under section 5 may be

33 furnished and the manner in which they may be verified;

(b) the form in which notice for making provisional assess-

ment shall be given;

(c) the form in which appeals under section 11 or section 12

may be filed and the manner in which they shall be verified;

(d) the procedure to be followed on applications for recti- fication of mistakes and applications for refunds;

(e) any other matter which by this Act is to be, or may b", prescribed.

5 (3) The Central Government shall cause every rule made under this section to be laid as soon as may be after it is made before each House of Parliament while it is in session for a total period of thirty days, which may be comprised in one session or in two successive sessions, and if, before the expiry of the session in which it is so

io laid or the session immediately following, both Houses agree in making any modification in the rule or borh Houses agree that the rule should not be made, that rule shall thereafter have effect only in such modified form or be of no ieffect, as the case may be; so however that any such modification or annulment shall be without 15 prejudice to the validity of anything previously done under that rule.

26. Nothing contained in this Act shall apply to any company which has no share capital.

THE FIRST SCHEDULE

[See section 2 (5) ]

20

RULES FOR COMPUTING THE CHARGEABLE PROFITS

In computing the chargeable profits of a previous year, the total income computed for that year under the Income-tax Act shall be adjusted as follows:—

25

1. Income, profits and gains and other sums falling within the following clauses shall be excluded from such total income, namely:—

(1) any income chargeable under the Income-tax Act under the head "Capital gains";

(ii) any compensation or other payment as is referred 30

to in clause (ii) of section 23 of the Income-tax Act;

(iii) profits and gains of any business of life insurance;

(iv) any income referred to in sub-section (2) of section 41 of the Income-tax Act;

35

(v) the amount of profits and gains derived from an Industrial undertaking or hotel, on which under section 84 of the Income-tax Act income-tax is not payable-

5 (vi) income chargeable under the Income-tax Act under the head "Interest on securities" derived from any security of the Central Government issued or declared to be income- tax free or from any security of a State Government issued income-tax free, the income-tax whereon is payable by the State Government;

(vil) any sum in respect of which a deduction of income- tax is allowed under the provisions of section 88 of the Income-tax Act:

10 (viii) income by way of dividends from an Indian company or a company which has made the prescribed arrangements for the declaration and payment of dividends within India;

(ix) income by way of royalties received from Govern-

15 ment or a local authority or any Indian concern;

20 (x) in the case of a non-resident company which has not made the prescribed arrangements for the declaration and payment oi dividends within India, its income by way of any interest or fees for rendering technical services received from Government or a local authority or any Indian concern;

(xi) in the case of a banking company—

10 of 1949. -

25

(a) any sum which during the previous year is transferred by it to a reserve fund under sub-section (1) of section 17 of the Banking Companies Act, 1949 or is deposited by it with the Reserve Bank of India under sub-clause (ii) of clause (b) of sub-section (2) of section 11 of that Act, not exceeding the amount required under the aforesaid provisions to be so transferred or deposited, as the case may be, or

30

35

(b) any sum transferred by it during the previous year to any reserves in India including reserves not shown as such in its published balance-sheet in so far as the sums transferred to such reserves are attributable to income chargeable to tax under the Income-tax Act and have not been allowed as a deduction in computing its total income under that Act and in so far as the aggre- gate of such sums does not exceed the highest oi the aggregate of such sums, if any, so transferred during nnv nne of the three vears Drior to the orevious vear.

40 whichever is higher;

(xii) the amount of any deduction from the income-tax and super-tax chargeable on the total income allowed under

the annual Finance Act In connection with export of any goods or merchandise out of India or the sale by a manu- facturer of any articles to any person who export! them out of India.

S

2. The balance of the total income arrived at after making the exclusions mentioned ,in rule 1 shall be reduced by—

10

(i) the amount of income-tax and super-tax payable by the company in respect of its total income under the provisions of the Income-tax Act after making allowance for any relief, rebate or deduction in respect of income-tax and super-tax to which the company may be entitled under the provisions of the said Act or the annual Finance Act, and after excluding from such amount—

15

(a) the amount of income-tax and super-tax, if any, payable by the company in respect of any income referred to in clause (i) or clause (ii) or clause (iii) or clause (viii) of rule 1 included in the total income;

so

(b) an amount equal to the amount by which the rebate of super-tax admissible to the company under the provisions of the annual Finance Act is, under the provisions of the said Act, reduced with reference to any amount of dividends distributed by the company during the previous year relevant to the assessment year;

35

So

(ii) in the case of a company which has been charged to tax in a country outside India on any portion of its income, profits and gains included in its total income as computed under the Income-tax Act, the tax actually paid in respect of such income, profits and gains in the said country in accordance with the laws in force in that country after allowance of every relief due under the said laws:

Provided that the aforesaid reduction shall not b" allowed unless the assesses produces evidence of the fact of the payment of the aforesaid tax in that country.

3. The net amount of income calculated in accordance with B5

rule 2 shall be Increased by the aggregate of—

40

(i) the amount of any interest payable by the company in respect of its debentures or moneys referred to in clause (v) of rule 1 of the Second Schedule for the previous year relevant to the assessment year allowed as a deduction in computing its total income;

(ii) any expenditure incurred on account of commission, entertainment and advertisement, to the extent such expen- diture, in the opinion of the Income-tax Officer, is excessive having regard to the circumstances of the case :

5 Provided that the previous authority of the Inspecting Assistant Commissioner is obtained for holding such expenditure to be excessive.

THE SECOND SCHEDULE

[See section 2(8)]

RULES FOR COMPUTING THE CAPITAL OF A COMPANY FOR THE PURPOSES or

10

SURTAX

1. Subject to the other provisions contained in this Schedule, the capital of a company shall be the aggregate of the amounts, as on th" first day of the previous year relevant to the assessment year, of—

(i) its paid-up share capital ;

15

(ii) its reserves, if any, created under the proviso (b) to

11 of 1922.

43 of 1961.

clause (vib) of sub-section (2) of section 10 of the Indian Income- tax Act, 1922 or under sub-section (3) of section 34 of the Incom*- tax Act, 1961;

2O (iii) its other reserves as reduced by the amounts credited to such reserves as have been allowed as a deduction in comout- Ing the income of the company for the purposes of the Indian Income-tax Act, 1922 or the Income-tax Act, 1961;

11 of 1022.

43 of 1S61.

25 (iv) its debentures, If any; and

30 (v) any moneys borrowed by it from the Industrial Finance Corporation of India or the Industrial Credit and Investment Corporation of India or any other financial institution which the Central Government may notify in this behalf in the Official Gazette or any moneys borrowed by it from any banking insti- tution (not being a financial Institution notified as aforesaid) under an agreement providing for the repayment of such moneys during a period of not less than ten years, or any moneys borrowed from any person in a country outside India for the creation of any capital asset in India.

35 Explanation.—For the removal of doubts it is hereby declared that any amount standing to the credit of any account in the books of a company as on the first day of the previous year relevant to the assessment year which Is of the nature of item (5) or item (6) or item (7) under the heading "RESERVES AND SURPLUS" or oi

any item under the heading "CURRENT LIABILITIES AND

PROVISIONS" in the column relating to "LIABILITIES" in the "i'oitM

OF BALANCE-SHEET" given in Part I ol Schedule VI to the Companies

Act, 1956 shall not be regarded as a reserve for the purposes of com-

putation of the capital of a company under the provisions of this

Schedule.

2. Where a company owns any assets the income from which In accordance with clause (lii) or clause (vi) or clause (viii) of rule 1 of the First Schedule is required to be excluded from its total income

> in computing its chargeable pronts, the amount of its capital as com-

puted under rule 1 of this Schedule shall be diminished by the cost to

it of the said assets as on the first day of the previous year relevant

Jo the assessment year in so far as such cost exceeds tne aggregate

of—

. (i) any moneys borrowed [other than such moneys as are

referred to in clause (v) ol rule 1] and remaining outstanding as

on the hrst day of the said previous year; and

(ii) the amount of any fund, any surplus and any such

reserve as is not to be taken into account in computing .the

> capital under rule 1.

Explanation 1.—A paid-up share capital or reserve brought into

existence by creating or mcreasmg (by revaluation or otherwise) any

book asset is not capital for computing the capital of a company lor

the purposes of this Act.

Explanation 2.—Any premium received in cash by the company

' on the issue of its shaies standing to the credit of the share premium

account snail be regarded as forming part ol its paid-up snare capital.

.Explanation 3.—Where a company has different previous years in

respect of its income, prolits and gains, Jhe computation oi capital

j under rules 1, 2 and 3 shall be made with reference to the previous

year which commenced first.

3. Where after the first day of the previous year relevant to the

assessment year the capital of a company as computed in accordance

with the foregoing rules of this Schedule is increased by any amount

; during that previous year on account of increase of paid-up shaie capital or issue of debentures or borrowing of any moneys referred

to in clause (v) of rule 1 or is reduced by any amount on account of

reduction of paid-up share capital or redemption of any debentures

or repayment of any such moneys, such capital shall be increased or

> reduced, as the case may be, by a sum which bears to that amount

the same proportion as the number ol days of the previous year

during which the increase or the reduction remained effective beara to the total number of days in that previous year.

5 4. Where a part of the income, profits and gains of a company ii not includible in its total income as computed under the Income-tax Act, its capital shall be the sum ascertained in accordance with rules 1, 2 and 3, diminished by an amount which bears to that sum the same proportion as the amount of the aforesaid income, profits and gains bears to the total amount of its income, profits and gains.

THE THIRD SCHEDULE

!•

(See section 4)

RATES OF SURTAX

1. On the amount by which the chargeable profits exceed the amount of the statutory deduction—

40 per cent/

15

2?

25 Provided that where the total income of an asuessee, being an Indian company or any other company which has made the prescribed arrangements for the declaration and payment of dividends within India, includes any income, profits and gains attributable to the business of generation and distribution of electricity or of manu* facture or production of any one or more of the articles specified in the list in paragraph 2, the assessee shall be entitled to a rebate equal to a sum of one-fifth of the amount which bears to the amount of the surtax payable by the assessee, the same proportion as the amount of the aforesaid inclusion bears to the amount of the total income of the assessee :

30

35 Provided further that if the Central Government, having regard to the stage of development of any industry and other relevant factors, considers it necessary or expedient so to do, it may, at any time by general or special order withdraw the benefit conferred by the preceding proviso in respect of the business of generation and distribution of electricity or of manufacture or production of any article specified in the said list or extend such benefit to any other business and such order shall have effect for the purposes of assess- ment under this Act for any such assessment year (not being the assessment year commencing on the first day of April, 1964) as may be specified in the said order.

2. The list 01 articles referred to in paragraph 1 shall be as follows :—

(1) Iron and steel (metal), ferro-alloys and special at"eli.

(2) Aluminium, copper, lead and zinc.

(3) Coal, lignite, iron ore and bauxite.

5

(4) Industrial machinery specified under the heading "8. Industrial Machinery", sub-heading "A. Major items of specialised equipment used in specific industries", of the First Schedule to the Industries (Development and Regulation) Act, 1951.

•a ot 10B1 10

(5) Boilers and steam generating plants, steam engines and turbines and internal combustion engines.

(6) Equipment for the generation, transmission and distri-

bution of electricity, including transformers.

(7) Machine tools, precision tools, dies and jigs.

13

(8) Tractors and earth-moving machinery.

(9) Steel castings and forgings.

(10) Cement and refractories.

(11) Fertilisers.

(12) Paper and pulp.

30

(13) Tea, coffee and rubber.

M

(14) Component parts of the articles mentioned in items Nos. (4), (5), (6) and (8), that is to say, such parts as are essential for the working of the machinery referred to in items aforesaid and have been given for that purpose some special shape or quality which would not be essential for their use for any other purpose and are in complete finished form and ready for fitment

STATEMENT OF OBJECTS AND REASONS

The object of this Bill is to impose a special tax on companies (other than those which have no share capital) on their excess profits, namely, the amount by which the total income of a company as reduced by certain types of income and certain sums and the income-tax and super-tax payable by it exceeds a sum of ten per cent, of its capital, reserves and certain borrowed moneys or a sum of Rs. 2 lakhs, whichever is higher. The Notes on clauses explain the various provisions of the Bill.

T. T. KRISHNAMACHARI.

NEW DELHI; The 29th February, 1904.

PRESIDENT'S RECOMMENDATION UNDER ARTICLE 117 OF THE CONSTITUTION OF INDIA

[Copy of letter No. F. 3(16)-B/64, dated the 29th February, 1964 from Shri T. T. Krishnamachari, Minister of Finance to the Secre- tary, Lok SabhaJ

The President having been informed of "the subject matter of the proposed Bill, recommends under article 117(1) and (3) of the Constitution of India, the introduction of the Companies (Profits) Surtax Bill, 1964 in the Lok Sabha and elso recommends to the Lok Sabha the consideration of the Bill.

Notes on clauses

Clause 2 contains definitions of the various terms and expressions used in the clauses of the Bill.

Sub-clause (3) defines "assessment year" as being the period of twelve months commencing on the 1st day of April, every year.

Sub-clause (5) defines "chargeable profits" to mean the total income of the assessee for the previous year relevant to the assess- ment year as computed under the Income-tax Act, 1961 and adjusted in accordance with the provisions of the First Schedule.

Sub-clause (8) defines the term "statutory deduction" to mean an amount equal to ten per cent, of the capital of the company as computed in accordance with the Second Schedule or an amount of Rs. 2 lakhs, whichever is greater. The amount of the statutory deduction is required to ba adjusted in relation to the length of the previous year, if such year is longer or shorter than a period of 12 months.

Sub-clause (9) provides that all words and expressions used in the Bill but not defined therein and defined In the Income-tax Act, 1961 shall have the same meanings as In that Act.

Clause 3 seeks to give jurisdiction in respect of surtax to the iame authorities as have jurisdiction under the Income-tax Act, 1981.

Clause 4 seeks to make a provision for charging a tax named "surtax" on every company for the assessment year 1964-65 and subsequent assessment years on that amount of Its chargeable profits during the previous year or the years which exceeds the amount of statutory deduction admissible to It at the rate or rates specified in the Third Schedule.

Clause 5—

Sub-clause (1) seeks to impose a liability on the principal officer of every company, and in the case of a non-resident company, also on the person who has been treated as Its agent under section 163 of the Income-tax Act, 1961, to furnish a return of the chargeable profits of the company by the 30th day of September of the relevant assessment year, if such chargeable profits exceed the amount of the statutory deduction.

Sub-clause (2) seeks to enable the Income-tax Officer to issue a notice to a company requiring it to furnish a return of the chargeable profits within thirty days from the date of service of the notice.

Under both the sub-clauses, the Income-tax Officer has been authorised to extend the time for furnishing the return.

Sub-clause (3) seeks to enable an assessee who haa not furnished the return within the time allowed or who having furnished the return discovers any omissions therein, to file a return or a revised rsturn, as the case may be, at any time before the completion of the assessment.

Clause 6 provides that the Income-tax Officer may call for accounts, documents or other evidence from the assessee for the purpose of his assessment, and shall make the assessment after considering all the material so obtained by him.

Clause 7 enables the Income-tax Officer to make a provisional assessment of the chargeable profits of an assessee at any time after the expiry of the period allowed for filing a return, subject to the issue of a 14 days' notice to him inviting his objections, if any, to the proposed assessment. It has been provided that there shall be no right of appeal against such a provisional assessment and that the tax paid on the provisional assessment shall be deemed to have been paid towards the regular assessment.

Clause 8 relates to the assessment or re-assessment of chargeable profits which have escaped assessment or have been under-assessed etc. It provides that in the case of an omission or failure on the part of the assessee to file a return or to disclose fully and truly all the materials necessary for his assessment, such proceedings may be initiated at any time, and in other cases within four years of the end of the relevant assessment year.

Clause 9 seeks to make a provision for the imposition of a penalty on an assessee for his failure, without reasonable cause, to furnish a return of his chargeable profits or to produce the accounts, documents or evidence required by the Income-tax Officer, and for any conceal- ment or deliberate furnishing of inaccurate particulars of his charge- able profits.

Clause 10 provides that the assessee shall be given a reasonabla opportunity of being heard before any penalty under clause 0 Is imposed upon him.

Clause 11 relates to appeals by the assessees to the Appellate Assistant Commissioner against any order passed by the Income-tax Officer.

Clause 12 relates to appeals to the Appellate Tribunal by assessees or by the Income-tax Officer under the directions of the Commissioner of Income-tax against any order made by the Appellate Assistant Commissioner. It has been provided that in disposing of such appeals, the Tribunal shall exercise the same powers and follow the same procedure as it exercises and follows in disposing of any appeal under the Income-tax Act, 1961.

Clause 13 provides for the rectification of mistakes apparent from the record of any proceedings by the Commissioner of Income-tax, the Appellate Assistant Commissioner and the Appellate Tribunal, suo motu or at the instance of the assessee, within four years of the date on which the order sought to be rectified has been passed.

Clause 14 seeks to enable the Income-tax Officer to recompute the chargeable profits of the assessee in consequence of any order of rectification or amendment passed under section 154 or section 155 of the Income-tax Act, 1961, in relation to the relevant income-tax assessment of the assessee, within four years from the date of the latter order.

Clause 15 seeks to provide that the surtax payable by a company for a particular assessment year shall be deducted from its total income for that assessment year in computing its distributable income for the purposes of Chapter XI-D of the Income-tax Act, 1961.

Clause 16 enables the Commissioner to revise any orders passed by the Income-tax Officer which are prejudicial to revenue, within a period of two years from the date of the order sought to be revised.

Clause 17 enables the Commissioner to give relief to the assessee on revision of any orders passed by the Income-tax Officer or the Appellate Assistant Commissioner subordinate to him, either of his own motion or on an application by the assessee.

Clause 18 seeks to make applicable to the proceedings relating to surtax, certain provisions of the Income-tax Act, 1961 pertaining to various matters for which no separate provisions have been made in the Bill, e.g., issue and service of notice of demand, recovery of arrear tax dues, assessment proceedings in the case of non-resident through an agent, liability of directors or private companies in liquidation, reference to High Court, appeal to Supreme Court, etc. It also seeks to apply the provisions of the Income-tax (Certificate Proceedings) Rules, 1962 to the proceedings of recovery of arrears of surtax.

Clause 19 provides that all information contained in any statement or returns made by the assessees or furnished in any proceeding under the Income-tax Act, 1961, may be used for the purposes of proceedings relating to surtax and vice versa.

Clauses 20 to 23 (both inclusive) relate to prosecution for various offences by way of failure to deliver returns without any reasonable cause, making of false statements, abetment of false returns, and the composition of such offences.

Clause 24 seeks to enable the Central Government to make an exemption, reduction in rate or other modification in respect of surtax in favour of any class of assessees or in regard to the whole or any part of the chargeable profits of any class of assessees in order to remove any difficulty or avoid any hardship that may arise as a result of application of surtax to the Union territories of Dadra and Nagar Haveli, Goa, Daman and Diu and Pondicherry.

Clause 25 seeks to enable the Central Board of Direct Taxes to make rules for carrying out the purposes of this enactment and in this behalf, inter alia, to prescribe various forms such as the form of return of chargeable profits.

Clause 26 seeks to exclude companies which have no share capital from the purview of surtax.

The First Schedule lays down rules for the computation of the chargeable profits. Under its provisions, 'chargeable profits' are to be computed by excluding from the assessee's total income (as com- puted under the Incame-tax Act) certain items of income and sums which have been exempted from surtax; deducting from the balance amount the income-tax and super-tax payable by the company (subject to certain adjustments); and adding to the amount so arrived at, any interest payable by th? assessee In respect of debentures, and specified loans referred to in rule l(v) of the Second Schedule, and such amount of any expenditure on commission, entertainment and advertisement which may be considered by the Income-tax Officer (with the approval of the Inspecting Assistant Commissioner) to be excessive in the circumstances of the case.

The Second Schedule contains the rules for the computation of the capital of a company for the purpose of determining the amount of 'statutory deduction' admissible to a company. Under theae rules, the capital of a company consists of the amounts, as on the first day of the relevant previous year, of its paid-up capital, reserves (includ- ing the reserves required to be created under the Indian Income-tax

Act, 1922 and the Income-tax Act, 1961 for entitlement to develop- ment rebate), debentures and specified loans. If a company possesses assets, the income from which is not taken into account in computing the chargeable profits under certain provisions of the First Schedule, such as investments in shares of companies, the cost thereof (subject to certain adjustments for borrowed moneys not included in the capital of the company) is required to be deducted from the capital aforesaid.

The Third Schedule lays down that surtax shall be charged at the

rate of 40 per cent, of the amount by which the chargeable profits of a company for the relevant previous year exceed the amount of the statutory deduction admissible to it. It also provides that an Indian company or a company which has made the prescribed arrange- ments for the declaration and payment of dividends within India shall be entitled to a rebate calculated at 20 per cent, of that part of the surtax which is attributable to any profits derived by it from the business of the generation and distribution of electricity or of the manufacture or production of any one or more of the articles specified in the list contained in the said Schedule. It also provides that the Central Government may, by issue of a notification in the Official Gazette, exclude any articles from or add any item to the said list for the purposes of an assessment for any assessment year subsequent to the assessment year 1964-65.

FINANCIAL MEMORANDUM

The Bill seeks to impose a new tax on all companies other than companies having no share capital. This tax will be administered by the Income-tax Department but its proceedings relating to assessment, collection and revision and appeals will be separate from that of income-tax. However, some incidental expenditure on the administration of the Act may be involved, the extent of which cannot be foreseen at present.

MEMORANDUM REGARDING DELEGATED LEGISLATION

Clause 25 empowers the Board to make rules for carrying out the purposes of the Act. The matters In respect of which such rules may be made pertain to the form in which returns under section 5 may be furnished, the form in which notice for making provisional assess- ment shall be given, the form in which appeals under the Act may be filed and the procedure that may be followed on application for rectification of mistakes and application for refunds. The matters in respect of which rules will be made are matters of procedure, form or detail.

The delegation of legislative power is, therefore, of a normal character.

M. N. KAXJL,

Secretary.

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