REGISTERED NO. D. 221
The Gazette of India
EXTRAORDINARY
PART II—Section 3—Sub-section (ii)
PUBLISHED BY A U T H O R I TY
No. 47] NEW DELHI, TUESDAY, MARCH 9, 1965/PHALGUNA 18, 1886
Separate paging is given to this Part in order that it may be filed as a separate compilation
CENTRAL BOARD OF DIRECT TAXES
NOTIFICATION
INCOME-TAX
New Delhi, the 8th March 1965
S.O. 860.—In exercise of the powers conferred by section 295 of the Income- tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:—
1. These rules may be called the Income-tax (Third Amendment) Rules, 1965,
2. In the Income-tax Rules, 1962 (hereinafter called the principal rules) rule 6A shall be re-numbered as rule 6E and before rule 6E as BO re-numbered, the following rules shall be inserted, namely:—
'6A. Limits and conditions for allowance of expenditure in certain canes.
Expenditure referred to in sub-section (3) of section 37 shall be allowed only to the extent and subject to the conditions specified in rules 6B, 6C and 6D:
Provided that In the case of such expenditure incurred before the 1st day of April, 1965, the full amount thereof, If otherwise admissible under sub-section (1) of section 37, shall be allowed.
(143)
144
'1'Hfe GAZfcTTfe OF INDIA EXTRAOkDINARV [tourtfk •
8B. Expenditure on advertisement.—(1) The allowance in respect of expenditure on advertisement shall not, in the following cases, exceed the amount specified hereunder:—
(a) in respect of each advertisement In any printed publication other than
a newspaper, Rs, 2,000/-.
Explanation.-—"Newspaper" shall have the meaning assigned to it in clauaw (b) of section 2 of the Working Journalists (Conditions of Service) and Miscellaneous Provisions Act, 1955 (45 of 1955);
(b) in respect of articles intended for presentation, Rs. 50 on each such
article;
(c) in respect of any advertisement outside India involving payment in foreign currency, the amount covered by foreign exchange granted to, or permitted to be acquired by, the assessee for this purpose under the law relating to foreign exchange for the time being in force.
(2) The allowance in respect of expenditure on advertisement shall not exceed—
(a) (i) in respect of the business of production of motion pictures, seven per cent, of the cost of production of each picture;
(il) in respect of the business of production-cum-distribution of motion pictures*, ten per cent, of the cost of production of each picture:
Provic-ed that any allowance under this clause In respect of expenditure on advertise nent before the release of the picture shall not exceed five per cent, of the cost of production.
Explanation.—For the purposes of this clause, "cost of production" shall be computed without taking into account the expenditure incurred on advertisement;
(b) in respect of the business of distribution of motion pictures, five per cent, of the gross receipts;
(c) in respect of any business relating to entertainment other than those refer- red to in clause (a) or clause (b), or any profession relating to entertainment, ten per cent, of the gross receipts or Rs. 10,000, whichever is higher;
(d) in respect of any business which consists wholly or mainly of international transport, two and a half per cent, of the gross receipts,
Explanation.—For the purposes of this clause, a business shall be deemed to consist tnalnly of international transport, if the amount of gross receipts attribut- able to the said activity included in the aggregate gross receipts for the relevant previous year Is not less than fifty-one per cent, of such aggregate gross receipts;
(e) in respect of any business or profession, other than those referred to in clauses (a), (b), (c), (d) and (f) the aggregate of the amounts computed as hereunder:
on the first Rs. 25,00,000/- of the turnover,
(i)
or, at the case may be, the gross receipts at the rate of two per cent., or R§.
5,000/-, whichever is higher ;
(ii)
at the rate of one per cent.;
(iii)
at the rate of one-half per cent.;
(iv)
on the next Rs. 23,00,000/- of the turnover, or, as the case may be, the gross receipts . on the next Rs. 50,00,000/- of the turnover, or, as the case may be, the gross receipts on the balance of the turnover, or, as the case may be, the gross receipts . . .. at the rate of one-fourth per cent.;
(0 in the case of any hotel or restaurant which has regularly provided during the relevant pre- vious year a cabaret for the entertainment of its customers
An amount determined under th" provisions of sub-clause (e) •• increased by ten per cent, thereof.
(3) Except in a business of production or production-cum-distribution of motion pictures, the allowance In respect of expenditure on advertisement shall in no case exceed a sum which bears to the turnover, or, as the case may bej the gross receipts, of the relevant previous year, the same proportion as the aggre- gate of the amount of expenditure on advertisement actually allowed in computing
_- • ' Af < Gi i . K: . . „ ^
the Income of the assessee for each of the three previous years immediately pre- ceding such previous year bears to the aggregate amount of the turnover, or, as tho case may be, the gross receipts, of the aforesaid three previous years:
Provided that where the business or profession was newly set up in the last year but one, or in the last, of the said three previous years, the references In this sub-rule to the said three previous years shall be construed as references to the last two, or, as the case may be, the last, of those previous years;
Provided further that nothing in this sub-rule shall apply to the determination of the allowance in respect of such expenditure Incurred In a business or profession newly set up in the relevant previous year.
(4) Nothing contained in sub-rule (2) or sub-rule (3) shall apply to—
(a) the computation of the profits and gains derived from any industrial undertaking which fulfils the conditions mentioned in clauses (i), (II) and (iv) of sub-section (2) of section 84 for the assessment year relevant to the previous year in which it begins to manufacture or produce articles within any part of India, and for the two assessment years immediately succeeding; or
(b) any expenditure on advertisement outside India, Involving payment In
foreifin currency. Incurred by a person who—
(I) carries on any business of exporting Roods or merchandise out of India or is engaged In the business of international transport or carries on any business or profession which involves the rendering of technical service outside India, or
(11) is engaged In the manufacture of any article In an industry specified in the First Schedule to the Industries (Development and Regula- tion) Act, 1951 (65 of 1951), nnd either himself exports such articles out of India or sells them to any other person In India who exports them out of India,
to the extent covered bv foreign exchange, granted to or p emitted to be acquired by him for this purpose under the law renting to foreign exchange for the time beim? in force,
(5) Where in relation to a portion of tbe amount of expenditure on advertise- ment incurred by the assessee the provisions of sub-rule (4) apply, the turnover sub rule % W, Ty ?*i ^ ^T ^^ f°r t he P r o s es o • sub-rule (2? and sub-rule (3) shall not include the turnover, or: ns the case mav be the"rn™ receipts, attributable to the business or profession referred to IrT sub-rule (4)
(6) For the purposes of this rule, rule 6C and rule 6D—
(i) "turnover" means the aggregate of all amounts for which sales of anv stock-in-trade have been effected bv the assesses during the -el J ^ rf previous year In the course, of his business and cred ted to th, manu facti.rlng account or trading amount or profit and loss account™ Hi) "gross receipts" means the aggregate of all amounts received or receiv able by an assessee during the relevant previous year in the course of his business or profession (other than receipts which a -e of n
ffiJcffl.^ nnd CrCdit6d t0 thc revenue
fnd
a-ounTh
Orhp?oit°S
T h e ^ w a ^ i r ^ ^ ^ ^^ """* hous,,-(1) PccommodSIn th"nature of a g u e s f i f o u ^ * r h ^ ^- ance of residential a referred to as guest house) shall not, in the following %l h™£e(jfj.reu""er
than 0 fiuest wh£ is S :^ • "! s^Setvr^Stre9 s ^r £the -p i a ce Since of such onn of the guest houses as wb , r e cK ?£> m a i n t e n~ ^ant^ssSsmS^a? ^^ nOt ^ ^ ^ " ^ ^ A ^ S ^ tS ^J^%^T^T^^^^^^^ on t he maintennnce of such one of the eue?t n o u ^' ^ r ^P evd i t u re faf>urred the assessee in writing to the Income-tax " o f f i c e - n o" later ? h ?n t h ^ ^^ hl APTII of the relevant assessment year;
h an t he l at day of
!46 THE GAZETTE OF INDIA EXTRAORDINARY JPABT II-
(b) where the BSses
Provided that at t.hnt place not less than twenty-five per cent, of such acquisi- tion, processing, production or sale, as the case may be, has taken place during the previous year;
(c) where an ass^ssee maintains a guest house at any place other than the places referred to in c'auses (a) and (b), the expenditure incurred on the main- tenance of the guest house, or where the assessee maintains two or more such guest houses, the expenditure incurred on the maintenance of the two guest houses, or, as the cas" may be, on such two of the guest houses, as may be specified by him in vrHing to the Income-tax Officer not later than the 1st day of April of the relevant assessment year:
Provided that the assessee has in his employment not less than 500 whole- time employees throu<7^out the relevant previous year and the guest house Is, or the guest houses a^e, maintained mainly for the use of the whole-time employees drawing salary not exceeding Rs. 1,000/- per month.
(2) The allowance in respect of expenditure incurred by an assessee on the maintenance of a guest house, or, as the case may be, guest houses, shall in no case exceed—
(a) in respect of the guest houses specified in clauses"1 (a) and (bi'of sub-nuV(i), the aggre- gate of the amounts computed as hereunder :
at the rate of one-half per cent ; and (i) on the first Ra. 2<,oo,oooof the turnover, or, as the case may be, gross receipts • (ii) on the balance of the turnover, or, aa the
case may be, gross receipts
at the rate of one-tenth per cent.;
(ft) in respect of a guest house, or, guest houses,
specified in clause (c) of sub-rule (i) . one half per cent, of the aggregate salary payable during the relevant previous year (or for such part of the relevant previous year for which theXguest house or guest houses have been maintained) to the whole-time employees drawing salary not exceeding Rs. i,ooo per month.
(3) The allowance in respect of expenditure incurred by an assessce on the maintenance of anv rpg;dential accommodation which results directly or in- directly in the provision of any benefit or pmenity or perquisite to an employee shall not exceed twenW -ner cent, of the salary duo to such errmloyee in respect of the period of his occupation of the said accommodation during the relevant previous year.
(4) Nothing contained In this rule shall apply to expenditure to which the provisions of sub-clause (iii) of clause (c) of section 40 apply.
(5) No allowance shnll be made in respect of expenditure incurred pn the maintenance of any residential accommodation in the nature of a guest house unless the assessee maintains a register in Form No. A in respect of the accom- modation.
(8) For the purposes of this rule and rule 6D, the expression "salary" shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule.
6 D. E x p e n d i t u re in c o n n e c t i on w i th t r a v e l l i n g, e t c .— ( 1) (]) Tht> a l l o w a n ce in respect of expenditure incurred by an assessee in connection with travelling by an employee or any other person outside India for the purposes of the busi- ness or profession of the assessee shall not exceed the amount which bears to
Sto ©A > OF L A J 147
the aggregate oi the amount, If any, covered by foreign exchange grantea or permitted to be acquired, for the purpose of such travel under the law relating to foreign exchange for the time being in force and the amount expended on such travel in Indian currency, the same proportion as 13 determined in tn" manner specified in clause (ii);
(ii) the proportion referred to in clause (i) shall be determined by dividing the number of days required for such travel by a reasonably direct route in the purposes of the business or profession of the assessee outside India, by the total number of days spent by such employee or other person outside India (excluding the number of days required for such travel by a reasonably direct route in the mode of travel adopted by him).
(2) The allowance in respect of expenditure incurred by an assessee in con- nection with travelling by an employee or any other person within India outside the headquarters of such employee or other person for the purposes of the busi- ness or profession! of the assessee shall not exceed the aggregate of the amounts computed as hereunder:—
(a) in respect of travel by road, rail, water-way or air, the actual fare
paid;
(b) in respect of travel involving journey by road otherwise than by taking a single seat in any public conveyance which plies regularly for hire between fixed points and charges fixed rates, the amount calculated at the rate 01 82 paise per kilometre;
(c) in respect of any other expenditure (including hotel expenses or allowances paid) in connection with such travel, an amount calculated at the following rates for the period spent outside such headquarter!)—
For the period other than that referred to in column
{{^{{FOOTNOTE (1)}}}}
For the period spent at Bombay, Calcutta, Delhi 01 Madras.
CO
W
Rs.
Rs.
80 per day or part thereof
40 per day or part thereof (0 In respect of an employee whose salary is Rs. 2,000 per month or more.
50 per day or part thereof
(Ii)
25 per day or part thereof In respect of "n employee whose salary is Rs. 1,000 per month or more but is less than Rs. 2,000 per month.!
In reapect of any other employee 25 per day or part thereof
(iii)
15 per day or part thereof
(iv) In"1 respect of any other person (including a Director of a company, who is not an em- ployee of the company)!
An amount calculated at th" rates applicable In th" case of the highest-paid employee of the aasesset :
An amount calculated at the rates applicable in the case of the highest- paid employee of the ass- essee.
Provided that in a case where such emp}oyee or other person (including a Director of a company, who is not an employee of the company) on any day of his stay outside his headquarters, stays free of charge in any residential accom- modation in the nature of a guest house maintained by the assessee' the amount under this clause shall be calculated at one-half of'the aforesaid rates.
(3) The allowance in respect of expenditure in connection with travelling by an employee or any other person shall not, in the case of any assesaee exceed a sum which bears to the turnover, or, as the case may be, the cross 'receipts of the relevant previous year the same proportion as the aggregate amount of expenditure on travelling actually allowed in assessing the income of the assessee for the three previous year* immediately preceding the said previous year
,148
"
J 3-
bears to the aggregate amount of the turnover, or, ns the case may be, the gross receipts of the aforesaid three previous years:
Provided that where the business or profession was newly set up in the last year but one, or in the last, of the said three previous years, the references In this sub-rule to the said three previous years shall be construed as references to the last two, or, as the case may be, the last, of those previous years:
Provided further that nothing in this sub-rule shall apply to the determina- tion of the allowance in respect of such expenditure incurred in a Business or profession newly set up in the relevant previous year.
(4) No allowance shall be made in respect of expenditure in the mainten- ance and running of a motor-car or other conveyance for the purposes of the business or profession unless the asaessee maintains a register in Form No. B in respect of such motor-car or other conveyance.'
3. After Appendix I to the principal rules, the following Appendix shall be Inserted, namely:—
"APPENDIX IA
! t
a
f t
>
FOKM NO. A (See rule 6 C)
* (
l i ) ] Register in respect ofresidential acccn.mcdau r in the nature oj a guest house mamUiitMdfor the purposes of the business or prcfeaic
Name of the person using
If the person
tbe accommodative
Date of arriTal
Date of departure
Signature of the person
Details of char- ges, if any, paid by the person
T H E If tbe person is an employee of tbe assessee, his designation & headquarters
If not an em- ployee of tbe assessee, full address and occupation
Whether the visit is for the purposes of the business or pro- fession of the assessee
is accompanied by members of his family or any other per- son, particulars
thereof
G A Z E T T E
(3)
(6)
( 2)
(4)
(5)
(7)
(8)
(9) CO
O F
i
N D
I
A
E X
t f r
A O W
t t
N A
i
V
t
$
i
$
i
FORM N O. B
>
(See rule 6D)
Register t* respect of•motor-car or other conveyance used for the purposes of the business or proj'as'cn
Signature of the
Distance
Period of use
Reading of meter
Remarks
T H E
person using the
covered
Place visited and purpose of visit
Date
conveyance
At the
Name and desig- nation of the person using the conveyance
To (Hours)
At the cemmenc- ment of the trip
From (Hours)
G A
conclu- sion of the trip
z r r r e
o
t
(6)
(3)
(3)
(4)
(5)
(7)
(8) ( i)
I
N D U
E X T
I
U O R W N A
I I
Y
[No. 20/F. No. l ( I 4 1 ) - 6 4 / T P L]
V. RAMASWAiC IYER, Secy.
p * "
i t - s i
c
.
4
(
H PSLNTH) IN INDIA BY TUB SSTZRAL M A K A O S, GOVE&NXBHT OF INDIA FBE3S, NXW DELHI AND FTTEUBHK MY THB MAJCASHI OF PUBLICATIONS, DELHI, 1 9 55
)
}