TAXATION LAWS (AMENDMENT) ACT, 1984 – CIRCULAR NO. 394, DATED 14-9-1984 AND CIRCULAR NO. 397, DATED 16-10-1984
I
Amendments at a glance
SECTION/SCHEDULE PARTICULARS
Income-tax Act
| 9(1)(i), Expln. | Exemption of foreign film producers from taxation of |
| (d) | income attributable to shooting of cinematograph films in India 4 |
| 10(5A) | Exemption of remuneration received for rendering services in connection with shooting of cinematograph films by foreign film producers 5 |
| 10(10AA), | Clarification regarding scope of exemption in respect |
| 17(1)(va) | of payments received for not availing of leave 6 |
| 10(13A), Expln. | Clarification regarding scope of exemption in respect of house rent allowance 7 |
| 16(i), Expln. | Ceiling on standard deduction in the case of salaried taxpayers 8 |
| 23(1), 2nd prov. | Deduction in respect of newly constructed residential units let out on rent 9 |
| 54E(1), | Extension of time for reinvestment in cases where |
| 2nd prov. | compensation for compulsory acquisition is delayed 10 |
| 80C(2)(g)/(h), | Expression �consisting only of husband and wife governed |
| 80CC(1)(c), | by system of community of property in force,� used in |
| 80L(1)(c) | sections 80C, 80CC and 80L, to qualify expressions �association of persons� and �body of individuals� 11 |
| 80L(3) | Exemption under section 80L in the case of partners of firms 12 |
| 132(5) and | Extension of time for making summary assessments in |
| Expln. | cases of search and seizure 13 |
| 132(11)/(11A), | Application against an order under section 132(5) to lie |
| 130(2) | to the Commissioner 14 |
| 132B(4)(a), | Increase in the rate of interest chargeable from |
| 139(8)(a), | assessees, and also payable to assessees, by Govern- |
| 201(1A), | ment under the provisions of the Income-tax Act 15 |
| 213 (prov.), | |
| 214(1), 215(1), | |
| 216, 217(1), | |
| 220(2), 243(1), | |
| 244(1), 269K(4) | |
| And rule | |
| 60(1) (a) of | |
| 2nd Sch. | |
| 144B(1) | Discontinuance of the procedure under section 144B relating to reference to Inspecting Assistant Commissioners 16 |
| 146(1) | Withdrawal of the power of Income-tax Officer to cancel ex parte assessment and make fresh assessment 17 |
| 153(1)(c) | Time limit for completion of assessments in certain cases 18 |
| 153, Expln. | Period of limitation in the case of declaration under |
| 1(iva) | section 158A 19 |
| 154(1), (7) | Rectification of mistakes 20 |
| 155(1)(c),(2)(c) | Amendment of section 155 relating to rectification by |
| (4), (7),(8),(9), | the ITO in certain cases 21 |
| (10)(a), (10A), | |
| (10C) | |
| 158A | Special provision for avoiding repetitive appeals 22 |
| 186(4) | Cancellation of registration 23 |
| 187(2), Prov. | Change in the constitution of a firm 24 |
| 220(2A) | Reduction or waiver of interest chargeable for default in payment of tax, etc. 25 |
| 231 | Extension of period of limitation for commencing recovery proceedings 26 |
| 245A(a) | Definition of �case� for the purposes of settlement cases 27 |
| 245C(1) to (1E) | Application for settlement of cases 28 |
| 245D(1A), (2A) | Procedure on receipt of application under section |
| to (2D), (6), | 245C 29 |
| (6A), (8) | |
| 245E | Power of Settlement Commission to reopen completed proceedings 30 |
| 245H(1) | Power of Settlement Commission to grant immunity from prosecution/penalty 31 |
| 245M(1) | Persons, who have filed appeals to Tribunal, entitled to make applications to Settlement Commission 32 |
| 246(2)(d), (ff) | Orders appealable to the AAC 33 |
| 253(1)(b) | Appeals to the Appellate Tribunal 34 |
| 263(1), | Revision of orders prejudicial to revenue 35 |
| Expln. (2) | |
| 271(1), | Penalty for certain defaults 36 |
| Expln. 5 | |
| 273A(1) | Power to reduce or waive penalty 37 |
| (Expln. 2), | |
| (2)(a), (4), | |
| (prov.) | |
| 279(1) | Prosecution for offences 38 |
| 288(3) | Appearance by authorised representative 39 |
| Wealth-tax Act | |
| 5(1)(xxxiii) | Exemption of moneys/value of assets brought into India by persons of Indian origin 40 |
| 8A | Power of Commissioner respecting specified areas, cases, etc. 41 |
| 17A, Expln. | Time limit for completion of assessment and reassess- |
| 7(iia) | ment 42 |
| 18(1), Expln. 5 | Penalty for certain defaults 43 |
| 18B(1), | Expln. 2 Power of Commissioner to reduce or wave penalty 44 |
| 18C | Special provision for avoiding repetitive appeals 45 |
| 22A(a) | Definition of �case� for the purposes of settlement of cases 46 |
| 22C(1) to (1E) | Application for settlement of cases 47 |
| 22D(2A) to (2D), | Procedure on receipt of an application under section |
| (6), (6A), (8) | 22C 48 |
| 22H(1) | Powers to Settlement Commission to grant immunity from prosecution 49 |
| 22M(1) | Persons who have filed appeals to the Appellate Tribunal entitled to make applications to the Settlement Commission 50 |
| 25(2), (Expln.) | Powers of Commissioner to revise order of subordi- |
| (3) | nate authorities 51 |
| 31(2), 34A(3) | Increase in the rate of interest chargeable from or payable to assessees 52 |
| 31(2A) | Reduction or waiver of interest chargeable for default in payment of tax, etc. 53 |
| 34ACC, 35EE | Furnishing of particulars/penalty for failure to furnish particulars 54 |
| 35(7) | Rectification of mistakes 55 |
| GIFT-TAX ACT | |
| 2(va) | Definition of �charitable purposes� 56 |
| 7A | Power of Commissioner respecting specified areas, cases or persons by new section 57 |
| 24(2) [(Expln.), | Powers of Commissioner to revise orders of subordinate |
| (3)] | authorities 58 |
| 32(2), 33A(3) | Increase in the rate of interest chargeable or payable to assessees 59 |
| 34(7) | Rectification of mistakes 60 |
| Surtax Act | |
| 7B, 7C(1)/(2)/ | Increase in the rate of interest chargeable from or |
| (3)/(4), 7D | payable to assessees 61 |
| 13(1) | Rectification of mistakes 62 |
| 14 | Other amendments 63 |
| 16(1), (Expln.), | Revision of orders prejudicial to revenue 64 |
| (2) | |
| Compulsory Deposit Scheme (ITP) Act | |
| 13(1) | Rectification of mistakes 65 |
| Interest-tax Act | |
| 17(1) | Rectification of mistakes 66 |
| 19(1), (Expln.), | Revision of orders prejudicial to revenue 67 |
| (2) |
Amendments to Income-tax Act
Taxation Laws (Amendment) Act, 1984-I
Exemption of foreign film producers from taxation of income attributable to shooting of cinematograph films in India
4.1 The Amending Act has inserted a new clause (d) in the Explanation to clause (i) of sub-section (1) of section 9 of the Income-tax Act relating to income deemed to accrue or arise in India.
Taxation Laws (Amendment) Act, 1984-I
4.2 Under section 9(1)(i) of the Income-tax Act, an income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India, is deemed to accrue or arise in India.
Taxation Laws (Amendment) Act, 1984-I
4.3 The new clause (d) of the aforesaid Explanation provides that, in the case of a non-resident, no income shall be deemed to accrue or arise in India through or from operations which are confined to the shooting of any cinematograph film in India if such non-resident is�
(a) an individual who is not a citizen of India ; or
(b) a firm which does not have any partner who is a citizen of India or who is resident in India ; or
(c) a company which does not have any shareholder who is citizen of India or who is resident in India.
The aforesaid provision takes effect retrospectively from 1st April, 1982 and will, accordingly, apply in relation to the assessment year 1982-83 and subsequent years.
[Section 3 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Exemption of remuneration received for rendering services in connection with shooting of cinematograph films by foreign film producers
5.1 The Amending Act has inserted a new clause (5A) in section 10 of the Income-tax Act relating to incomes not included in total income.
Taxation Laws (Amendment) Act, 1984-I
5.2 New clause (5A) provides that in the case of an individual who is not a citizen of India and is a non-resident, who comes to India solely in connection with the shooting of a cinematograph film in India by the individual, firm or company referred to in new clause (d) of the Explanation to section 9(1)(i) of the Income-tax Act, any remuneration received by him for rendering any service in connection with such shooting shall not be included in computing the total income of such individual.
Taxation Laws (Amendment) Act, 1984-I
5.3 The aforesaid provision takes effect from 1st April, 1982 and will, accordingly, apply in relation to the assessment year 1982-83 and subsequent years.
[Section 4(a) of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Clarification regarding scope of exemption in respect of payments received for not availing of leave
6.1 Section 10(10AA) of the Income-tax Act provides exemption in respect of amounts received by a person on retirement from service by way of cash equivalent of unutilised earned leave. In the case of persons who are not employed by the Central Government or any State Government, the exemption under this provision is subject to an overall ceiling, which currently stands at Rs. 30,000.
Taxation Laws (Amendment) Act, 1984-I
6.2 It has come to notice that attempts have been made by taxpayers to claim exemption under the aforesaid provision in respect of payments received by them for not utilising leave even while in service. With a view to avoiding litigation on this point, the Amending Act has made two amendments to put the underlying intention beyond doubt.
Taxation Laws (Amendment) Act, 1984-I
6.3 Under one of the amendments, a new sub-clause (va) has been inserted in clause (1) of section 17 of the Income-tax Act to provide that any payment received by an employee in respect of any period of leave not availed of by him shall be regarded as �salary�. The other amendment has been made in section 10(10AA) of the Act to clarify that the exemption under the aforesaid provision shall be allowed only where the payment is received by the employee on his retirement, whether on superannuation or otherwise. The combined effect of the two aforesaid amendments will be that payments received by an employee in respect of any period of leave not availed of by him will be exempt from income tax only in cases where such payments are received on retirement and subject to the fulfilment of the other conditions laid down in section 10(10AA) of the Income-tax Act.
Taxation Laws (Amendment) Act, 1984-I
6.4 Both these amendments have been made with retrospective effect from 1st April, 1978, that is, the date from which clause 10(10AA) was inserted in section 10 of the Income-tax Act by the Finance Act, 1982. The provisions of section 10(10AA) and section 17(1) as amended will, therefore, apply in relation to the assessment year 1978-79 and subsequent years.
[Section 4(b) and section 7(1) of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Clarification regarding scope of exemption in respect of house rent allowance
7.1 Section 10(13A) of the Income-tax Act exempts any special allowance specifically granted to an assessee by his employer.
Taxation Laws (Amendment) Act, 1984-I
7.2 In the case of CIT v. Justice S.C. Mittal [1980] 121 ITR 503, the Punjab and Haryana High Court has held that exemption under the aforesaid provision would be admissible where the assessee suffers monetary loss by way of expenditure or otherwise in respect of residential accommodation occupied by him. According to the High Court, an assessee, who occupied his own house, disentitled himself from the rent which he would have been entitled to if he had not occupied the same himself and, in that sense, he suffered expenditure in that regard. The High Court, therefore, held that an assessee occupying his own house, if compensated by the employer by payment of house rent allowance, will be entitled to the benefit of exemption under section 10(13A) of the Income-tax Act. This decision has been followed by the Punjab and Haryana High Court in the case ofCIT v. Justice M.S. Gujral [1980] 125 ITR 655 where the assessee was residing in the house owned by the Hindu undivided family of which he was a member.
Taxation Laws (Amendment) Act, 1984-I
7.3 As the decisions of the Punjab and Haryana High Court are not in conformity with the underlying intention, the Amending Act has inserted an Explanation to clause (13A) of section 10 of the Income-tax Act. The new Explanation declares, for the removal of doubts, that nothing contained in the aforesaid clause (13A) shall apply in a case where (a) the residential accommodation occupied by the assessee is owned by him ; or (b) the assessee has not actually incurred expenditure on payment of rent (by whatever name called) in respect of the residential accommodation occupied by him.
Taxation Laws (Amendment) Act, 1984-I
7.4 The aforesaid amendment takes effect from 1st April, 1976.
[Section 4(c) of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Clarificatory amendment regarding ceiling on standard deduction in the case of salaried taxpayers
8.1 Salaried taxpayers are entitled to a standard deduction under section 16(i) of the Income-tax Act at the rate of 25 per cent of the salary subject to a maximum of Rs. 6,000. In cases where a person is employed with more than one employer, it has been claimed that the monetary ceiling of Rs. 6,000 will apply separately in computing the taxable salary received by the person from each employer. Such an interpretation of the relevant provisions would not be in conformity with the underlying intention. With a view to avoiding litigation on this point, the Amending Act has inserted an Explanation to clause (i) of section 16 of the Income-tax Act. The new Explanation declares, for the removal of doubts, that where, in the case of an assessee, salary is due from, or paid or allowed by, more than one employer, the deduction under the aforesaid provision shall be computed with reference to the aggregate salary due, paid or allowed to the assessee and shall in no case exceed the amount specified under the said provision. Hence, any claim that the monetary ceiling laid down in section 16(i) of the Income-tax Act should be applied separately in the case of persons who are employed with more than one employer stands clearly debarred by virtue of the provision contained in the aforesaid Explanation.
Taxation Laws (Amendment) Act, 1984-I
8.2 The aforesaid amendment takes effect from 1st April, 1975, that is, the date from which a standard deduction under section 16(i) of the Income-tax Act was provided for by the Finance Act, 1974. The aforesaid amendment will, accordingly, apply in relation to the assessment year 1975-76 and subsequent years.
[Section 6 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Deduction in respect of newly constructed residential units let out on rent
9.1 The second proviso to section 23(1) of the Income-tax Act provides for a deduction in the computation of income from house property for a period of five successive years after the completion of new residential buildings let out on rent. In the case of residential units the erection of which is completed after 31st March, 1982, deduction is allowed at the rate of Rs. 3,600 in respect of each such unit. However, where the annual value of the residential unit as determined under section 23(1) does not exceed Rs. 3,600 the deduction is limited to the amount of such annual value. The aforesaid second proviso ends with the following words :
�so, however, that the income in respect of any residential unit referred to in clause (a) or clause (b) or clause (c) or clause (d) is in no case a loss.�
Taxation Laws (Amendment) Act, 1984-I
9.2 Apprehensions had been expressed that the above quoted words may be construed to imply that no loss shall be allowed in respect of such new residential units even when the loss may arise as a result of other deductions claimed by the assessee, as for instance, interest paid on borrowed capital for purposes of constructing the residential building. With a view to removing any controversy or doubt in the matter, the above quoted words have been omitted from the aforesaid second proviso. This would secure that the deduction admissible to the assessee under the provisions of section 24 of the Income-tax Act in computing the income from house property shall not be limited to the annual letting value of the house property as arrived at after providing for the deduction under the said second proviso.
Taxation Laws (Amendment) Act, 1984-I
9.3 The aforesaid amendment takes effect from 1st April, 1984 and will, accordingly, apply in relation to the assessment year 1984-85 and subsequent years.
[Section 8(b) of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Extension of time for reinvestment in cases where compensation for compulsory acquisition is delayed
10.1 Section 54E of the Income-tax Act provides for exemption of capital gains in cases where the net consideration arising from the transfer of a long-term capital asset is reinvested within six months in specified financial assets, namely, the National Rural Development Bonds and special series of units of the Unit Trust of India notified by the Central Government in this behalf. The time of six months allowed for reinvestment may, however, not be adequate in some cases of compulsory acquisition where the whole or a part of the compensation is not immediately paid by the Government.
Taxation Laws (Amendment) Act, 1984-I
10.2 With a view to avoiding hardship in such cases, the Amending Act has inserted a second proviso to section 54E(1) of the Income-tax Act to provide that in a case where the full amount of compensation awarded for compulsory acquisition of an asset is not received by the assessee on the date of such acquisition, the period of six months referred to in the said provision shall, in relation to so much of such compensation as is not received on the date of the transfer, be reckoned from the date immediately following the date on which such compensation is received by the assessee.
Taxation Laws (Amendment) Act, 1984-I
10.3 The aforesaid amendment takes effect from 1st April, 1984 and will, accordingly, apply in relation to the assessment year 1984-85 and subsequent years.
[Section 16 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Clarificatory amendment of sections 80C, 80CC and 80L of the Income-tax Act
11.1 Section 80C(2)(g) of the Income-tax Act provides for deduction of savings made in specified forms by an association of persons or a body of individuals consisting only of husband and wife governed by the system of community of property in force in the Union territories of Dadra and Nagar Haveli and Goa, Daman and Diu. Section 80C(2)(h) similarly specifies another mode of savings by such associations or bodies, besides individuals and Hindu undivided families. Section 80CC of the Income-tax Act also provides for deduction in respect of investment in certain new shares by such associations and bodies, besides individuals and Hindu undivided families. Section 80L of the Income-tax Act also provides for deduction in respect of income from investment in specified financial assets to such associations and bodies, besides individuals and Hindu undivided families.
Taxation Laws (Amendment) Act, 1984-I
11.2 The aforesaid sections have been misconstrued in certain appellate orders to imply that the expression �consisting only of husband and wife governed by the system of community of property in force� in certain Union territories only qualifies the expression �body of individuals� and not the expression �association of persons�. As such an interpretation of the relevant provisions is clearly not in conformity with the underlying intention, the aforesaid provisions have been amended retrospectively to clarify that the expression �consisting only of husband and wife governed by the system of community of property in force� in certain Union territories will qualify the expressions �association of persons� as well as �body of individuals�.
Taxation Laws (Amendment) Act, 1984-I
11.3 The aforesaid amendment to clause (g) of section 80C(2) will take effect retrospectively from 1st April, 1971, that is, the date from which the said clause (g) was inserted in the said section. The amendment will, therefore, apply in relation to the assessment year 1971-72 and subsequent years.
Taxation Laws (Amendment) Act, 1984-I
11.4 The amendment to clause (h) of section 80C(2) takes effect from 1st April, 1983, that is, the date from which the said clause (h) was inserted in section 80C(2). The amendment will, therefore, apply in relation to the assessment year 1983-84 and subsequent years.
Taxation Laws (Amendment) Act, 1984-I
11.5 The amendment to section 80CC takes effect from 1st April, 1978, that is, the date from which the said section was introduced in the Income-tax Act. The amendment will, accordingly, apply in relation to the assessment year 1978-79 and subsequent years.
Taxation Laws (Amendment) Act, 1984-I
11.6 The amendment to section 80L takes effect from 1st April, 1972, that is, the date from which the concession under the said section was extended to associations of persons or bodies of individuals of the nature referred to above. The amendment will, therefore, apply in relation to the assessment year 1972-73 and subsequent years.
[Sections 19, 20 and 21(a) of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Clarificatory amendment relating to exemption under section 80L in the case of partners of firms
12.1 It had come to notice that, in some cases, partners of firms had claimed exemption under section 80L in their own assessments in respect of income derived by the firm from investment in specified financial assets. Such claims for deduction are clearly not in conformity with the intention underlying the provisions of section 80L of the Act.
Taxation Laws (Amendment) Act, 1984-I
12.2 With a view to avoiding litigation on this point, the Amending Act has inserted a new sub-section (3) in section 80L of the Act. The new sub-section declares, for the removal of doubts, that where the income referred to in sub-section (1) of the said section is derived from any asset held by, or on behalf of, a firm or an association of persons or a body of individuals, no deduction shall be allowed under the said sub-section in respect of such income in computing the total income of any partner of the firm or any member of the association or body.
Taxation Laws (Amendment) Act, 1984-I
12.3 The aforesaid amendment takes effect retrospectively from 1st April, 1976.
[Section 21(b) of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Extension of time for making summary assessments in cases of search and seizure
13.1 Section 132(5) of the Income-tax Act provides that where any money, bullion, jewellery or other valuable article or thing is seized in the course of search by the income-tax authorities under the said section, the Income-tax Officer shall within 90 days of the seizure, make an order (with the previous approval of the Inspecting Assistant Commissioner) estimating the undisclosed income in a summary manner to the best of his judgment on the basis of such materials as are available to him. The Income-tax Officer is also required to calculate the amount of tax on such estimated income, determine the amount of interest payable and the amount of penalty imposable in consequence of the order made by him ; and specify the amount that will be required to satisfy any existing liability of the taxpayer under the direct taxes enactments.
Taxation Laws (Amendment) Act, 1984-I
13.2 The Amending Act has amended sub-section (5) of section 132 so as to extend the time for making an order under the said sub-section from 90 days to 120 days of the seizure. A consequential amendment has also been made in Explanation 1 to section 132.
Taxation Laws (Amendment) Act, 1984-I
13.3 The aforesaid amendments take effect from 1st October, 1984.
[Section 23(a) and (e) of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Application against an order under section 132(5) to lie to the Commissioner
14.1 Section 132(11) of the Income-tax Act provides that a taxpayer objecting for any reason to an order made by the Income-tax Officer under section 132(5) referred to in paragraph 13 above may make an application to the authority notified by the Central Government in this behalf for appropriate relief in the matter. The Amending Act has made an amendment to sub-section (11) of section 132 to provide that an application against an order under section 132(5) shall lie to the Commissioner. A consequential amendment has been made to section 130(2) of the Income-tax Act to secure that, for the purposes of section 132, the Commissioner referred to therein shall, in relation to an assessee, be the Commissioner having for the time being jurisdiction over the assessee.
Taxation Laws (Amendment) Act, 1984-I
14.2 The Amending Act has also inserted a new sub-section (11A) in section 132 to provide that every application referred to in sub-section (11) which is pending immediately before 1st October, 1984 before an authority notified under that sub-section (as it stood immediately before 1st October, 1984) shall stand transferred on that date to the Commissioner, and the Commissioner may proceed with such application from the stage at which it was on that date. The applicant may, however, demand that before proceeding further with the application, he be reheard by the Commissioner.
Taxation Laws (Amendment) Act, 1984-I
14.3 The aforesaid amendments take effect from 1st October, 1984.
[Section 22 and section 23(b), (c) and (d) of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Increase in the rate of interest chargeable from assessees, and also payable to assessees, by Government under the provisions of the Income-tax Act
15.1 Simple interest at 12 per cent per annum is chargeable from assessees under certain provisions of the Income-tax Act, e.g., for failure to pay the tax due within the time allowed under the notice of demand, short payment of advance tax, delay in furnishing return of income, etc. Likewise, assessees are entitled to receive simple interest from the Central Government at 12 per cent per annum on excess payment of advance tax, delay in issue of refund, etc.
Taxation Laws (Amendment) Act, 1984-I
15.2 The Amending Act has increased the rate of interest chargeable from, or payable to, assessees under the various provisions of the Income-tax Act from 12 per cent to 15 per cent per annum with effect from 1st October, 1984. These provisions are section 132B, section 139, section 201, sections 213 to 217, section 220, section 243, section 244 and section 269K and rule 60 of the Second Schedule.
Taxation Laws (Amendment) Act, 1984-I
15.3 Section 84 of the Amending Act specifically clarifies that the increase in the rate of interest will apply in respect of any period falling after 30th September, 1984, also in those cases where the interest became chargeable or payable from an earlier date.
[Sections 24 and 84 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Discontinuance of the procedure under section 144B of the Income-tax Act relating to reference to Inspecting Assistant Commissioners
16.1 Under section 144B of the Income-tax Act, the Income-tax Officer is required to send a draft of the assessment order to the assessee in cases where the aggregate amount of the variation to the returned income proposed by the Income-tax Officer exceeds a fixed amount, which is currently Rs. 1 lakh. If the assessee objects to the variation proposed by the Income-tax Officer, the objections are referred by the Income-tax Officer to the Inspecting Assistant Commissioner, who is authorised to give appropriate directions to the Income-tax Officer for the modification of the draft assessment order.
Taxation Laws (Amendment) Act, 1984-I
16.2 The Amending Act has made an amendment in sub-section (1) of section 144B to secure that the provisions of the said section shall apply only in those cases where the Income-tax Officer proposes to make, before 1st October, 1984, any variation to the returned income. In the result, the provisions of section 144B shall cease to apply in cases where any variation to the returned income is proposed to be made by the Income-tax Officer after 30th September, 1984.
[Section 26 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Withdrawal of the power of Income-tax Officer to cancel ex parte assessment and make fresh assessment
17.1 Section 144 of the Income-tax Act empowers the Income-tax Officer to make an ex parte or best judgment assessment in cases where the assessee fails to furnish the return of income or to comply with the statutory notices issued by the Income-tax Officer in the course of assessment proceedings. The ex parte assessment can be cancelled by the Income-tax Officer under section 146 of the Income-tax Act if the assessee is able to show that he was prevented by sufficient cause from making the return or he did not receive the statutory notices or did not have reasonable opportunity to comply with, or was prevented by sufficient cause from complying with, such notices.
Taxation Laws (Amendment) Act, 1984-I
17.2 The Amending Act has made an amendment in sub-section (1) of section 146 of the Income-tax Act to secure that the provisions of the said section shall apply only in cases where an assessee has been assessed under section 144 before 1st October, 1984.
[Section 27 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Amendment of section 153 of the Income-tax Act relating to time limit for completion of assessments in certain cases
18.1 Under section 153(1) of the Income-tax Act, an order of assessment cannot, ordinarily, be made after the expiry of two years from the end of the assessment year in which the income was first assessable or the expiry of one year from the date of the filing of a return or a revised return, whichever is later. This provision has resulted in a practical difficulty in cases where an order of assessment is made by the Income-tax Officer under section 143(1) of the Act without requiring the presence of the assessee or the production by him of any evidence in support of the return filed by him. In such cases, the assessee is entitled under section 143(2)(a) of the Act to make an application within one month to the Income-tax Officer objecting to such assessment. On receipt of an application under this provision, the Income-tax Officer is required to make a fresh assessment after considering the objections raised by the assessee.
Taxation Laws (Amendment) Act, 1984-I
18.2 It had come to notice that, in certain cases, where the order of assessment under section 143(1) of the Act was made towards the expiry of the period of limitation laid down in section 153(1), the Income-tax Officer was not in a position to make a fresh assessment because the period of limitation had expired by the time the application filed by the assessee under section 143(2)(a) raising objections against the said assessment order was taken up for consideration by the Income-tax Officer.
Taxation Laws (Amendment) Act, 1984-I
18.3 With a view to removing this difficulty, the Amending Act has inserted a new clause (c) in sub-section (1) of section 153 of the Act to secure that, in such cases, the fresh assessment may be made by the Income-tax Officer within the period of limitation laid down under the existing provisions of section 153(1) or before the expiry of six months from the end of the month in which an application under clause (a) of sub-section (2) of section 143 of the Act is made by the assessee, whichever is later. The aforesaid amendment takes effect from 1st October, 1984.
[Section 28(a) of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Amendment of section 153 of the Income-tax Act in consequence of insertion of section 158A
19.1 The Amending Act has inserted a new section 158A in the Income-tax Act relating to procedure when assessee claims that identical question of law is pending before the High Court or Supreme Court. In consequence of the insertion of this section, the Amending Act has inserted a new clause (iva) in Explanation 1 below sub-section (3) of section 153 of the Income-tax Act. The new clause seeks to secure that in computing the period of limitation for the purposes of section 153, the period (not exceeding sixty days) commencing from the date on which the Income-tax Officer received the declaration under sub-section (1) of new section 158A and ending with the date on which the order under sub-section (3) of that section is made by him, shall be excluded.
Taxation Laws (Amendment) Act, 1984-I
19.2 The aforesaid amendment takes effect from 1st October, 1984, that is, the date from which new section 158A has been inserted in the Income-tax Act.
[Section 28(b) of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Amendment of section 154 relating to rectification of mistakes
20.1 Section 154 of the Income-tax Act empowers the Income-tax Officer, the Appellate Assistant Commissioner, the Commissioner (Appeals) and the Commissioner of Income-tax to rectify mistakes apparent from the record in the orders passed by them. An order of rectification can be made within a period of four years from the date of the passing of the order sought to be rectified.
Taxation Laws (Amendment) Act, 1984-I
20.2 The Amending Act has substituted sub-section (1) of section 154 by a new sub-section. The new sub-section provides that with a view to rectifying any mistake apparent from the record, an income-tax authority referred to in section 116 may amend any order passed by it under the provisions of the Act. The effect of the substituted sub-section, therefore, will be that all income-tax authorities referred to in section 116 will be empowered to rectify any mistake apparent from the record in any order passed by them under the provisions of the Income-tax Act.
Taxation Laws (Amendment) Act, 1984-I
20.3 The Amending Act has also amended sub-section (7) of section 154 with a view to securing that the period of four years specified in that sub-section for rectification of mistakes shall be reckoned from the end of the financial year in which the order sought to be amended was passed by the concerned income-tax authority, and not from the date of such order as at present. This modification would facilitate the income-tax authorities in keeping track of the period of limitation.
Taxation Laws (Amendment) Act, 1984-I
20.4 The aforesaid amendments take effect from 1st October, 1984.
[Section 29 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Amendment of section 155 of the Income-tax Act
21.1 The Amending Act has made certain modifications in the provisions of section 155 of the Income-tax Act.
Taxation Laws (Amendment) Act, 1984-I
21.2 Under one of the amendments, a new clause (c) has been inserted in sub-section (1) of section 155. The new clause (c) seeks to secure that, where in respect of any completed assessment of a partner in a firm, it is found on any order passed under sub-section (4) of section 245D by the Settlement Commission on the application made by the firm that the share of the partner in the income of the firm has not been included in the assessment of the partner or, if included, is not correct, the Income-tax Officer may amend the order of assessment of the partner, with a view to the inclusion of the share in the assessment or the correction thereof, as the case may be.
Taxation Laws (Amendment) Act, 1984-I
21.3 Under another amendment a new clause (c) has been inserted in sub-section (2) of section 155. The new clause seeks to secure that, where in respect of any completed assessment of a member of an association of persons or body of individuals, it is found on any order passed under sub-section (4) of section 245D by the Settlement Commission on the application made by the association or body that the share of the member in the income of the association or body, as the case may be, has not been included in the assessment of the member, or if included, is not correct, the Income-tax Officer may amend the order of assessment of the member with a view to the inclusion of the share in the assessment or the correction thereof, as the case may be.
Taxation Laws (Amendment) Act, 1984-I
21.4 Sub-sections (1), (2), (4), (7), (8), (9), (10), (10A) and (10C) of section 155 have also been amended to secure that the period of rectification laid down in the respective sub-sections shall be reckoned from the end of the financial year in which the relevant order was passed, and not from the date of the relevant order as at present. This modification would facilitate in keeping track of the period of limitation laid down for passing an order under section 155 of the Act.
Taxation Laws (Amendment) Act, 1984-I
21.5 The aforesaid amendments take effect from 1st October, 1984.
[Section 30, excluding clause (e), of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Special provision for avoiding repetitive appeals
22.1 When there is a difference between the Income-tax Officer and a taxpayer on any question of law arising in the case of the taxpayer for several years, the taxpayer has to contest the question of law for each of these years. This leads to unnecessary proliferation of appeals before the appellate authorities and reference applications before the High Courts on identical questions of law in the case of the same taxpayer.
Taxation Laws (Amendment) Act, 1984-I
22.2 With a view to avoiding such repetitive appeals and reference applications, the Amending Act has inserted a new Chapter XIVA in the Income-tax Act entitled �SPECIAL PROVISION FOR AVOIDING REPETITIVE APPEALS�. The aforesaid Chapter contains a new section 158A which provides for a special procedure in cases where an assessee claims that any question of law arising in his case for an assessment year which is pending before the Income-tax Officer or any appellate authority (such case being hereafter referred to as �the relevant case�) is identical with the question of law arising in his case for another assessment year which is pending before the High Court on a reference under section 256 or before the Supreme Court on a reference under section 257 or in appeal under section 261 (such case being hereafter referred to as �the other case�). In such cases, the assessee may furnish to the Income-tax Officer or the appellate authority, as the case may be, a declaration in the prescribed form1 and verified in the prescribed manner, that if the Income-tax Officer or, as the case may be, the appellate authority agrees to apply to the relevant case the final decision on the question of law in the other case, he shall not raise such question of law in the relevant case in appeal before any appellate authority or for a reference before the High Court or the Supreme Court or in appeal before the Supreme Court under the aforesaid sections of the Income-tax Act.
Taxation Laws (Amendment) Act, 1984-I
22.3 Where a declaration as aforesaid is furnished to any appellate authority, the appellate authority will have to call for a report from the Income-tax Officer on the correctness of the claim made by the assessee. Where the Income-tax Officer makes a request to the appellate authority to give him an opportunity of being heard in the matter, the appellate authority will have to allow such opportunity to the Income-tax Officer.
Taxation Laws (Amendment) Act, 1984-I
22.4 If the Income-tax Officer or, as the case may be, the appellate authority is satisfied that the question of law arising in the relevant case is identical with the question of law in the other case, the Income-tax Officer or, as the case may be, the appellate authority, may admit the claim of the assessee. Where the Income-tax Officer or the appellate authority is not so satisfied, the claim of the assessee shall be rejected. The order admitting or rejecting the claim will have to be made in writing. The order of the Income-tax Officer or the appellate authority admitting or rejecting the claim shall be final and shall not be called in question in any proceeding by way of appeal, reference or revision under the Income-tax Act.
Taxation Laws (Amendment) Act, 1984-I
22.5 The fact that the claim made by the assessee is admitted will not, however, preclude the Income-tax Officer or, as the case may be, the appellate authority from making an order disposing of the relevant case without awaiting the final decision on the question of law in the other case. However, when the decision on the question of law in the other case becomes final, it shall be applied to the relevant case and the Income-tax Officer or, as the case may be, the appellate authority, shall, if necessary, amend the order earlier passed by the Income-tax Officer or the appellate authority conformably to the final decision on the question of law in the other case.
Taxation Laws (Amendment) Act, 1984-I
22.6 When a claim made by the assessee is admitted, the assessee shall not be entitled to raise, in relation to the relevant case, the question of law in appeal before any appellate authority, or for a reference before the High Court or the Supreme Court or in appeal before the Supreme Court under the aforesaid sections of the Income-tax Act.
Taxation Laws (Amendment) Act, 1984-I
22.7 For purposes of new section 158A, the expression �appellate authority� means the Appellate Assistant Commissioner, the Commissioner (Appeals) or the Appellate Tribunal. The expression �case�, in relation to an assessee, has been defined to mean any proceeding under the Income-tax Act for the assessment of the total income of the assessee or for the imposition of any penalty on him.
Taxation Laws (Amendment) Act, 1984-I
22.8 The aforesaid provisions take effect from 1st October 1984.
[Section 31 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Amendment of section 186 relating to cancellation of registration
23.1 Sub-section (3) of section 186 provides that where the registration of a firm is cancelled for any assessment year, the Income-tax Officer shall amend the assessments of the firm and its partners for that assessment year on the footing that the firm is an unregistered firm. Sub-section (4) of section 186 provides that the provisions of section 154 shall, so far as may be, apply to the amendments of the assessments of the firm and its partners under the aforesaid sub-section (3) and the period of four years specified in section 154(7) shall, for this purpose, be reckoned from the date of the order cancelling the registration. The Amending Act has made an amendment in section 186 to secure that the aforesaid period of four years shall be reckoned from the end of the financial year in which the order cancelling the registration was passed, and not from the date of such order as at present.
Taxation Laws (Amendment) Act, 1984-I
23.2 The aforesaid amendment takes effect from 1st October, 1984.
[Section 32 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Amendment of section 187 relating to change in the constitution of a firm
24.1 Section 187 of the Income-tax Act provides that where at the time of making an assessment it is found that a change has occurred in the constitution of a firm, the assessment shall be made on the firm as constituted at the time of making the assessment. Section 187(2) of the Act clarifies that if one or more of the partners cease to be partners or one or more new partners are admitted in such circumstances that one or more of the persons who were partners of the firm before the change continue as partner or partners after the change or where all the partners continue with a change in their respective shares or in the shares of some of them, such cases would be regarded as cases of change in the constitution of the firm.
Taxation Laws (Amendment) Act, 1984-I
24.2 The question whether the provisions of section 187(2) of the Act would also apply in cases where a firm stands dissolved by operation of law or by virtue of an agreement among the partners, has given rise to considerable litigation and conflict of judicial decisions. With a view to ending uncertainty and litigation on this issue, the Amending Act has inserted a proviso to sub-section (2) of section 187 to provide that nothing contained in clause (a) of the said sub-section shall apply to a case where the firm is dissolved on the death of any of its partners. The effect of this amendment will be that where a firm is dissolved on the death of any of its partners, it shall not be regarded as a case of change in the constitution of the firm under the special provisions contained in section 187(2)(a) of the Income-tax Act.
Taxation Laws (Amendment) Act, 1984-I
24.3 The aforesaid amendment takes effect from 1st April, 1975 and will, accordingly, apply in relation to the assessment year 1975-76 and subsequent years.
[Section 33 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
New provision for reduction or waiver of interest chargeable for default in payment of tax, etc.
25.1 Section 220(2) of the Income-tax Act provides that if the amount specified in any notice of demand under section 156 is not paid within the period limited under sub-section (1) of section 220, the assessee shall be liable to pay simple interest at the specified rate from the day commencing after the end of the period mentioned in sub-section (1) of section 220.
Taxation Laws (Amendment) Act, 1984-I
25.2 The Amending Act has inserted a new sub-section (2A) empowering the Board to reduce or waive the amount of interest payable by an assessee under sub-section (2) of section 220. The Board will exercise this power only on the recommendation made by the Commissioner in this behalf. An order reducing or waiving the interest will be passed by the Board only if it is satisfied that (a) the payment of such interest would cause genuine hardship to the assessee ; (b) the default in the payment of the amount on which interest was payable was due to circumstances beyond the control of the assessee ; and (c) the assessee has co-operated in any enquiry relating to the assessment or any proceeding for the recovery of any amount due from him.
Taxation Laws (Amendment) Act, 1984-I
25.3 The aforesaid provision takes effect from 1st October, 1984
[Section 37 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Extension of the period of limitation for commencing recovery proceedings
26.1 Section 231 of the Income-tax Act provides that no action for recovery can be commenced after the expiration of one year from the end of the financial year in which the demand was raised. The Amending Act has made an amendment in section 231 with a view to extending the period of limitation for commencement of recovery proceedings, from one year to three years, from the end of the financial year in which the demand was made, or in the case of a person who is deemed to be an assessee in default under any provision of the Act, from one year to three years after the expiration of the last day of the financial year in which the assessee is deemed to be in default.
Taxation Laws (Amendment) Act, 1984-I
26.2 The aforesaid amendment takes effect from 1st October, 1984.
[Section 38 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Amendment of section 245A
27.1 The Amending Act has substituted the definition of the term �case� for the purposes of Chapter XIXA relating to settlement of cases by a new definition. Under the new definition, the term �case� would mean any proceeding under the Income-tax Act, 1961 (and not under the Indian Income-tax Act, 1922) for the assessment or reassessment of any person in respect of any year or years, or by way of appeal or revision in connection with such assessment or reassessment, which may be pending before an income-tax authority on the date on which an application under sub-section (1) of section 245C is made by the assessee.
Taxation Laws (Amendment) Act, 1984-I
27.2 The amended definition takes effect from 1st October, 1984.
[Section 39 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Amendment of section 245C
28.1 The Amending Act has substituted sub-section (1) of section 245C of the Income-tax Act relating to application for settlement of cases by new sub-sections (1) to (1E).
Taxation Laws (Amendment) Act, 1984-I
28.2 New sub-section (1) provides that an assessee may, at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his income which has not been disclosed before the Income-tax Officer, the manner in which such income has been derived, the additional amount of income-tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner provided in the provisions of Chapter XIXA of the Act.
Taxation Laws (Amendment) Act, 1984-I
28.3 The proviso to sub-section (1) lays down that no such application shall be made unless the additional amount of income-tax payable on the income disclosed in the application exceeds Rs. 50,000.
Taxation Laws (Amendment) Act, 1984-I
28.4 The portions italicised above indicate the salient features of the difference between the earlier sub-section (1) and the new sub-section (1) of section 245C. It will be observed that under the new provision, the application to the Settlement Commission will have to contain :
(a) a full and true disclosure of the applicant�s income which has not been disclosed before the Income-tax Officer ;
(b) the manner in which such income has been derived ; and
(c) the additional amount of income-tax payable on such income.
Besides, the new sub-section, for the first time, precludes persons from making an application to the Settlement Commission unless the additional amount of income-tax payable on the income disclosed in the application exceeds Rs. 50,000.
Taxation Laws (Amendment) Act, 1984-I
28.5 New sub-section (1A) provides that the additional amount of income-tax payable in respect of the income disclosed in the application under sub-section (1) shall be calculated in accordance with the provisions of sub-sections (1B) to (1D).
Taxation Laws (Amendment) Act, 1984-I
28.6 New sub-section (1B) provides that where the income disclosed in the application relates to only one previous year, the additional income-tax will be determined in the following manner :
(i) if the applicant has not furnished a return in respect of the total income of that year and no assessment has been made in respect of the total income of that year, tax shall be calculated on the income disclosed in the application as if such income were the total income ;
(ii) if the applicant has furnished a return in respect of the total income of that year and no assessment has been made in pursuance of such return, tax shall be calculated on the aggregate of the total income returned and the income disclosed in the application as if such aggregate were the total income ;
(iii) if an assessment in respect of the total income of that year has been made, tax shall be calculated on the aggregate of the total income as assessed and the income disclosed in the application as if such aggregate were the total income.
Taxation Laws (Amendment) Act, 1984-I
28.7 New sub-section (1C) provides that the tax as calculated under sub-section (1B) shall be reduced as indicated below :
(a) in a case referred to in (i) of the preceding paragraph, by the sum, if any, deducted at source under Chapter XVIIB or paid in advance under Chapter XVIIC of the Income-tax Act ;
(b) in a case referred to in (ii) of the preceding paragraph, by the aggregate of the sums referred to in (a) above and the tax, if any, paid by the applicant under section 140A of the Income-tax Act ; and
(c) in a case referred to in (iii) of the preceding paragraph, by the aggregate of the sums and tax referred to in (b) above as increased by the tax, if any, paid in pursuance of the assessment made in respect of the total income of that year.
The resultant amount so arrived at shall be the additional amount of income-tax payable in respect of the income disclosed in the application relating to that year.
Taxation Laws (Amendment) Act, 1984-I
28.8 New sub-section (1D) provides that where the income disclosed in the application relates to more than one previous year, the additional amount of income-tax payable in respect of the income disclosed for each of the years shall first be calculated in accordance with the provisions of sub-sections (1B) and (1C) and the aggregate of the amount so arrived at in respect of each of the years for which the application has been made shall be the additional amount of income-tax payable in respect of the income disclosed in the application.
Taxation Laws (Amendment) Act, 1984-I
28.9 New sub-section (1E) provides that where any books of account, other documents, money, bullion, jewellery or other valuable article or thing belonging to an assessee are seized under section 132 of the Income-tax Act, the assessee shall not be entitled to make an application under sub-section (1) of section 245C before the expiry of 120 days from the date of the seizure.
Taxation Laws (Amendment) Act, 1984-I
28.10 The aforesaid provisions take effect from 1st October, 1984.
[Section 40 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Amendment of section 245D relating to procedure on receipt of application under section 245C
29.1 The Amending Act has made a number of modifications in section 245D of the Income-tax Act.
Taxation Laws (Amendment) Act, 1984-I
29.2 Under the first amendment, the reference in sub-section (1A) to the Indian Income-tax Act, 1922 has been omitted. This omission is consequential to the amendment of the definition of the term �case� contained in section 245A which excludes proceedings under the Indian Income-tax Act, 1922 from the purview of settlement of cases by the Settlement Commission.
Taxation Laws (Amendment) Act, 1984-I
29.3 The Amending Act has inserted new sub-sections (2A) to (2D) in section 245D.
Taxation Laws (Amendment) Act, 1984-I
29.4 Sub-section (2A) provides that the assessee shall, within thirty-five days of the receipt of a copy of the order of the Settlement Commission under sub-section (1), pay the additional amount of income-tax payable on the income disclosed in the application and shall furnish proof of such payment to the Settlement Commission. As a case effectively falls under the jurisdiction of the Settlement Commission only after an application is allowed to be proceeded with by it, the aforesaid requirement of payment of additional tax will also apply only in those cases where the Settlement Commission has made an order under section 245D(1) allowing the application to be proceeded with, and not in cases where the application is rejected.
Taxation Laws (Amendment) Act, 1984-I
29.5 Sub-section (2B) provides that if the Settlement Commission is satisfied on an application made in this behalf by the assessee, that he is unable for good and sufficient reasons to pay the additional amount of income-tax within the time specified in sub-section (2A), it may extend the time for payment of the amount which remains unpaid or allow payment thereof by instalments. Such an order under sub-section (2B) will be made by the Settlement Commission only if the assessee furnishes adequate security for the payment of the aforesaid amount.
Taxation Laws (Amendment) Act, 1984-I
29.6 New sub-section (2C) provides that where the additional amount of income-tax is not paid within the time specified under sub-section (2A), the assessee shall be liable to pay simple interest at 15 per cent per annum on the amount remaining unpaid from the date of expiry of the period of thirty-five days referred to in the said sub-section. Interest under this provision will have to be paid by the assessee irrespective of whether or not the Settlement Commission has extended the time for payment of the amount or has allowed payment thereof by instalments.
Taxation Laws (Amendment) Act, 1984-I
29.7 New sub-section (2D) provides that where the additional amount of income-tax is not paid by the assessee within the time specified under sub-section (2A) or within the extended time allowed by the Settlement Commission, the Settlement Commission may direct that the amount remaining unpaid, together with any interest payable thereon under sub-section (2C), shall be recovered and any penalty for default in making payment of such additional amount may be imposed and recovered by the Income-tax Officer having jurisdiction over the assessee in accordance with the provisions of Chapter XVII of the Income-tax Act.
Taxation Laws (Amendment) Act, 1984-I
29.8 Sub-section (6) of section 245D, inter alia, provides that every order passed under sub-section (4) shall provide for the terms of settlement including any demand by way of tax, penalty or interest. The Amending Act has amended the aforesaid sub-section with a view to deleting the reference to �interest� under the aforesaid provision. The aforesaid amendment is consequential to the insertion of new sub-section (2C) which provides for payment of interest on the additional amount of income-tax and new sub-section (6A) which also provides for payment of interest on the tax payable by an assessee in pursuance of an order made by the Settlement Commission under sub-section (4) of section 245D. However, as the existing provisions of sub-section (6) empower the Settlement Commission to specify the terms of settlement, including any demand by way of tax, penalty or interest, the omission of the word �interest� by the Amending Act will not preclude Settlement Commission from setting out the terms relating to payment of interest in its order under section 245D(4) to the extent that such terms do not contravene the provisions of new sub-sections (2C) and (6A).
Taxation Laws (Amendment) Act, 1984-I
29.9 The Amending Act includes a new sub-section (6A) in section 245D. The new sub-section provides that where any tax payable in pursuance of an order under sub-section (4) is not paid by the assessee within thirty-five days of the receipt of a copy of the order by him, the assessee shall be liable to pay simple interest at 15 per cent per annum on the amount remaining unpaid from the date of expiry of the aforesaid period of thirty-five days. Interest will have to be paid by the assessee irrespective of whether or not the Settlement Commission has extended the time for payment of such tax or has allowed payment thereof by instalments.
Taxation Laws (Amendment) Act, 1984-I
29.10 The Amending Act has also inserted a new sub-section (8) in section 245D. The new sub-section declares, for the removal of doubts, that nothing contained in section 153 of the Income-tax Act relating to the time limit for completion of assessments and reassessments shall apply to any order passed under sub-section (4) of section 245D or to any order of assessment, reassessment or recomputation required to be made by the Income-tax Officer in pursuance of any directions contained in such order passed by the Settlement Commission.
Taxation Laws (Amendment) Act, 1984-I
29.11 The aforesaid amendments take effect from 1st October, 1984.
[Section 41 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Amendment of section 245E
30.1 The Amending Act has made an amendment in section 245E relating to power of Settlement Commission to reopen completed proceedings. Under the amendment, the reference to proceedings completed under the Indian Income-tax Act, 1922, has been omitted from the section. This amendment has been made with a view to removing all scope for doubt or controversy regarding the power of Settlement Commission to reopen completed proceedings. As clearly laid down in the proviso to section 245E, no proceeding can be reopened by the Settlement Commission after the expiration of the period of eight years from the end of the assessment year to which such proceeding relates.
Taxation Laws (Amendment) Act, 1984-I
30.2 The aforesaid amendment takes effect from 1st October, 1984.
[Section 42 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Amendment of section 245H
31.1 The Amending Act has made an amendment in section 245H relating to power of Settlement Commission to grant immunity from prosecution and penalty. The amendment empowers the Settlement Commission to provide even partial immunity from the imposition of any penalty under the Income-tax Act.
Taxation Laws (Amendment) Act, 1984-I
31.2 The amendment takes effect from 1st October, 1984.
[Section 43 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Amendment of section 245M
32. The Amending Act has made an amendment in section 245M which enables persons who have filed appeals to the Tribunal to make applications to the Settlement Commission after withdrawing the appeal pending before the Appellate Tribunal. The effect of the amendment will be that the provisions of section 245M will apply only in cases where the appeal is withdrawn by the assessee before 1st October, 1984. In other words, an assessee who has filed an appeal to the Tribunal for an assessment year which is pending before it, shall not be entitled to make an application to the Settlement Commission by withdrawing such appeal unless such appeal has been withdrawn before 1st October, 1984.
[Section 44 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Amendment of section 246 relating to appealable orders
33.1 The Amending Act has made two amendments in section 246 of the Income-tax Act.
Taxation Laws (Amendment) Act, 1984-I
33.2 Under the first amendment, a new clause (d) has been inserted in section 246(2) of the Act to provide that an appeal to the Commissioner (Appeals) shall lie in cases where an order of assessment is made after 30th September, 1984 on the basis of directions issued by the Inspecting Assistant Commissioner under section 144A of the Income-tax Act.
Taxation Laws (Amendment) Act, 1984-I
33.3 The other amendment seeks to insert a new clause (ff) in section 246(2). The new clause provides that an appeal shall lie to the Commissioner (Appeals) against an order made by the Inspecting Assistant Commissioner under section 154 of the Income-tax Act.
Taxation Laws (Amendment) Act, 1984-I
33.4 These amendments take effect from 1st October, 1984.
[Section 45 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Amendment of section 253 relating to appeals to the Appellate Tribunal
34.1 The Amending Act has omitted clause (b) of sub-section (1) of section 253 which provides that an appeal shall lie to the Appellate Tribunal against an order passed by an Inspecting Assistant Commissioner under section 154 of the Income-tax Act. This amendment is consequential to the insertion of new clause (ff) in section 246(2) of the Income-tax Act which provides that an appeal against an order made by the Inspecting Assistant Commissioner under section 154 shall lie to the Commissioner (Appeals).
Taxation Laws (Amendment) Act, 1984-I
34.2 The aforesaid amendment takes effect from 1st October, 1984.
[Section 46 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Amendment of section 263 of the Income-tax Act relating to revision of orders prejudicial to revenue
35.1 The Amending Act has modified the provisions of section 263 of the Income-tax Act in certain respects.
Taxation Laws (Amendment) Act, 1984-I
35.2 Under one of the amendments, a new Explanation has been inserted at the end of sub-section (1) of section 263. The new Explanation declares, for the removal of doubts, that for the purposes of the said sub-section, an order passed by the Income-tax Officer shall include an order of assessment made on the basis of directions issued by the Inspecting Assistant Commissioner under section 144A or section 144B of the Income-tax Act. The new Explanation also provides that an order made by the Inspecting Assistant Commissioner in exercise of the powers or in performance of the functions of an Income-tax Officer conferred on, or assigned to, him under section 125(1)(a) or section 125A(1) of the Income-tax Act, shall also be regarded as an order passed by the Income-tax Officer. The new Explanation seeks to clarify the aforesaid position with a view to removing further controversy and litigation on these points.
Taxation Laws (Amendment) Act, 1984-I
35.3 Under another amendment, sub-section (2) of section 263 has been substituted by a new sub-section. The effect of the new sub-section will be that it will be permissible for the Commissioner to revise under section 263 even an order of reassessment made under section 147 of the Income-tax Act. This has been secured by omitting from the new sub-section the reference to the prohibition against revision of such orders contained in sub-section (2) of section 263 as it stood prior to its amendment by the Amending Act.
Taxation Laws (Amendment) Act, 1984-I
35.4 The new sub-section also seeks to secure that no order under section 263 shall be made by the Commissioner after the expiry of two years from the end of the financial year in which the order sought to be revised was passed, as against two years from the date of such order as at present.
Taxation Laws (Amendment) Act, 1984-I
35.5 The aforesaid amendments take effect from 1st October, 1984.
[Section 47 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Amendment of section 271 relating to penalty for certain defaults
36.1 The Amending Act has inserted a new Explanation 5 to sub-section (1) of section 271 of the Income-tax Act.
Taxation Laws (Amendment) Act, 1984-I
36.2 The new Explanation contains a special provision applicable to cases where in the course of a search under section 132 of the Income-tax Act, the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing. The new Explanation provides that if in such cases, the assessee claims that the assets referred to above have been acquired by him by utilising (whether wholly or in part) his income for any previous year which has ended before the date of the search,but the return of income for such year has not been furnished before the said date, or where such return has been furnished before the said date, such income has not been declared in the return, the assessee shall, for the purposes of imposition of penalty under section 271(1)(c) of the Income-tax Act, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income unless such income is, or the transactions resulting in such income are, recorded before the date of the search in the books of account, if any, maintained by him for any source of income or such income is otherwise disclosed to the Commissioner before the date of the search. Where the assessee claims that the aforesaid assets have been acquired by him by utilising (whether wholly or in part) his income for any previous year which is to end on or after the date of the search, he shall for the purposes of section 271(1)(c) of the Act be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income, unless such income is or the transactions resulting in such income are, recorded on or before such date in the books of account, if any, maintained by him for any source of income or such income is otherwise disclosed to the Commissioner before the said date.
Taxation Laws (Amendment) Act, 1984-I
36.3 The fact that the income referred to above is declared by the assessee in any return of income furnished by him on or after the date of the search will not provide immunity to the assessee from imposition of penalty under section 271(1)(c) of the Act unless the conditions mentioned in the preceding paragraph are fulfilled.
Taxation Laws (Amendment) Act, 1984-I
36.4 The aforesaid amendments take effect from 1st October, 1984.
[Section 48 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Amendment of section 273A of the Income-tax Act
37.1 The Amending Act seeks to make certain modifications in section 273A of the Income-tax Act relating to power of Commissioner to reduce or waive penalty, etc.
Taxation Laws (Amendment) Act, 1984-I
37.2 Under one of the amendments, a new Explanation 2 has been inserted in section 273A(1). The new Explanationprovides that where any books of account, other documents, money, bullion, jewellery or other valuable article or thing belonging to a person are seized under section 132 of the Income-tax Act and, within 15 days of such seizure, the person makes a full and true disclosure of his income to the Commissioner, such person shall for the purposes of clause (b) of sub-section (1) of section 273A, be deemed to have made, prior to the detection by the Income-tax Officer of the concealment of particulars of income or of the inaccuracy of the particulars furnished in respect of such income, voluntarily and in good faith, a disclosure of such particulars.
Taxation Laws (Amendment) Act, 1984-I
37.3 Another provision has amended sub-section (2) of section 273A. The effect of this amendment will be that the Commissioner will be required to take the prior approval of the Board for making an order for the reduction or waiver of penalty in the cases referred to in clause (a) of sub-section (2) only where the amount or, as the case may be, the aggregate amount of the penalty imposed or imposable exceeds Rs. 1 lakh, as against the existing limit of Rs. 50,000 only.
Taxation Laws (Amendment) Act, 1984-I
37.4 Another amendment seeks to insert a proviso to sub-section (4) of section 273A. The new proviso lays down that where the amount of any penalty payable under the Income-tax Act, or where the application under sub-section (4) relates to more than one penalty, the aggregate amount of such penalties exceeds Rs. 1 lakh, no order reducing or waiving such amount or compounding any proceeding for its recovery under sub-section (4) shall be made by the Commissioner except with the previous approval of the Board.
Taxation Laws (Amendment) Act, 1984-I
37.5 The aforesaid amendments take effect from 1st October, 1984.
[Section 50 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Amendment of section 279 of the Income-tax Act relating to prosecution for offences
38.1 The Amending Act has amended sub-section (1) of section 279 of the Income-tax Act. This amendment seeks to secure that a person shall not be proceeded against for an offence under section 276DD relating to failure to comply with the provisions of section 269SS except at the instance of the Commissioner.
Taxation Laws (Amendment) Act, 1984-I
38.2 The aforesaid amendment takes effect from 1st April, 1984, i.e., the date from which sections 269SS and 276DD were inserted in the Income-tax Act by the Finance Act, 1984.
[Section 51 of the Amending Act]
Taxation Laws (Amendment) Act, 1984-I
Amendment of section 288 of the Income-tax Act relating to appearance by authorised representative
39.1 Section 288(3) of the Income-tax Act provides that if a person formerly employed as an income-tax authority (not below the rank of an Income-tax Officer) has retired or resigned from such employment after having served for not less than three years from the date of his first employment as such, he shall not be entitled to represent any assessee for a period of two years from the date of his retirement or resignation.
Taxation Laws (Amendment) Act, 1984-I
39.2 The Amending Act has omitted the aforesaid sub-section (3) of section 288. Although the aforesaid sub-section (3) has been omitted, officers belonging to the Indian Revenue Service (Income-tax Wing) who have retired from Government service shall continue to be governed by the provision of the Central Civil Services (Pension Rules) which regulates the setting up of practice by such officers after retirement.
Taxation Laws (Amendment) Act, 1984-I
39.3 The aforesaid amendment takes effect from 1st October, 1984.
[Section 52 of the Amending Act]
Amendments to Wealth-tax Act
Taxation Laws (Amendment) ACT, 1984-I
Amendment of section 5 of the Wealth-tax Act
40.1 Section 5(1)(xxxiii) of the Wealth-tax Act provides for exemption from wealth-tax of the moneys and the value of assets brought into India by persons of Indian origin who are ordinarily residing in foreign countries in cases where such persons return to India with the intention of permanently residing therein. The value of assets acquired by them out of the moneys brought into India also qualifies for exemption under this provision. The exemption is available for seven assessment years commencing with the assessment year next following the date on which such person returns to India.
Taxation Laws (Amendment) ACT, 1984-I
40.2 The Amending Act has amended the aforesaid provision with a view to extending the exemption under the said provision to Indian citizens as well.
Taxation Laws (Amendment) ACT, 1984-I
40.3 The aforesaid amendment takes effect from 1st April, 1977, i.e., the date from which the aforesaid provision was introduced in the Wealth-tax Act by the Finance Act, 1976. The amended provision will, therefore, apply in relation to the assessment year 1977-78 and subsequent years.
[Section 54(a)(ii) of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Substitution of section 8A by new section
41.1 Section 8A of the Wealth-tax Act provides that the Commissioner may, by general or special order in writing, direct that such of the functions assigned to the Wealth-tax Officer by or under the Wealth-tax Act as are specified in any such order may, in respect of any specified area or specified cases or classes of cases or specified persons or classes of persons, be performed by an Inspector of Wealth-tax or any member of the ministerial staff appointed to work under the Commissioner or any other wealth-tax authority subordinate to him, and specified in such order.
Taxation Laws (Amendment) ACT, 1984-I
41.2 The Amending Act substitutes section 8A of the Wealth-tax Act with a view to enabling the Commissioner to also make a general or special order in writing directing that the powers conferred on the Wealth-tax Officer by or under the Wealth-tax Act shall, in respect of any specified cases or class of cases or of any specified person or class of persons, be exercised by the Inspecting Assistant Commissioner. The substituted section also provides that where such order is made by the Commissioner, references in the Wealth-tax Act or in any rule made thereunder to the Wealth-tax Officer shall be deemed to be references to the Inspecting Assistant Commissioner and any provision of that Act requiring approval or sanction of the Inspecting Assistant Commissioner shall not apply.
Taxation Laws (Amendment) ACT, 1984-I
41.3 The substituted section takes effect from 1st October, 1984.
[Section 55 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Amendment of section 17A relating to time limit for completion of assessment and reassessment
42.1 The Amending Act has inserted a new clause (iia) in Explanation 1 to section 17A of the Wealth-tax Act relating to time limit for completion of assessment and reassessment.
Taxation Laws (Amendment) ACT, 1984-I
42.2 The new clause (iia) has been inserted in consequence of the insertion of a new section 18C in the Wealth-tax Act relating to procedure when assessee claims identical question of law is pending before the High Court or the Supreme Court. The new clause seeks to secure that in computing the period of limitation, for the purposes of section 17A, the period (not exceeding 60 days) commencing from the date on which the Wealth-tax Officer received the declaration under sub-section (1) of section 18C and ending with the date on which the order under sub-section (3) of that section is made by him shall be excluded.
Taxation Laws (Amendment) ACT, 1984-I
42.3 The aforesaid amendment takes effect from 1st October, 1984, that is, the date from which the new section 18C has been inserted in the Wealth-tax Act.
[Section 56 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Amendment of section 18 relating to penalty for certain defaults
43.1 The Amending Act has inserted a new Explanation 5 to sub-section (1) of section 18 of the Wealth-tax Act.
Taxation Laws (Amendment) ACT, 1984-I
43.2 The new Explanation contains a special provision applicable to cases where, in the course of a search under section 37A, the assessee is found to be the owner of any money, bullion, jewellery or other valuable article or thing. The new Explanationprovides that, if in such cases, the assessee claims that the assets referred to above, represent or form part of his net wealth on any valuation date falling before the date of the search, but the return in respect of the net wealth on such date has not been furnished before the date of the search or, where such return has been furnished before the said date, such assets have not been declared in such return, the assessee shall, for purposes of imposition of penalty under section 18(1)(c) of the Wealth-tax Act, be deemed to have concealed the particulars of such assets or furnished inaccurate particulars of such assets, unless such assets are recorded before the date of the search in the books of account, if any, maintained by him or such assets are otherwise disclosed to the Commissioner before the date of the search. Where the assessee claims that the aforesaid assets represent or form part of net wealth on any valuation date falling on or after the date of the search, he shall for the purposes of section 18(1)(c) of the Wealth-tax Act be deemed to have concealed, the particulars of such assets or furnished inaccurate particulars of such assets, unless such assets are recorded on or before the date of the search in the books of account, if any, maintained by him or such assets as are otherwise disclosed to the Commissioner before the said date.
Taxation Laws (Amendment) ACT, 1984-I
43.3 The fact that such assets are declared by the assessee in any return of net wealth furnished by him on or after the date of the search will not provide immunity to the assessee from imposition of penalty under section 18(1)(c) of the Act unless the conditions mentioned in the preceding paragraph are fulfilled.
Taxation Laws (Amendment) ACT, 1984-I
43.4 The aforesaid amendments take effect from 1st October, 1984.
[Section 57 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Amendment of section 18B
44.1 The Amending Act seeks to insert a new Explanation 2 in sub-section (1) of section 18B of the Wealth-tax Act relating to power of Commissioner to reduce or waive penalty in certain cases.
Taxation Laws (Amendment) ACT, 1984-I
44.2 The new Explanation provides that where any books of account or other documents belonging to a person are seized under section 37A of the Wealth-tax Act and, within fifteen days of such seizure a person makes a full and true disclosure of his net wealth to the Commissioner, such person shall for the purposes of clause (b) of sub-section (1) of section 18B, be deemed to have made, prior to the detection by the Wealth-tax Officer of the concealment of particulars of assets or of the inaccuracy of particulars furnished in respect of any asset or debt in respect of which penalty is imposable, voluntarily and in good faith, a disclosure of such particulars.
Taxation Laws (Amendment) ACT, 1984-I
44.3 The aforesaid provision takes effect from 1st October, 1984.
[Section 58 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Special provision for avoiding repetitive appeals
45.1 The Amending Act has inserted a new Chapter IVA entitled �SPECIAL PROVISION FOR AVOIDING REPETITIVE APPEALS�. The aforesaid Chapter contains a new section 18C which provides for a special procedure in cases where an assessee claims that any question of law arising in his case for an assessment year which is pending before the Wealth-tax Officer or any appellate authority is identical with the question of law arising in his case for another assessment year which is pending before the High Court or the Supreme Court on a reference or which is pending in appeal before the Supreme Court under the provisions of the Wealth-tax Act. The provisions of the aforesaid section 18C are in pari materia with the provisions contained in new section 158A inserted in the Income-tax Act by section 31 of the Amending Act. The provisions of new section 158A have been explained in paragraphs 22.1 to 22.8 of this circular.
Taxation Laws (Amendment) ACT, 1984-I
45.2 The new provisions take effect from 1st October, 1984.
[Section 59 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Amendment of section 22A
46.1 The Amending Act has substituted the definition of the term �case� for the purposes of Chapter VA relating to settlement of cases by a new definition. Under the new definition, the term �case� would mean any proceeding under the Wealth-tax Act for the assessment or reassessment of any person in respect of any year or years by way of appeal or revision in connection with such assessment or reassessment, which may be pending before a wealth-tax authority on the date on which an application under sub-section (1) of section 22C is made by the assessee.
Taxation Laws (Amendment) ACT, 1984-I
46.2 The amended definition takes effect from 1st October, 1984.
[Section 60 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Modification of provisions relating to application for settlement of cases – Section 22C
47.1 The Amending Act has substituted sub-section (1) of section 22C of the Wealth-tax Act relating to application for settlement of cases by new sub-sections (1) to (1E).
Taxation Laws (Amendment) ACT, 1984-I
47.2 New sub-section (1) provides that an assessee may at any stage of a case relating to him, make an application in such form and in such manner as may be prescribed and containing full and true disclosure of his wealth which has not been disclosed before the Wealth-tax Officer, the manner in which such wealth has been derived, the additional amount of wealth-tax payable on such wealth and such other particulars as may be prescribed, to the Settlement Commission to have the case settled and any such application shall be disposed of in the manner provided in the provisions of Chapter VA of the Act.
Taxation Laws (Amendment) ACT, 1984-I
47.3 The portion italicised above indicates the salient features of the difference between the old sub-section (1) and the new sub-section (1) of section 22C. It will be observed that under the new provision, the application to the Settlement Commission will have to contain�
(a) a full and true disclosure of the applicant�s wealth which has not been disclosed before the Wealth-tax Officer ;
(b) the manner in which such wealth has been derived ; and
(c) the additional amount of wealth-tax payable on such wealth.
Taxation Laws (Amendment) ACT, 1984-I
47.4 New sub-section (1A) provides that the additional amount of wealth-tax payable in respect of the wealth disclosed in the application under sub-section (1) shall be calculated in accordance with the provisions of sub-sections (1B) to (1D).
Taxation Laws (Amendment) ACT, 1984-I
47.5 New sub-section (1B) provides that where the wealth disclosed in the application relates to only one previous year, the additional wealth-tax will be determined in the following manner :
(i) if the applicant has not furnished a return in respect of the net wealth of that year and no assessment has been made in respect of the net wealth for that year, tax shall be calculated on the wealth disclosed in the application as if such wealth were the net wealth ;
(ii) if the applicant has furnished a return in respect of the net wealth for that year and no assessment has been made in pursuance of such return, tax shall be calculated on the aggregate of the net wealth returned and the wealth disclosed in the application as if such aggregate were the net wealth ;
(iii) if an assessment in respect of the net wealth of that year has been made, tax shall be calculated on the aggregate of the net wealth assessed and the wealth disclosed in the application as if such aggregate were the net wealth.
Taxation Laws (Amendment) ACT, 1984-I
47.6 New sub-section (1C) provides that the tax as calculated under sub-section (1B) shall be reduced as indicated below :
(a) in a case referred to in (ii) of the preceding paragraph, by the wealth-tax, if any, paid by the applicant under section 15B ;
(b) in a case referred to in (iii) of the preceding paragraph, by the aggregate of the wealth-tax referred to in (a) above and the wealth-tax, if any, paid by the applicant in pursuance of the assessment made in respect of the net wealth for that year.
The amount referred to in (i) of the preceding paragraph or, as the case may be, the resultant amount arrived at under (a) or (b) above shall be the additional amount of wealth-tax payable in respect of the wealth disclosed in the application relating to that year.
Taxation Laws (Amendment) ACT, 1984-I
47.7 New sub-section (1D) provides that where the wealth disclosed in the application relates to more than one assessment year, the additional amount of wealth-tax payable in respect of the wealth disclosed for each of the assessment years shall first be calculated in accordance with the provisions of sub-sections (1B) and (1C) and the aggregate amount so arrived at in respect of each of the years for which the application has been made shall be the additional amount of wealth-tax payable in respect of the wealth disclosed in the application.
Taxation Laws (Amendment) ACT, 1984-I
47.8 New sub-section (1E) provides that where any books of account or other documents belonging to an assessee are seized under section 37A of the Wealth-tax Act, the assessee shall not be entitled to make an application under sub-section (1)before the expiry of 120 days from the date of the seizure.
Taxation Laws (Amendment) ACT, 1984-I
47.9 The aforesaid provisions take effect from 1st October, 1984.
[Section 61 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Modification of provisions relating to procedure on receipt of an application under section 22C – Section 22D
48.1 The Amending Act has made a number of modifications in section 22D of the Wealth-tax Act. Under one of these amendments, new sub-sections (2A) to (2D) have been inserted in section 22D.
Taxation Laws (Amendment) ACT, 1984-I
48.2 New sub-section (2A) provides that the assessee shall, within 35 days of the receipt of a copy of the order of the Settlement Commission under sub-section (1), pay the additional amount of wealth-tax payable on the wealth disclosed in the application and shall furnish proof of such payment to the Settlement Commission. As a case effectively falls under the jurisdiction of the Settlement Commission only after an application is allowed to be proceeded with by it, the aforesaid requirement of payment of additional tax will also apply only in those cases where the Settlement Commission has made an order under section 22D(1) allowing the application to be proceeded with, and not in cases where the application is rejected.
Taxation Laws (Amendment) ACT, 1984-I
48.3 New sub-section (2B) provides that if the Settlement Commission is satisfied on an application made in this behalf by the assessee, that he is unable for good and sufficient reasons to pay the additional amount of wealth-tax within the time specified in sub-section (2A), it may extend the time for payment of the amount which remains unpaid or allow payment thereof by instalments. Such an order under new sub-section (2B) will be made by the Settlement Commission only if the assessee furnishes adequate security for the payment of the aforesaid amount.
Taxation Laws (Amendment) ACT, 1984-I
48.4 New sub-section (2C) provides that where the additional amount of wealth-tax is not paid within the time specified under sub-section (2A), the assessee shall be liable to pay simple interest at fifteen per cent per annum on the amount remaining unpaid from the date of expiry of the period of 35 days referred to in the said sub-section. Interest under this provision will have to be paid by the assessee irrespective of whether or not the Settlement Commission has extended the time for payment of the amount or has allowed payment thereof by instalments.
Taxation Laws (Amendment) ACT, 1984-I
48.5 New sub-section (2D) provides that where the additional amount of wealth-tax is not paid by the assessee within the time specified in sub-section (2A) or within the extended time allowed by the Settlement Commission, the Settlement Commission may direct that the amount remaining unpaid, together with any interest payable thereon under sub-section (2C), shall be recovered and any penalty for default in making payment of such additional amount may be imposed and recovered by the Wealth-tax Officer having jurisdiction over the assessee in accordance with the provisions of Chapter VII of the Wealth-tax Act.
Taxation Laws (Amendment) ACT, 1984-I
48.6 Sub-section (6) of section 22D, inter alia, provides that every order passed under sub-section (4) shall provide for the terms of settlement including any demand by way of tax, penalty or interest. The Amending Act has amended the aforesaid sub-section with a view to deleting the reference to interest under the aforesaid provision. The amendment is consequential to the insertion of new sub-section (2C) which provides for payment of interest on the additional amount of wealth-tax and new sub-section (6A) which provides for payment of interest on the tax payable by the assessee in pursuance of an order made by the Settlement Commission under sub-section (4) of section 22D. However, as the existing provisions of sub-section (6) empower the Settlement Commission to specify the terms of settlement, including any payment by way of tax, penalty or interest, the omission of the word �interest� by the Amending Act will not preclude the Settlement Commission from setting out the terms relating to payment of interest in its order under section 22D(4) to the extent that such terms do not contravene the provisions of new sub-sections (2C) and (6A).
Taxation Laws (Amendment) ACT, 1984-I
48.7 The Amending Act includes a new sub-section (6A) in section 22D.
The new sub-section provides that where any tax payable in pursuance of an order under sub-section (4) is not paid by the assessee within 35 days of the receipt of a copy of the order by him, the assessee shall be liable to pay simple interest at fifteen per cent per annum on the amount remaining unpaid from the date of expiry of the aforesaid period of 35 days. The interest will have to be paid by the assessee irrespective of whether or not the Settlement Commission has extended the time for payment of such tax or has allowed payment thereof by instalments.
Taxation Laws (Amendment) ACT, 1984-I
48.8 The Amending Act has also inserted a new sub-section (8) in section 22D. The new sub-section declares, for the removal of doubts, that nothing contained in section 17A of the Wealth-tax Act relating to time limit for completion of assessment and reassessment shall apply to any order passed under sub-section (4) of section 22D or to any order of assessment, reassessment or recomputation required to be made by the Wealth-tax Officer in pursuance of any direction contained in such order passed by the Settlement Commission.
Taxation Laws (Amendment) ACT, 1984-I
48.9 The aforesaid amendments take effect from 1st October, 1984.
[Section 62 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Modification of provision relating to powers of Settlement Commission to grant immunity from prosecution – Section 22H
49.1 The Amending Act has amended section 22H relating to powers of Settlement Commission to grant immunity from prosecution and penalty. The amendment empowers the Settlement Commission to allow even partial immunity from the imposition of any penalty under the Wealth-tax Act.
Taxation Laws (Amendment) ACT, 1984-I
49.2 The amendment takes effect from 1st October, 1984.
[Section 63 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Modification of provisions relating to certain persons who have filed appeals to the Appellate Tribunal entitled to make applications to the Settlement Commission – Section 22M
50. The Amending Act has amended section 22M which enables the persons who have filed appeals to the Appellate Tribunal to make applications to the Settlement Commission after withdrawing the appeal pending before the Appellate Tribunal. The effect of the amendment will be that the provisions of section 22M will apply only in cases where the appeal is withdrawn by the assessee before 1st October, 1984. In other words, an assessee who has filed an appeal to the Tribunal for an assessment year which is pending before it shall not be entitled to make an application to the Settlement Commission by withdrawing such appeal unless such appeal has been withdrawn before the 1st October, 1984.
[Section 64 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Modification of provisions relating to powers of Commissioner to revise orders of subordinate authorities – Section 25
51.1 The Amending Act has modified the provisions of section 25 of the Wealth-tax Act in certain respects.
Taxation Laws (Amendment) ACT, 1984-I
51.2 Under one of the amendments, a new Explanation has been inserted at the end of sub-section (2). The new Explanationdeclares, for the removal of doubts, that for the purposes of the said sub-section, an order passed by the Wealth-tax Officer shall include an order passed by the Inspecting Assistant Commissioner in exercise of the powers or in performance of the functions of a Wealth-tax Officer conferred on, or assigned to, him under section 8A(1)(a) or section 8AA(1) of the Wealth-tax Act. The new Explanation seeks to clarify the aforesaid position with a view to removing further controversy and litigation on this point.
Taxation Laws (Amendment) ACT, 1984-I
51.3 Sub-section (3) has been amended to secure that no order under sub-section (2) of section 25 shall be made by the Commissioner after the expiry of two years from the end of the financial year in which the order sought to be revised was passed as against two years from the date of such order as at present.
Taxation Laws (Amendment) ACT, 1984-I
51.4 The aforesaid amendments take effect from 1st October, 1984.
[Section 65 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Increase in the rate of interest chargeable from or payable to assessees – Sections 31 and 34A
52. Simple interest at 12 per cent per annum is chargeable from an assessee on the arrears of tax due from him, for the period of default in payment. Likewise, assessees are entitled to receive simple interest from the Central Government at 12 per cent per annum on amount of refunds due to them for the period of delay in the issue of refund beyond 6 months from the date of the order giving rise to the refund. In line with the increase in the rate of interest chargeable from or payable to assessees under the Income-tax Act, sections 31 and 34A have been amended to raise the rate of interest provided therein from 12 per cent per annum to 15 per cent per annum with effect from 1-10-1984. Section 84 of the Amending Act specifically clarifies that the increase in the rate of interest will apply in respect of any period falling after 30th September, 1984, also in those cases where the interest became chargeable or payable from an earlier date.
[Sections 66(a), 67 and 84 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
New provision for reduction or waiver of interest chargeable for default in payment of tax, etc. – Section 31(2A)
53.1 Section 31(2) of the Wealth-tax Act provides that if the amount specified in any notice of demand under section 30 is not paid within the period specified in section 31(1), the assessee shall be liable to pay simple interest at the specified rate from the day commencing after the end of the period mentioned in section 31(1).
Taxation Laws (Amendment) ACT, 1984-I
53.2 The Amending Act has inserted a new sub-section (2A) empowering the Board to reduce or waive the amount of interest payable by an assessee under section 31(1). The Board will exercise this power only on the recommendation made by the Commissioner in this behalf. An order reducing or waiving the interest will be passed by the Board only if it is satisfied that�
(a) the payment of such interest would cause genuine hardship to the assessee ;
(b) the default in payment of the amount on which interest was payable was due to circumstances beyond the control of the assessee; and
(c) the assessee has co-operated in any inquiry relating to the assessment or any proceeding for the recovery of any amount due from him.
Taxation Laws (Amendment) ACT, 1984-I
53.3 The aforesaid provision takes effect from 1st October, 1984.
[Section 66(b) of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Insertion of new sections 34ACC and 35EE
54.1 The Amending Act has inserted a new section 34ACC relating to furnishing of particulars in certain cases.
Taxation Laws (Amendment) ACT, 1984-I
54.2 The new section provides that where any person who is registered as a valuer under section 34AB or who has made an application for registration as a valuer under that section is, at any time thereafter convicted of any offence and sentenced to a term of imprisonment or is found guilty of misconduct in his professional capacity by a professional association or institution of which he is a member, he shall immediately after such conviction or, as the case may be, finding, intimate the particulars thereof to the Board. Provisions on the lines of those contained in the new section 34ACC are, at present, contained in rule 8M of the Wealth-tax Rules. As the contravention of the provisions of rule 8M did not carry with it any sanction for punishing those, who did not comply with that provision, the requirement of the said rule has been laid down in the aforesaid section so that a provision could also be made in the law for punishing those who did not comply with the said requirement.
Taxation Laws (Amendment) ACT, 1984-I
54.3 The Amending Act has also inserted a new section 35EE relating to failure to furnish particulars under section 34ACC.
Taxation Laws (Amendment) ACT, 1984-I
54.4 The new section provides that if a person referred to in section 34ACC fails, without reasonable cause or excuse, to intimate to the Board the particulars of conviction or finding referred to in the said section, he shall be punishable with rigorous imprisonment for a term which may extend to two years and shall also be liable to fine.
Taxation Laws (Amendment) ACT, 1984-I
54.5 The two aforesaid sections take effect from 1st October, 1984.
[Sections 68 and 70 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Modification of provisions relating to rectification of mistakes – Section 35
55.1 Section 35 of the Wealth-tax Act empowers the Wealth-tax Officer, the Valuation Officer, the Appellate Assistant Commissioner, the Commissioner and the Appellate Tribunal to rectify mistakes apparent from the record in any order passed by them. Sub-section (7) of section 35 provides that an order of rectification may be made within a period of 4 years from the date of the order sought to be rectified. The Amending Act has amended sub-section (7) to secure that the period of 4 years specified in the said sub-section for rectification of mistakes shall be reckoned from the end of the financial year in which the relevant order referred to in that sub-section was passed by the concerned authority and not from the date of such order as at present. This modification would facilitate keeping track of the period of limitation.
Taxation Laws (Amendment) ACT, 1984-I
55.2 The aforesaid amendment takes effect from 1st October, 1984.
[Section 69 of the Amending Act]
Amendments to Gift-tax Act
Taxation Laws (Amendment) ACT, 1984-I
Amendment of section 2 relating to definitions
56.1 Clause (va) of section 2 of the Gift-tax Act defines the term �charitable purpose� to include relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit. The aforesaid definition of the term �charitable purpose� in the Gift-tax Act is identical with the definition of the said term contained in section 2(15) of the Income-tax Act prior to its amendment by the Finance Act, 1983. Under an amendment made by the Finance Act, 1983 the words italicised above were omitted with effect from 1st April, 1984. With a view to bringing the definition of the term �charitable purpose� in the Gift-tax Act in line with the definition of the said term in the Income-tax Act, the Amending Act has omitted the italicised words from the definition of the aforesaid term in section 2(va) of the Gift-tax Act.
Taxation Laws (Amendment) ACT, 1984-I
56.2 The aforesaid amendment takes effect from 1st April, 1984, that is, the date from which a similar amendment was made in section 2(15) of the Income-tax Act by the Finance Act, 1983. The amended provision will accordingly apply in relation to the assessment year 1984-85 and subsequent years.
[Section 71 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Substitution of section 7A relating to power of Commissioner respecting specified areas, cases or persons by new section
57.1 Section 7A of the Gift-tax Act provides that the Commissioner may, by general or special order in writing, direct that such of the functions assigned to the Gift-tax Officer by or under the Gift-tax Act as are specified in any such order may, in respect of any specified area, or specified cases, or classes of cases or specified persons or classes of persons, be performed by an Inspector of Gift-tax or any member of the ministerial staff appointed to work under the Commissioner or any other gift-tax authority subordinate to him and specified in such order.
Taxation Laws (Amendment) ACT, 1984-I
57.2 The Amending Act has substituted section 7A of the Gift-tax Act with a view to enabling the Commissioner to also make a general or special order in writing directing that the powers conferred on the Gift-tax Officer by or under the Gift-tax Act shall, in respect of any specified cases or classes of cases, or any specified persons or classes of persons, be exercised by the Inspecting Assistant Commissioner. The substituted section also provides that where such order is made by the Commissioner, references in the Gift-tax Act or in any rule made thereunder to the Gift-tax Officer shall be deemed to be references to the Inspecting Assistant Commissioner and any provision of that Act requiring approval or sanction of the Inspecting Assistant Commissioner shall not apply.
Taxation Laws (Amendment) ACT, 1984-I
57.3 The substituted section takes effect from 1st October, 1984.
[Section 73 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Modification of the provisions relating to the powers of Commissioner to revise orders of subordinate authorities – Section 24
58.1 The Amending Act has modified the provisions of section 24 of the Gift-tax Act in certain respects.
Taxation Laws (Amendment) ACT, 1984-I
58.2 Under one of the amendments a new Explanation has been inserted at the end of sub-section (2). The new Explanationdeclares, for the removal of doubts, that for the purposes of the said sub-section, an order passed by the Gift-tax Officer shall include an order passed by the Inspecting Assistant Commissioner in exercise of the powers or in performance of the functions, of a Gift-tax Officer, conferred on, or assigned to, him under section 7A(1)(a) or section 7AA(1) of the Gift-tax Act. The newExplanation seeks to clarify the aforesaid position with a view to removing further controversy and litigation on this point.
Taxation Laws (Amendment) ACT, 1984-I
58.3 Sub-section (3) has been amended to secure that no order under sub-section (2) of section 24 shall be made by the Commissioner after the expiry of two years from the end of the financial year in which the order sought to be revised was passed, as against two years from the date of such order as at present.
Taxation Laws (Amendment) ACT, 1984-I
58.4 The aforesaid amendments take effect from 1st October 1984.
[Section 74 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Increase in the rate of interest chargeable or payable to assessees – Sections 32 and 33
59. Simple interest at 12 per cent per annum is chargeable from an assessee on the arrears of tax due from him, for the period of default in payment. Likewise, assessees are entitled to receive simple interest from the Central Government at 12 per cent per annum on account of refunds beyond six months from the date of the order giving rise to the refund. In line with the increase in the rate of interest chargeable from or payable to assessees under the Income-tax Act, sections 32 and 33A of the Gift-tax Act have been amended to raise the rate of interest provided therein from 12 per cent to 15 per cent per annum with effect from 1st October, 1984. Section 84 of the Amending Act specifically clarifies that the increase in the rate of interest will apply in respect of any period falling after 30th September, 1984, also in those cases where the interest became chargeable or payable from an earlier date.
[Sections 75 and 84 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Modification of provisions relating to rectification of mistakes – Section 34
60.1 Section 34 of the Gift-tax Act empowers the Gift-tax Officer, Appellate Assistant Commissioner, Commissioner (Appeals), Inspecting Assistant Commissioner, Commissioner and the Appellate Tribunal to rectify mistakes apparent from the record in any order passed by them. Sub-section (7) of section 34 provides that an order of rectification may be made within a period of four years from the date of the order sought to be rectified. The Amending Act has amended sub-section (7) to secure that the period of four years specified in the said sub-section for rectification of mistakes shall be reckoned from the end of the financial year in which the relevant order referred to in that sub-section was passed by the concerned authority and not from the date of such order as at present. This modification would facilitate keeping track of the period of limitation.
60.2 The aforesaid amendment takes effect from 1st October, 1984.
[Section 76 of the Amending Act]
Amendments to Gift-tax Act
Taxation Laws (Amendment) ACT, 1984-I
Amendment of section 2 relating to definitions
56.1 Clause (va) of section 2 of the Gift-tax Act defines the term �charitable purpose� to include relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit. The aforesaid definition of the term �charitable purpose� in the Gift-tax Act is identical with the definition of the said term contained in section 2(15) of the Income-tax Act prior to its amendment by the Finance Act, 1983. Under an amendment made by the Finance Act, 1983 the words italicised above were omitted with effect from 1st April, 1984. With a view to bringing the definition of the term �charitable purpose� in the Gift-tax Act in line with the definition of the said term in the Income-tax Act, the Amending Act has omitted the italicised words from the definition of the aforesaid term in section 2(va) of the Gift-tax Act.
Taxation Laws (Amendment) ACT, 1984-I
56.2 The aforesaid amendment takes effect from 1st April, 1984, that is, the date from which a similar amendment was made in section 2(15) of the Income-tax Act by the Finance Act, 1983. The amended provision will accordingly apply in relation to the assessment year 1984-85 and subsequent years.
[Section 71 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Substitution of section 7A relating to power of Commissioner respecting specified areas, cases or persons by new section
57.1 Section 7A of the Gift-tax Act provides that the Commissioner may, by general or special order in writing, direct that such of the functions assigned to the Gift-tax Officer by or under the Gift-tax Act as are specified in any such order may, in respect of any specified area, or specified cases, or classes of cases or specified persons or classes of persons, be performed by an Inspector of Gift-tax or any member of the ministerial staff appointed to work under the Commissioner or any other gift-tax authority subordinate to him and specified in such order.
Taxation Laws (Amendment) ACT, 1984-I
57.2 The Amending Act has substituted section 7A of the Gift-tax Act with a view to enabling the Commissioner to also make a general or special order in writing directing that the powers conferred on the Gift-tax Officer by or under the Gift-tax Act shall, in respect of any specified cases or classes of cases, or any specified persons or classes of persons, be exercised by the Inspecting Assistant Commissioner. The substituted section also provides that where such order is made by the Commissioner, references in the Gift-tax Act or in any rule made thereunder to the Gift-tax Officer shall be deemed to be references to the Inspecting Assistant Commissioner and any provision of that Act requiring approval or sanction of the Inspecting Assistant Commissioner shall not apply.
Taxation Laws (Amendment) ACT, 1984-I
57.3 The substituted section takes effect from 1st October, 1984.
[Section 73 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Modification of the provisions relating to the powers of Commissioner to revise orders of subordinate authorities – Section 24
58.1 The Amending Act has modified the provisions of section 24 of the Gift-tax Act in certain respects.
Taxation Laws (Amendment) ACT, 1984-I
58.2 Under one of the amendments a new Explanation has been inserted at the end of sub-section (2). The new Explanationdeclares, for the removal of doubts, that for the purposes of the said sub-section, an order passed by the Gift-tax Officer shall include an order passed by the Inspecting Assistant Commissioner in exercise of the powers or in performance of the functions, of a Gift-tax Officer, conferred on, or assigned to, him under section 7A(1)(a) or section 7AA(1) of the Gift-tax Act. The newExplanation seeks to clarify the aforesaid position with a view to removing further controversy and litigation on this point.
Taxation Laws (Amendment) ACT, 1984-I
58.3 Sub-section (3) has been amended to secure that no order under sub-section (2) of section 24 shall be made by the Commissioner after the expiry of two years from the end of the financial year in which the order sought to be revised was passed, as against two years from the date of such order as at present.
Taxation Laws (Amendment) ACT, 1984-I
58.4 The aforesaid amendments take effect from 1st October 1984.
[Section 74 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Increase in the rate of interest chargeable or payable to assessees – Sections 32 and 33
59. Simple interest at 12 per cent per annum is chargeable from an assessee on the arrears of tax due from him, for the period of default in payment. Likewise, assessees are entitled to receive simple interest from the Central Government at 12 per cent per annum on account of refunds beyond six months from the date of the order giving rise to the refund. In line with the increase in the rate of interest chargeable from or payable to assessees under the Income-tax Act, sections 32 and 33A of the Gift-tax Act have been amended to raise the rate of interest provided therein from 12 per cent to 15 per cent per annum with effect from 1st October, 1984. Section 84 of the Amending Act specifically clarifies that the increase in the rate of interest will apply in respect of any period falling after 30th September, 1984, also in those cases where the interest became chargeable or payable from an earlier date.
[Sections 75 and 84 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Modification of provisions relating to rectification of mistakes – Section 34
60.1 Section 34 of the Gift-tax Act empowers the Gift-tax Officer, Appellate Assistant Commissioner, Commissioner (Appeals), Inspecting Assistant Commissioner, Commissioner and the Appellate Tribunal to rectify mistakes apparent from the record in any order passed by them. Sub-section (7) of section 34 provides that an order of rectification may be made within a period of four years from the date of the order sought to be rectified. The Amending Act has amended sub-section (7) to secure that the period of four years specified in the said sub-section for rectification of mistakes shall be reckoned from the end of the financial year in which the relevant order referred to in that sub-section was passed by the concerned authority and not from the date of such order as at present. This modification would facilitate keeping track of the period of limitation.
60.2 The aforesaid amendment takes effect from 1st October, 1984.
[Section 76 of the Amending Act]
Amendments to Companies (Profits) Surtax Act
Taxation Laws (Amendment) ACT, 1984-I
Increase in the rate of interest chargeable from or payable to assessees – Sections 7B, 7C and 7D
61. Simple interest at 12 per cent per annum is chargeable from an assessee for non-payment or short payment of advance surtax as specified in sections 7C and 7D. Likewise, assessees are entitled under section 7B to receive simple interest from the Central Government at 12 per cent per annum on the amount by which the advance tax paid during any financial year exceeds the amount of tax determined on regular assessment. In line with the increase in the rate of interest chargeable from or payable to assessees under the Income-tax Act, sections 7B, 7C and 7D have been amended to raise the rate of interest provided therein from 12 per cent per annum to 15 per cent per annum with effect from 1-10-1984. A number of provisions of the Income-tax Act relating to payment of interest also apply to the Companies (Profits) Surtax Act by virtue of section 18 of the latter Act. Section 84 of the Amending Act specifically clarifies that the increase in the rate of interest under the aforesaid provisions of the Companies (Profits) Surtax Act and the applied provisions of the Income-tax Act, will apply in respect of any period falling after 30th September, 1984, also in those cases, where the interest became chargeable or payable from an earlier date.
[Sections 77 and 84 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Modification of the provisions relating to rectification of mistakes – Section 13
62.1 Sub-section (1) of section 13 of the Companies (Profits) Surtax Act empowers the Commissioner, Income-tax Officer, Commissioner (Appeals) and the Appellate Tribunal to rectify mistakes apparent from the record in any order passed by them within a period of four years from the date of the order sought to be rectified. The Amending Act has amended sub-section (1) to secure that the period of four years specified in the said sub-section for rectification of mistakes shall be reckoned from the end of the financial year in which the relevant order referred to in that sub-section was passed by the concerned authority, and not from the date of such order as at present. This modification would facilitate keeping track of the period of limitation.
Taxation Laws (Amendment) ACT, 1984-I
62.2 The aforesaid amendment takes effect from 1st October, 1984.
[Section 78 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Modification of the provisions relating to other amendments�Section 14
63.1 Section 14 of the Companies (Profits) Surtax Act provides that where as a result of any order made under sections 154, 155, 250, 254, 260, 262, 263 or 264 of the Income-tax Act, it is necessary to recompute the chargeable profits determined in any assessment under the Companies (Profits) Surtax Act, the Income-tax Officer may proceed to recompute the chargeable profits and determine the surtax payable or refundable on the basis of such recomputation within a period of four years from the date of the order passed under the aforesaid sections of the Income-tax Act. The Amending Act has amended this provision to secure that the period of four years specified therein shall be reckoned from the end of the financial year in which the order was passed under any of the aforesaid sections of the Income-tax Act and not from the date of the order as at present. This modification would facilitate keeping track of the period of limitation.
Taxation Laws (Amendment) ACT, 1984-I
63.2 The aforesaid amendment takes effect from 1st October, 1984.
[Section 79 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Modification of the provisions relating to revision of orders prejudicial to revenue- Section 16
64.1 The Amending Act has modified the provisions of section 16 of the Companies (Profits) Surtax Act in certain respects.
Taxation Laws (Amendment) ACT, 1984-I
64.2 Under one of the amendments a new Explanation has been inserted at the end of sub-section (1). The new Explanationdeclares, for the removal of doubts, that for the purposes of the said sub-section, an order passed by the Income-tax Officer shall include an order passed by the Inspecting Assistant Commissioner in exercise of the powers or in performance of the functions of an Income-tax Officer conferred on, or assigned to, him under section 125(1)(a) or section 125A(1) of the Income-tax Act as applied by section 18 of the Companies (Profits) Surtax Act. The new Explanation seeks to clarify the aforesaid position with a view to removing further controversy and litigation on this point.
Taxation Laws (Amendment) ACT, 1984-I
64.3 Sub-section (2) has been substituted by a new sub-section to provide that no order shall be made by the Commissioner after the expiry of two years from the end of the financial year in which the order sought to be revised was passed, as against two years from the date of such order as at present. The substituted sub-section also removes the existing bar against the revision of an order of reassessment made under section 8 of the Act.
Taxation Laws (Amendment) ACT, 1984-I
64.4 The aforesaid amendments take effect from 1st October, 1984.
[Section 80 of the Amending Act]
Amendment to Compulsory Deposit Scheme
(Income-tax Payers) Act
Taxation Laws (Amendment) ACT, 1984-I
Modification of the provision relating to rectification of mistakes – Section 13
65.1 Sub-section (1) of section 13 of the Compulsory Deposit Scheme (Income-tax Payers) Act empowers the Income-tax Officer, Appellate Assistant Commissioner, Commissioner (Appeals), Commissioner and the Appellate Tribunal to rectify mistakes apparent from the record in any order passed by them within a period of four years from the date of the order sought to be rectified. The Amending Act has amended sub-section (1) to secure that the period of four years specified in the said sub-section for rectification of mistakes shall be reckoned from the end of the financial year in which the relevant order referred to in that sub-section was passed by the concerned authority, and not from the date of such order as at present. This modification would facilitate keeping track of the period of limitation.
Taxation Laws (Amendment) ACT, 1984-I
65.2 The aforesaid amendment takes effect from 1st October, 1984.
[Section 81 of the Amending Act]
Amendments to Interest-tax Act
Taxation Laws (Amendment) ACT, 1984-I
Modification of the provisions relating to rectification of mistakes – Section 17
66.1 Sub-section (1) of section 17 of the Interest-tax Act empowers the Commissioner, Income-tax Officer, Commissioner (Appeals) and the Appellate Tribunal to rectify mistakes apparent from the record in any order passed by them within a period of four years from the date of the order sought to be rectified. The Amending Act has amended sub-section (1) to secure that the period of four years specified in the said sub-section for rectification of mistakes shall be reckoned from the end of the financial year in which the relevant order referred to in that sub-section was passed by the concerned authority, and not from the date of such order as at present. This modification would facilitate keeping track of the period of limitation.
Taxation Laws (Amendment) ACT, 1984-I
66.2 The aforesaid amendment takes effect from 1st October, 1984.
[Section 82 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-I
Modification of the provisions relating to revision of orders prejudicial to revenue- Section 19
67.1 The Amending Act has modified the provisions of section 19 of the Interest-tax Act in certain respects.
Taxation Laws (Amendment) ACT, 1984-I
67.2 Under one of the amendments, a new Explanation has been inserted at the end of sub-section (1). The new Explanationdeclares, for the removal of doubts that for the purposes of the said sub-section, an order passed by the Income tax Officer shall include an order passed by the Inspecting Assistant Commissioner in exercise of the powers of an Income-tax Officer conferred on him under section 125(1)(a) of the Income-tax Act as applied by section 21 of the Interest-tax Act.
Taxation Laws (Amendment) ACT, 1984-I
67.3 Sub-section (2) has been substituted by a new sub-section to provide that no order shall be made by the Commissioner after the expiry of two years from the end of the financial year in which the order sought to be revised was passed as against two years from the date of such order as at present. The substituted sub-section also removes the existing bar against the revision of an order of reassessment made under section 10 of the Act.
Taxation Laws (Amendment) ACT, 1984-I
67.4 The aforesaid amendment takes effect from 1st October, 1984.
[Section 83 of the Amending Act]
Taxation Laws (Amendment)
Act, 1984
II
Amendments at a glance
| Section/Schedule | Particulars |
| Income-tax Act | |
| 2(47) | �Transfer� to include conversion into or treatment as a trading asset 2 |
| 13(3)(b) | Modification of the definition of �substantial contribution to a trust or institution� 3 |
| 17(2)(vi) | Taxation of perquisite represented by interest-free loans or loans at concessional rates of interest to employees 4 |
| 23(1) (1st | Modification of provisions relating to determination |
| prov.), Expln. 2 | of annual value for computation of income from house property 5 |
| 25A | Special provision for cases where unrealised rent allowed as deduction is realised subsequently 6 |
| 40(b), Explns. | Amounts not deductible in the computation of income |
| 1, 2 and 3 | from business or profession 7 |
| 40 A(5), sub- | Expenses or payments not deductible in certain cir- |
| clause (vi) of | cumstances 8 |
| clause (b) of | |
| Expln. 2 | |
| 45(2) | Capital gains 9 |
| 47A | Withdrawal of exemption in certain cases 10 |
| 49(3) | Cost with reference to certain modes of acquisition 11 |
| 53 | Capital gains exempt from tax 12 |
| 64(1)(viii) | Income of individual to include income of spouse, minor child, etc. 13 |
| 80 | Submission of return for losses 14 |
| 139(1A)(b)(8)(a), | Return of income 15 |
| [Expln. 2]/(b) | |
| 155(7B) | Other amendments 16 |
| 208(3) | Condition of liability to pay advance tax 17 |
| 214(1), (1A), (2), | Interest payable by Government 18 |
| Expln. 1/2 | |
| 215(3), (6) | Interest payable by assessee 19 |
| 273(2), Expln. 2 | False estimate of, or failure to pay, advance tax 20 |
| Wealth-tax act | |
| 4(1)(a)/(vi) | Net wealth to include certain assets 21 |
| 5(1)(xxviib), (3) | Exemption in respect of certain assets 22 |
| Gift-tax Act | |
| 5(1)(xvi) | Exemption in respect of certain gifts 23 |
Amendments to Income-tax Act
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
�Transfer� to include conversion into or treatment as a trading asset – Section 2(47)
2.1 Under section 2(47) of the Income-tax Act, 1961 (hereinafter referred to as �the Act�) the term �transfer� in relation to a capital asset, has been defined to include the sale, exchange or relinquishment of the asset ; or the extinguishment of any rights therein ; or the compulsory acquisition of the asset under any law.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
2.2 Under the existing provisions, an assessee who converts a capital asset owned by him into a trading asset of his business and then sells the converted asset is able to avoid payment of tax on the capital gains represented by the appreciation in the value of the asset up to the date of its conversion. This is because the assessee can claim that the mere conversion of a capital asset into a trading asset does not amount to a transfer. The assessee can also claim that for the purposes of determining his business profits from the sale of the converted asset, the cost of such asset should be taken as its market value on the date of its conversion into a trading asset and not its actual cost of acquisition to him. Hence, when the converted capital asset is sold by him as stock-in-trade, only the difference between sale price and market value of the stock-in-trade on the date of the conversion of the capital asset can be regarded as profit accruing to the assessee from the transaction.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
2.3 With a view to preventing the avoidance of tax on such capital gains through the device of converting a capital asset into a trading asset, the Amending Act has substituted the definition of �transfer� in section 2(47) of the Act by a new definition to provide that, in a case where a capital asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment shall also be regarded as a transfer of the asset.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
2.4 The amendment takes effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 2 of the Amending Act]
JUDICIAL ANALYSIS
EXPLAINED IN – Paras 2.1 to 2.4 were quoted and explained in G.D. Agarwalla v. Dy. CIT [1996] 59 ITD 230 (Cal.) with the follow�ing observations:
�The provisions of section 45(2) are also elaborated by giving illustrations in paragraph 9 of the aforesaid Circular. These provisions take effect from the assessment year 1985-86. However, as is clear from the objective sought to be achieved by amending the definition of the word �transfer� in section 2(47) of the Act and enlarging the same to include cases of conversion of capital asset into stock-in-trade, the new provisions were introduced to overcome the judgment of the Supreme Court in what is known as CIT v. Bai Shirinbai K. Kooka [1962] 46 ITR 86 which principle was later applied by the Supreme Court in CIT v. Groz-Beckert Saboo Ltd. [1979] 116 ITR 125. Though the Circular does not expressly mention these decisions it is clear to us from the Circular that the provisions were introduced to nullify the attempt of the assessees to convert their capital asset into stock-in-trade of their business and thus escape or avoid capital gains tax…� (p. 237)
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
Modification of the definition of �substantial contribution to a trust or institution�- Section 13(3)(b)
3.1 Section 13(1)(c) of the Act provides that a trust for charitable or religious purposes or a charitable or religious institution will forfeit exemption from income-tax if under the terms of the trust or the rules governing the institution (created or established on or after April 1, 1962), any part of the income of the trust or institution enures directly or indirectly for the benefit of any one or more of the persons specified in section 13(3) of the Act. Exemption from income-tax is also forfeited if any part of the income or property of the trust or institution (whenever created or established) is used or applied directly or indirectly for the benefit of the aforesaid persons.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
3.2 One of the categories of persons specified in section 13(3)(b) of the Act consists of persons who have made a �substantial contribution� to the trust or institution, that is, persons whose total contribution up to the end of the relevant accounting year exceeds Rs. 5,000. The monetary ceiling of Rs. 5,000 was fixed by the Finance Act, 1972. The Amending Act has raised the aforesaid monetary ceiling to Rs. 25,000. Thus a person shall be regarded as having made a substantial contribution to a trust or institution only if his total contribution up to the end of the relevant accounting year exceeds Rs. 25,000.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
3.3 The amendment takes effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 5 of the Amending Act]
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
Taxation of perquisite represented by interest-free loans or loans at concessional rates of interest to employees – Section 17(2)(vi)
4.1 Employers often grant loans free of interest or on concessional terms to their employees for various purposes, e.g., house building, purchase of a conveyance, etc. The provision of a loan to an employee free of interest or at an unduly concessional rate of interest confers a benefit which should be assessable as a perquisite.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
4.2 The Amending Act has inserted a new sub-clause (vi) in clause (2) of section 17 of the Act to provide that where the employer has advanced any loan to an employee for building a house or purchasing a site or a house and a site or for purchasing a motor-car and either no interest is charged by the employer on such loan or interest is charged at a rate which is lower than the rate of interest which the Central Government may specify in this behalf by notification in the Official Gazette, an amount calculated on the following basis shall be regarded as perquisite received by the employee and charged to tax accordingly :
(a) in a case where such loan is advanced without charging any interest, the amount of interest (calculated in the prescribed manner) on such loan at the rate notified ;
(b) in a case such loan is advanced by charging interest at a rate which is lower than the rate so notified, the amount of the difference between the interest (calculated in the prescribed manner) on such loan at the rate so notified and the interest charged by the employer.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
4.3 In notifying the rate of interest for the purposes of this provision, the Central Government shall have regard to the rate of interest charged by it from its employees on loans for similar purposes granted to them.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
4.4 The new provision will not apply to employees of the Central Government or any State Government or an employee (not being a director of a company or a person who has a substantial interest in the company) whose income under the head �Salaries�, exclusive of all benefits or amenities not provided for by way of monetary payment, does not exceed Rs. 18,000. Thus, employees drawing cash remuneration up to Rs. 24,000 per annum will be exempted from the purview of this provision, because, after deduction of standard deduction, the income in such cases under the head �Salaries� will not exceed Rs. 18,000.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
4.5 The new provision takes effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 7(ii) of the Amending Act]
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
Modification of provisions relating to determination of annual value for computation of income from house property – Section 23(1)
5.1 Under the first proviso to section 23(1) of the Act, taxes levied by a local authority in respect of a house property which is in the occupation of a tenant are allowed as deduction in determining the annual value of a property to the extent such taxes are borne by the owner. The Amending Act has substituted this proviso by a new proviso to provide that deduction in respect of such taxes shall be allowed in determining the annual value of the property of only that year in which such taxes are actually paid by the owner.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
5.2 The Amending Act has also inserted a new Explanation to clarify that where a deduction in respect of the taxes referred to in the first proviso to section 23(1) has been allowed in determining the annual value of the property of any accounting year relevant to the assessment year 1984-85 or an earlier assessment year, a deduction in respect of such taxes shall not be allowed again in determining the annual value of the property of the accounting year in which such taxes are actually paid by the owner.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
5.3 These amendments take effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 8(a) and (c) of the Amending Act]
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
Special provision for cases where unrealised rent allowed as deduction is realised subsequently – Section 25A
6.1 Section 24(1)(x) of the Act provides that (subject to the conditions laid down in rule 4 of the Income-tax Rules, 1962), the rent which an assessee cannot realise from his tenant will be allowed as deduction in computing his income from the property. There is, however, no provision in the Act for charging income-tax in cases where the amount which has been allowed as deduction is subsequently recovered by the assessee.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
6.2 The Amending Act has inserted a new section 25A in the Act to provide that where a deduction has been allowed under section 24(1)(x) in respect of unrealised rent and subsequently during any accounting year the assessee has realised any amount in respect of such rent, the rent so realised shall be chargeable under the head �Income from house property� and accordingly charged to tax (without making any deduction under section 23 or section 24 of the Act) as the income of that year, irrespective of whether the assessee is the owner of that property in that year or not.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
6.3 The new section takes effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 9 of the Amending Act]
JUDICIAL ANALYSIS
EXPLAINED IN – In Sri Aditya Chandra Agarwala v. ACIT [1997] 138 Taxation 29 (Trib.), the Tribunal relied on paragraph 6. The Tribunal observed:
�Section 25A makes a special provision for charging the unrea�lised rent already allowed as a deduction to tax if the same is subsequently recovered by the assessee. Under section 25A where a deduction has been allowed under section 24(1)(x) of the Act in respect of unrealised rent and subsequently during any previous year the assessee has realised any amount in respect of such unrealised rent, the amount so realised shall for and from the assessment year 1985-86 be chargeable under the head �Income from house property� and accordingly charged to tax as income of that year, irrespective of whether the assessee is not the owner of that property in that year or not. It is apparent from the provi�sions of section 25A that the CIT(A) was not justified in apply�ing the same to the instant case as firstly, the arrears of rent received by the assessee are not unrealised rent recovered subsequently and secondly, it is not unrealised rent already allowed as a deduction to tax under section 24(1)(x) of the Act. According to the provisions of section 25A, an assessee is enti�tled to the deduction of irrecoverable rent in the computation of income from his property let out to a tenant subject to the terms of Rule 4 of the Income-tax Rules, 1962. As none of the conditions laid down in section 25A is fulfilled by the assessee in the instant case it can safely be held that the CIT (Appeals) was not justified in applying section 25A to the instant case to bring the arrears of tax for which no deduction was allowed in earlier years. The scope and effect of section 25A have been elaborated in the departmental circular No. 397 dated 16-10-1984 which supports the view, taken by us in the foregoing paragraphs.� (p. 34)
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
Amounts not deductible in the computation of income from business or profession- Section 40(b)
7.1 Section 40(b) of the Act provides that in the case of a firm, any payment of interest, salary, bonus, commission or remuneration made by the firm, to any partner of the firm shall not be allowed as deduction in computing the income of the firm chargeable under the head �Profits and gains of business or profession�.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
7.2 The Amending Act has inserted three new Explanations to section 40(b) of the Act. Explanation 1provides that where interest is paid by firm to a partner who has also paid interest to the firm, the amount of interest to be disallowed under section 40(b) of the Act shall be limited to the net amount of interest paid by the firm to the partner. To illustrate:
n If a firm paid interest of Rs. 7,000 to a partner and that partner paid interest of Rs. 2,000 to the firm in the same accounting year, the disallowance to be made under section 40(b) of the Act in the case of the firm will be restricted to Rs. 5,000 only.
n If a firm paid interest of Rs. 5,000 to a partner and that partner paid interest of Rs. 8,000 to the firm in the same accounting year, no disallowance of interest will be required to be made under section 40(b) of the Act in the computation of the income of the firm.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
7.3 Explanation 2 provides that where an individual is a partner in a firm on behalf, or for the benefit, of any other person, interest paid by the firm to such individual or by such individual to the firm, otherwise than as partner in a representative capacity, shall not be taken into account for the purposes of section 40(b) of the Act. Thus, if an individual is a partner in a firm on behalf of a Hindu undivided family (�HUF�), interest paid by the firm to such individual otherwise than in his capacity as representative of the HUF will not be taken into account for the purposes of section 40(b) of the Act. It has also been provided that, in such cases, interest paid by the firm to such individual or by such individual to the firm as partner in a representative capacity and interest paid by the firm to the person so represented or by such person to the firm shall be taken into account for the purposes of section 40(b) of the Act.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
7.4 Explanation 3 provides that where an individual is a partner in a firm, otherwise than in a representative capacity, interest paid by the firm to such individual shall not be taken into account for the purposes of section 40(b) of the Act, if such interest is received by him, on behalf or for the benefit of any other person. In other words, if an individual is a partner in a firm in his personal capacity, interest paid by the firm to such individual, not in his personal capacity, but, say, as representing the HUF of which he is the karta, shall not be taken into account for the purposes of section 40(b) of the Act.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
7.5 These amendments will take effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 10 of the Amending Act]
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
Expenses or payments not deductible in certain circumstances – Section 40A
8.1 Section 40A(5) of the Act places certain limits on the deductible amount of expenditure incurred by an assessee in respect of payment of salary to any employee or a former employee, or in providing any perquisite, etc., to such employee. Explanation 2 to section 40A(5) defines the expressions �salary� and �perquisite� for the purposes of the aforesaid provision.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
8.2 The Amending Act has inserted a new sub-clause (vi) in clause (b) of the aforesaid Explanation. This is consequential to insertion of sub-clause (vi) in clause (2) of section 17 of the Act, referred to in paragraphs 4.1 to 4.5 above. The effect of the new sub-clause will be that the amount of interest referred to in item (a) or item (b), as the case may be, of sub-clause (vi) of section 17(2) of the Act shall be regarded as perquisite provided by the assessee to his employee for the purposes of section 40A(5) of the Act.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
8.3 The amendment takes effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 11 of the Amending Act]
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
Capital gains – Section 45(2)
9.1 Under the existing provisions, profits or gains arising from the transfer of a capital asset effected in the previous year are taken to be the income of the previous year in which the transfer took place and are chargeable to income-tax under the head �Capital gains�.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
9.2 The Amending Act has inserted a new sub-section (2) in section 45 of the Act to provide that the profits and gains arising from the transfer by way of conversion by the owner of a capital asset into, or its treatment by him, as stock-in-trade of a business carried on by him, shall be charged to tax under the head �Capital gains� in the year in which such stock-in-trade is sold or otherwise transferred by him. The new sub-section further provides that for the purposes of computing the capital gain in such cases, the fair market value of the capital asset on the date on which it was converted or treated as stock-in-trade shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset.
To illustrate :
� Suppose the cost of the asset is Rs. 20,000. The asset is converted by the owner as stock-in-trade on 1-6-1984 and taken to his stock at the market value of Rs. 70,000. The asset is sold on 1-8-1985 for Rs. 80,000.
� Capital gain of Rs. 50,000 (subject to admissible deductions) will be liable to tax in the assessment year 1986-87. The business profit of Rs. 10,000 arising on the sale of the asset will be liable to tax as part of the business income for the assessment year 1986-87. (The accounting year of the assessee has been taken to be the financial year).
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
9.3 The amendment takes effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 12 of the Amending Act]
JUDICIAL ANALYSIS
n Explained In G.D. Agarwalla v. Dy. CIT [1996] 59 ITD 230 (Cal.), the Tribu�nal referred to the above paragraph 9, and observed :
�The provisions of section 45(2) are also elaborated by giving illustrations in paragraph 9 of the aforesaid Circular. These provisions take effect from the assessment year 1985-86. However, as is clear from the objective sought to be achieved by amending the definition of the word �transfer� in section 2(47) of the Act and enlarging the same to include cases of conversion of capital asset into stock-in-trade, the new provisions were introduced to overcome the judgment of the Supreme Court in what is known as CIT v. Bai Shirinbai K. Kooka [1962] 46 ITR 86 which principle was later applied by the Supreme Court in CIT v. Groz-Beckert Saboo Ltd. [1979] 116 ITR 125. Though the Circular does not expressly mention these decisions it is clear to us from the Circular that the provisions were introduced to nullify the attempt of the assessees to convert their capital asset into stock-in-trade of their business and thus escape or avoid capital gains tax. These provisions are not applicable to the facts of the present case. Obviously they are confined to cases of the same assessee converting his capital asset into stock-in-trade for the purpose of avoiding or escaping capital gains tax. When the partners in the present case contributed their capital asset to the firm these assets became the firm�s property. This is by virtue of section 14 of the Partnership Act. Thereafter the partners have no right in specie over the property since during the subsistence of the partnership no partner can claim to have any right in or over a particular property belonging to the firm. In the case of partnership asset, it is now well-settled that the partners cannot treat themselves to be the owners…� (p. 237)
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
Withdrawal of exemption in certain cases – New section 47A
10.1 Under clause (iv) of section 47 of the Act, capital gain arising from the transfer of a capital asset by a company to its wholly-owned subsidiary company is exempt from tax. Similarly, under clause (v) of section 47, capital gain arising from the transfer of a capital asset by a subsidiary company to the holding company is also exempt from tax. Exemption under this provision is allowed only if the transferee company is an Indian company.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
10.2 The Amending Act has inserted a new section 47A to provide that, if at any time before the expiry of 8 years from the date of transfer of a capital asset referred to in clause (iv) or clause (v) of section 47, such capital asset is converted by the transferee company into, or is treated by it as, stock-in-trade of its business ; or the parent company or its nominee, or as the case may be, the holding company ceases to hold the whole of the share capital of the subsidiary company before the expiry of the period of 8 years aforesaid, the amount of capital gain exempted from tax by virtue of the provisions contained in section 47 of the Act shall be deemed to be the income of the transferor company chargeable under the head �Capital gains� of the year in which the transfer took place [Please also see paragraph 16 below].
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
10.3 The amendment takes effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 13 of the Amending Act]
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
Cost with reference to certain modes of acquisition – Section 49(3)
11.1 The Amending Act has inserted a new sub-section (3) in section 49 of the Act to provide that in a case where the capital gain arising from the transfer of a capital asset referred to in clause (iv) or clause (v) of section 47 of the Act, is deemed, by virtue of the provisions of new section 47A to be income chargeable under the head �Capital gains�, the cost of acquisition of such asset to the transferee company shall be the cost for which such asset was acquired by it.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
11.2 The amendment takes effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 14 of the Amending Act]
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
Capital gains exempt from tax – Section 53
12.1 Under the existing provisions, capital gains arising from the transfer of any capital asset, being building, or land appurtenant thereto, the income from which is chargeable under the head �Income from house property� is exempt from tax in cases where the consideration for the transfer does not exceed Rs. 25,000 and the aggregate of the fair market values of all such capital assets owned by the assessee immediately before the transfer does not exceed Rs. 50,000.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
12.2 The Amending Act has substituted section 53 by a new section to provide that long-term capital gain arising from the transfer of a residential house will be exempt from tax in cases where the consideration received or accruing as a result of the transfer does not exceed Rs. 2 lakhs. In cases where such consideration exceeds Rs. 2 lakhs, the capital gain would be exempted proportionately.
In other words, the amount of capital gain to be exempted under this provision would bear the same proportion to the amount of capital gain arising from the transfer as the amount of Rs. 2 lakhs bears to the amount of consideration received or accruing from the transfer. To illustrate, if the consideration for the transfer is Rs. 6 lakhs, one-third of the capital gain arising from the transfer will be exempt from tax. The exemption under the new section 53 will not be available if the assessee owns any other residential house on the date of such transfer.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
12.3 Section 54 of the Act provides exemption in respect of long-term capital gains arising from the sale of a residential house in cases where such capital gain is utilised by the taxpayer for purchasing or constructing another residential house within the specified period. Sub-section (1) of section 54 provides that the exemption under the said section will be available in cases where the capital gain arises from the transfer of long-term capital asset �to which the provisions of section 53 are not applicable�. These provisions should be construed to imply that it will not be permissible for a taxpayer who has opted to avail of the tax exemption under section 53 to also seek partial exemption in respect of the remaining capital gain under section 54. In other words, the above-quoted words should not be construed to imply that the exemption under section 54 will stand barred in all cases where long-term capital gains are derived from the sale of a residential house owned by the taxpayer.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
12.4 The amendment takes effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 15 of the Amending Act]
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
Income of individual to include income of spouse, minor child, etc. – Section 64(1)
13.1 The Amending Act has inserted a new clause (viii) in sub-section (1) of section 64 of the Act to provide that any income arising, directly or indirectly, to any person or association of persons, from assets transferred, directly or indirectly, on or after 1st June, 1973, otherwise than for an adequate consideration, to the person or association of persons by such individual shall, to the extent to which the income from such assets is for the immediate or deferred benefit of son�s wife or son�s minor child of the individual or both, be included in computing the total income of such individual.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
13.2 This amendment takes effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 17 of the Amending Act]
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
Submission of return for losses – Section 80
14.1 Under the existing provisions of section 80 of the Act relating to submission of return for losses no loss is allowed to be carried forward and set off under sections 72(1), 73(2), 74(1) or 74A(3) unless such loss has been determined in pursuance of a return filed under section 139 of the Act.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
14.2 The Amending Act has amended section 80 to provide that such loss shall not be allowed to be carried forward and set off unless such loss is determined in pursuance of a return filed within the time allowed under section 139(1) for furnishing a voluntary return of income or within such further time as may be allowed by the Income-tax Officer.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
14.3 The amendment takes effect from 1st April, 1985 and will, accordingly, apply in relation to any loss for the assessment year 1985-86 and subsequent years.
[Section 18 of the Amending Act]
JUDICIAL ANALYSIS
EXPLAINED IN – In Krishna Chandra Dutta (Cookme) (P.) Ltd. CIT [1993] 204 ITR 23 (Cal.) the abve Circular was explained with the following observations :
�We find that the position as clarified by the Board is based on the correct construction of the provisions. We also share the view that the amendment shall apply to loss arising in assessment year 1985-86 and not in the earlier years.� (p. 29)
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
Return of income – Section 139(1A)/(8)(a), (b)
15.1 Under the existing provisions contained in clause (b) of sub-section (1A) of section 139 of the Act, a person whose salary (exclusive of the value of all benefits or amenities not provided by way of monetary payment) does not exceed Rs. 18,000 is not required to furnish a voluntary return of income, if the other conditions laid down in that sub-section are fulfilled.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
15.2 The Amending Act has substituted the aforesaid clause (b) by a new clause to provide that a person whose income under the head �Salaries� (exclusive of the value of benefits or amenities not provided by way of monetary payment) does not exceed Rs. 18,000 will not be required to furnish a voluntary return of income, subject to the fulfilment of the other conditions laid down in the aforesaid sub-section. As income under the head �Salaries� is computed after allowing standard deduction under section 16(i) of the Act, the effect of the amendment will be that a person whose salary (exclusive of the value of benefits and amenities aforesaid) does not exceed Rs. 24,000 will not be required to furnish a voluntary return of income, subject to the fulfilment of the other conditions contained in section 139(1) of the Act.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
15.3 Under the existing provisions contained in Explanation 2 to clause (a) of section 139(8), interest for late filing of, or failure to file the return of income in the case of a registered firm is calculated by treating the registered firm as an unregistered firm. The aforesaid Explanation 2 has been substituted by a new Explanation 2. The new Explanation, which will apply to all categories of assessees, provides that where an assessment is made for the first time under section 147 of the Act, the assessment so made shall be regarded as regular assessment under section 143 or section 144 of the Act. The effect of the amendment, therefore, will be that�
(a) interest under section 139(8) for delay or default in furnishing the return of income by a registered firm shall be calculated with reference to the tax payable by the firm as a registered firm and not with reference to tax payable by it as if it were assessed as an unregistered firm ; and
(b) interest under section 139(8) in the case of all categories of assessees will become payable even in cases where an assessment for a particular year is made for the first time under section 147.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
15.4 Under the existing provisions contained in clause (b) of section 139(8), interest payable by an assessee for delay or default in furnishing the return of income is required to be reduced in cases where the tax on which the interest was payable has been reduced as a result of an order under sections 154, 155, 250, 254, 260, 262 or section 264 of the Act. This clause has been substituted by a new clause (b) which provides that where as a result of any of the orders specified in that clause, the amount of tax on which interest was payable has been increased or reduced, the interest shall be increased or reduced accordingly. In a case where the interest is increased, the Income-tax Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable and such notice of demand shall be deemed to be issued under section 156 of the Act and the provisions of the Act shall apply accordingly. In cases where such interest is reduced, the excess interest paid, if any, shall be refunded to the assessee.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
15.5 These amendments take effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 25 of the Amending Act]
JUDICIAL ANALYSIS
EXPLAINED IN – In CIT v. Gobind Ram & Co. [1996] 222 ITR 294 (Patna), para 15.3 was referred to and the Court observed :
�Mr. Rastogi further referred to the circular of the Central Board of Direct Taxes as reported and paragraphs 14.3 and 15.3 thereof. From this circular also it is clear that prior to April 1, 1985, interest could not have been charged in reassessment proceeding.� (p. 296)
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
Other amendments – Section 155(7B)
16.1 The Amending Act has inserted a new sub-section (7B) in section 155 of the Act relating to other amendments. This is in consequence of insertion of a new section 47A by section 13 of the Amending Act [Please see paragraph 10 above].
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
16.2 The new sub-section (7B) provides that where profits or gains arising from the transfer of a capital asset are not charged to tax under section 45 of the Act by virtue of clause (iv) or clause (v) of section 47 of the Act, but such profits and gains are deemed under the new section 47A to be income chargeable under the head �Capital gains�, the Income-tax Officer may make an order of amendment at any time before the expiry of four years from the end of the previous year in which the relevant capital asset was converted into, or treated as, stock-in-trade or, as the case may be, the parent company or its nominees or, as the case may be, the holding company ceased to hold the entire share capital of the subsidiary company.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
16.3 The amendment takes effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 30(e) of the Amending Act]
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
Condition of liability to pay advance tax – Section 208(3)
17.1 The Amending Act, besides making an amendment of a drafting nature, has inserted a new sub-section (3) under section 208 of the Act relating to condition of liability to pay advance tax. The new sub-section provides that it shall not be necessary for an assessee referred to in clause (c) or clause (d) of sub-section (2) of section 208 (that is to say, an assessee other than a company, local authority or registered firm), to pay advance tax during the financial year if the amount of advance tax payable by the assessee during that financial year, as computed in accordance with the provisions of section 209 of the Act, does not exceed Rs. 1,500.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
17.2 These amendments take effect from 2nd April, 1985 and will, accordingly, apply in relation to the advance tax payable during the financial year 1985-86 and subsequent financial years.
[Section 34 of the Amending Act]
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
Interest payable by Government – Section 214(1), (1A), (2)
18.1 The Amending Act has amended sub-section (1) of section 214 of the Act by substituting the words �assessed tax� for the words �tax determined on regular assessment�. This amendment is intended to secure uniformity in the terms used in related sections, namely sections 214, 215, 217 and 273 of the Act. As stated in paragraph 18.4 below, the expression �assessed tax� shall have the same meaning as in section 215(5).
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
18.2 The existing sub-section (1A) of section 214 provides that where on completion of the regular assessment, the amount on which interest was paid by the Government under sub-section (1) has been reduced, the interest shall be reduced accordingly and the excess, if any, paid shall be deemed to be tax payable by the assessee and the provisions of the Income-tax Act shall apply accordingly.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
18.3 The Amending Act has substituted the aforesaid sub-section (1A) by a new sub-section (1A) to provide that where as a result of any order under the sections specified therein, the amount on which interest was payable under sub-section (1) of section 214 has been increased or reduced, the interest payable by the Government shall be increased or reduced accordingly. Further, it has been provided that in a case where interest payable by the Government is reduced, the Income-tax Officer shall serve on the assessee a notice of demand in the prescribed form specifying the amount of the excess interest payable and requiring him to pay such amount. Such notice of demand shall be deemed to be issued under section 156 and the provisions of the Income-tax Act shall apply accordingly.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
18.4 The Amending Act has also inserted two new Explanations after sub-section (2) of section 214.Explanation 1 provides that the expression �assessed tax� shall, for the purposes of section 214, have the same meaning as in section 215(5). This Explanation is consequential to the amendment referred to in paragraph 18.1 above.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
18.5 Explanation 2 provides that an assessment made for the first time under section 147 of the Act shall be regarded as a regular assessment for the purposes of section 214.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
18.6 These amendments take effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 35 of the Amending Act]
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
Interest payable by assessee – Section 215(3)
19.1 Sub-section (3) of section 215 of the Act provides that where as a result of an order under any of the specified sections, the amount on which interest was payable by the assessee is reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
19.2 The Amending Act has substituted the aforesaid sub-section (3) by a new sub-section (3) to provide that where as a result of an order under any of the specified sections, the amount on which interest was payable by the assessee has been increased or reduced, the interest shall be increased or reducedaccordingly. In a case where the interest is so increased, the Income-tax Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable by the assessee. Such notice of demand shall be deemed to be issued under section 156 of the Act and the provisions of the Act shall apply accordingly. In a case where interest is reduced, the excess interest paid, if any, shall be refunded to the assessee.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
19.3 The Amending Act has also inserted a new sub-section (6) in section 215 to provide that where in relation to an assessment year, an assessment is made for the first time under section 147, the assessment so made shall be regarded as a regular assessment for the purposes of section 215, section 216, section 217 and section 273 of the Act.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
19.4 The aforesaid amendments take effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 36 of the Amending Act]
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
False estimate of, or failure to pay, advance tax – Section 273(2)
20.1 The Amending Act has inserted a new Explanation 2 to sub-section (2) of section 273 to provide that where the person liable to penalty is a registered firm or an unregistered firm which has been assessed under clause (b) of section 183, then the penalty imposable on the firm under section 273 shall be the same amount as would be imposable if the firm were an unregistered firm.
TAXATION LAWS (AMENDMENT)
ACT, 1984-II
20.2 The amendment takes effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 49 of the Amending Act]
Amendments to Wealth-tax Act
Taxation Laws (Amendment) ACT, 1984-II
Net wealth to include certain assets – Section 4(1)(a)(vi)
21.1 The Amending Act has inserted a new sub-clause (vi) in section 4(1)(a) of the Wealth-tax Act to provide that in computing the net wealth of an individual, there shall be included as belonging to him the value of assets which on the valuation date are held by a person or an association of persons, to whom such assets have been transferred on or after 1st June, 1973 by the individual otherwise than for adequate consideration, for the immediate or deferred benefit of the son�s wife or the son�s minor child, of such individual or both.
Taxation Laws (Amendment) ACT, 1984-II
21.2 The amendment takes effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 53 of the Amending Act]
Taxation Laws (Amendment) ACT, 1984-II
Exemption in respect of certain assets – Section 5(1)/(3)
22.1 The Amending Act has inserted a new clause (xxiib) in sub-section (1) of section 5 of the Wealth-tax Act to provide that subject to the provisions of sub-section (1A), wealth-tax shall not be payable by an assessee in respect of a deposit with any authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages or for both.
Taxation Laws (Amendment) ACT, 1984-II
22.2 Another amendment seeks to secure that exemption in respect of the deposits referred to in new clause (xxviib) inserted in section 5(1) is subject to the monetary limit contained in sub-section (1A).
Taxation Laws (Amendment) ACT, 1984-II
22.3 The Amending Act has made two amendments to sub-section (3) of section 5. These are explained below :
1. Under the existing provisions, exemption under section 5(1) in respect of the assets specified in section 5(3) is allowed only if the relevant asset is held by the assessee for a specified period ending with the valuation date. The first amendment secures that exemption in respect of the deposits referred to in new clause (xxviib) will not be allowed unless the deposit has been held by the taxpayer for a period of at least six months ending with the relevant valuation date.
2. Under the existing provisions, in a case where the relevant new asset referred to in sub-section (3) was acquired by the assessee by conversion of, or in exchange of, or with the proceeds of, or with money constituting, any other asset exempt under sub-section (1), the period for which such other asset was held by assessee within the period of twelve months ending with the valuation date is included in computing the period of six months specified under sub-section (3), if the assessee acquires the relevant asset within thirty days after he ceased to own such other asset. The second amendment has raised the aforesaid limit of thirty days to sixty days.
Taxation Laws (Amendment) ACT, 1984-II
22.4 The aforesaid amendments take effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 54(a)(i), (b) and (c) of the Amending Act]
Amendment to Gift-tax Act:
Taxation Laws (Amendment) ACT, 1984-II
Exemption in respect of certain gifts – Section 5(1)(xvi)
23.1 The Amending Act has inserted a new clause (xvi) in sub-section (1) of section 5 of the Gift-tax Act to provide that gifts to an individual donee up to a maximum of Rs. 500 in value in one year will be exempt from gift-tax.
Taxation Laws (Amendment) ACT, 1984-II
23.2 The amendment takes effect from 1st April, 1985 and will, accordingly, apply in relation to the assessment year 1985-86 and subsequent years.
[Section 72 of the Amending Act]
