FINANCE ACT, 1963 – CIRCULAR NO. 1(15)-63/TPL, DATED 8-9-1963

 1. Amendments at a glance

Section/Schedule Particulars
Finance Act
2 and 1st Sch. Rate structure 2-8
2(5) Tax concession for export profits 10-11
COMPULSORY DEPOSIT SCHEME ACT
4(3) Relief in respect of additional surcharge on account of deposits 9
INCOME-TAX ACT
40(c)(iii) Disallowance of remuneration, etc., exceeding Rs. 5,000 per mensem 19
139(1)(prov.),(1A) Interest for delay in filing returns 12, Annex
141A Self-assessment 13-18, Annex
210(3) Revision of advance tax demands on the basis of subsequent assessments 20-21
215(2) Interest for under-payment of advance tax 22
220(2)(prov.) Revision of interest for delayed payment of tax 23
297(2)(e) Proceedings under section 23A of the 1922Act 24
WEALTH-TAX ACT
5(1)(viii), (xvi) Exemptions in respect of jewellery and in­vestments in certificates 26

 2. Rate structure

Rates of tax
2. The basic rates of income-tax and super tax for the assessment year 1963-64 continue to be exactly the same as for the assess­ment year 1962-63. So far as Union surcharge and the special surcharge on unearned income are concerned, the rates are the same as in the last year, subject to the following changes :
1. Previously, only total income above Rs. 7,500 (Rs. 15,000 for Hindu undivided families satisfying the prescribed conditions) was liable to surcharge; in case the assessee had some income from dividends there was a marginal adjustments to these limits, which were to be increased by the amount of the dividends up to a maximum of Rs. 1,500. These special provisions have now been deleted and the minimum limits above which surcharges are to be levied will be exactly the same as for charging basic income-tax.
2. Registered firms with total incomes exceeding Rs. 25,000 were, under the rates in force in 1962-63, subject to income-tax at specified slab rates, but were not liable to any surcharge. For the assessment year 1963-64, they will become subject to the levy of a Union surcharge equal to 20 per cent of the proportionate amount of tax on the business income of the firm plus 10 per cent of the proportionate amount of income-tax on the income of the firm from all other sources including income from a profession. The amount of income-tax attributable to the business income and to the income from all other sources will be worked out at the average rate of income-tax applicable to the firm’s total income. The intention behind the provision of a smaller rate of 10 per cent is to give a concessional treatment to professional firms, e.g., accountants’ firms.
Finance Act, 1963
Additional surcharge
3. The most important change made in the rate structure is the introduction of an additional surcharge on income-tax for pur­poses of the Union, which is applicable to individuals, Hindu undivided families, unregistered firms, other associations of persons and bodies of individuals, and artificial juridical persons and also in any other case where income-tax is to be charged at the maximum rate under the provisions of the Income-tax act. This additional surcharge will be calculated not on the total income of the assessee, but on his “residual income”. The “residual income” is to be computed by deducting from the total income.
(a) The amount of capital gains, if any, included in it [it is to be noted that the amount of compensation, if any, under section 28(ii) is not to be deducted]; and
(b) the gross amount of income-tax, super tax, Union surcharge and special surcharge which will be chargeable on such reduced total income if it were the total income, before allowing any rebates or deductions in respect of income-tax and super tax admissible under the provisions of the Income-tax act or the Finance Act.
For example, even if an assessee has any income from such sources as share income from an unregistered firm (taxed as such) or interest on tax-free securities on which he is entitled to exemp­tion under sections 86(iii), 99(1)(i) and 86( i) and (ii) or if he is entitled to a rebate of income-tax on payments of life insur­ance premia, contributions to provident fund, donations to the National Defence Fund and charitable institutions or to a rebate of income-tax and super tax under section2(5) of the Finance Act, 1963 in respect of profits derived from exports, the total income of tax to be deducted for arriving at the residual income will be worked out without reducing it by the tax rebate on the aforesaid items.
Finance Act, 1963
4. The additional surcharge is to be calculated on the following slab rates:
On the first Rs. 6,000 of the residual income at 4 per cent
On the next Rs. 9,000 of the residual income at 6 per cent
On the next Rs. 12,000 of the residual income at 8 per cent
On the next Rs. 15,000 of the residual income at 9 per cent
On the balance of the residual income at 10 per cent
The additional surcharge is to be levied only in cases where income-tax is leviable that is, where the total income in not less than Rs. 3,000, Rs. 3,300, Rs. 3,600 or Rs. 6,000, depending on the circumstances. Marginal relief is also admissible in cases where the residual income exceeds these limits by a small amount; in such cases, the additional surcharge will be limited to an amount equal to 3 per cent of these amounts (Rs. 3,000, Rs. 3,300, Rs. 3,600 or Rs. 6,000) plus one-half the excess of the residual income over these limits.
Finance Act, 1963
5. It has to be noted carefully that under the provisions of section 3 of the Finance Act, 1963 the additional surcharge shall not be taken into account in calculating any rebate or deduction of income-tax admissible to an assessee under the provisions of Chapter VII or Chapter VIIIA or the provisions of section 2(5) of the Finance Act, 1963. Thus, the additional surcharge will be left out of account in working out the average rate of income-tax for the purpose of calculating the rebate of income-tax admissi­ble in respect of income included in the total income on which no income-tax is payable under the provisions of Chapter VII, e.g., income of newly established industrial undertakings or hotels (vide section 84), share of partnership income from an unregis­tered firm, interest on income-tax free securities of the Central or a State Government or in respect of items referred to in Chap­ter VIIIA such as payments of life insurance premia, contribution to provident funds, donations to the National Defence Fund or to any other fund or institutions referred to in section 88 of the Income-tax act, or for allowing the rebate of income-tax due to exporters and manufacturers under section 2(5) of the Finance Act, 1963. The average rate of income-tax for the purpose of calculating the rebate of income-tax in such cases will be ar­rived at only with reference to income-tax and other surcharges on income-tax exclusive of the additional surcharge.
Relief in respect of additional surcharge will, however, be admissible in cases falling under the provisions of section 89, e.g., where salary is paid in arrears or in cases where double income-tax relief is due under the provisions of Chapter IX.
The following is an illustration of the computation of residual income and additional surcharges:
ILLUSTRATION
An individual with two children has income from the following sources for the assessment year 1963-64 :
Rs.
1.
Interest on tax-free securities
2,000
2.
Income from property
11,000
3.
Business – Share from URF (Taxed)

Business carried on by the individual
2,000

40,000
4.
Capital gains – Short-term
5,000
LIP paid by him is Rs. 5,000.
Solution :
In this case, the tax payable will be calculated as follows :
The total income is
60,000
Earned income
40,000

Tax payable in accordance with section 114(a) on Rs. 55,000 (being total income less capital gains) works out to :
Rs.
Income-tax on Rs. 55,000
11,045.00
Surcharge @ 5%
552.25
Special surcharge on unearned income :
Rs.
Income-tax on Rs. 55,000
11,045
Less : Income-tax on Rs. 40,000
7,295
15% of
3,750
562.50
Income-tax
12,159.75 (A)
Super tax on Rs. 55,000
8,700.00
Surcharge @ 5%
345.00
Special surcharge on unearned income :
Rs.
Super tax on Rs. 55,000
8,700.00
Less : Super tax on Rs. 44,000
3,500.00
15% of
5,200.00
780.00
Super tax
9,915.00 (B)

Tax payable in accordance with section 114(b)(i) on Rs. 55,000 at the average rate of tax on Rs. 60,000:
Rs.
Income-tax on Rs. 60,000
12,295.00
Surcharge @ 5%
614.75
Special surcharge on unearned income:
Rs.
Income-tax on Rs. 60,000
12,295
Less : Income-tax on Rs. 40,000
7,295
15% of
5,000
750.00
Income-tax
13,659.75
Super tax on Rs. 60,000
10,700.00
Surcharge @ 5%
535.00
11,235.00
SPECIAL SURCHARGE ON UNEARNED INCOME
Rs.
Super tax on Rs. 60,000
10,700
Less : Super tax on Rs. 40,000
3,500
15% of
7,200
1,080.00
Super tax
12,315.00
Average rate of income tax =
13,659.75 x 100/60,000
= 0.2277 per Re.
Average rate of super tax =
12,315 x 100/60,000
= 0.2053 per Re.
Income-tax on Rs. 5,000
1,138.31 ( C)
Super tax on Rs. 5,000
1,026.25 ( D)
2,164.56
COMPUTATION OF RESIDUAL INCOME
Reduced total income
Rs. 60,000—Rs. 5,000 = Rs. 55,000
Residual income
Rs. 55,000
Tax on Rs. 55,000
Rs. 22,074.75 (IT Rs. 12,159.75+ST Rs. 9,915.00)
Net residual income
Rs. 32,925.25 (Rs. 55,000—Rs. 22,074.75)
ADDITIONAL SURCHARGE PAYABLE
Rs.
On the first Rs. 6,000 of residual income @ 4%
240.00
On the next Rs. 9,000 of residual income @ 6%
540.00
On the next Rs. 12,000 of residual income @ 8%
960.00
On the next Rs. 5,925 of residual income @ 9%
533.25
Additional surcharge
2,273.25 ( E)
Gross tax payable = A + B + C + D + E
26,512.56
Less : Abatements :
Rs.
– Interest on TF Security
443.20
– LIP rebate
1,108.00
– Share from URF
807.80
2,359.00
Net tax payable
24,153.56
It may be noted that the deduction of tax or rebate on inter on tax-free securities, life insurance premium, and share from URF has been calculated at the average rate of income-tax (excluding additional surcharge) and super tax applicable to the total income of Rs. 60,000.
Finance Act, 1963
6. There is no change in the rates of income-tax on companies and local authorities, or in the rates of super tax applicable to any class of assessees.
Finance Act, 1963
Rates for deduction of tax at source
7. The rates for deduction of tax at source remain unchanged. However, in respect of income from salaries, the additional sur­charge is also to be included in calculating the amount of tax to be deducted.
Finance Act, 1963
8. In respect of advance tax to be paid for the assessment year 1964-65, the additional surcharge is to be taken into account. This will be so, whether the advance tax is paid in accordance with the notices, issued by the Income-tax Officer, or in accord­ance with the estimates or revised estimates filed by the asses­sees themselves.

 3. Compulsory Deposit Scheme Act, 1963

Finance Act, 1963

Relief in respect of additional surcharge on account of deposits

9. Assessees who are liable to pay additional surcharge are enabled by section 4(3) of the Compulsory Deposit Scheme Act, 1963 to make a deposit up to a specified maximum amount under the provisions of that Act. On making a deposit the assessee becomes entitled to a deduction from the amount of additional surcharge payable by him of a sum, equal to the specified maximum amount or the amount of the deposit actually made, whichever is less. The maximum amount up to which a deposit can be made is 3 per cent of the first slab of Rs. 6,000 of the residual income and 2 per cent of the balance thereof.

Provisions in regard to the manner in which deposits are to be made by assessees and other matters relating to such deposits have been laid down in the Compulsory Deposit (Income-tax Payers) Scheme, 1963. The deposits bear simple interest at the rate of 4 per cent per annum and are repayable together with the interest thereon after the expiry of five years from the end of the finan­cial year in which the deposit is made. Under section 4(8) of the Compulsory Deposit Scheme Act, the interest on the deposits is free of any tax under the Income-tax Act.

For the assessment year 1963-64, no additional surcharge is payable by an assessee whose total income in respect of the previous year consists only of income under the head Salaries, because such income is chargeable to tax at the rates prescribed in the Finance (No. 2) Act, 1962. However where the total income for that year includes income under any other head (other than capital gains) additional surcharge will be payable by the assessee in respect of his non-salary income forming part of his residual income. In such a case the maximum amount of the deposit which should be made under the Compulsory Deposit Scheme Act for entitling the assessee to a deduction from the amount of addi­tional surcharge payable by him will be worked out on a propor­tionate basis, vide paragraph 3 of the Compulsory Deposit (In­come-tax Payers) Scheme, 1963.

An assessee by whom additional surcharge is payable in respect of any assessment year may make a deposit on or before the close of the financial year immediately preceding that assessment year. However, in respect of the assessment year 1963-64, it has been provided that if the regular assessment for the year has been completed before 1-7-1963, the assessee may make a deposit on or before 30-9-1963. If the regular assessment for that year had been completed on or after 1-7-1963, the deposit may be made at any time within thirty days of the service of the demand notice or by 31-3-1964, whichever is earlier. If the deposit is made within the aforesaid time, the deduction admissible to the asses­see from the additional surcharge payable by him will be allowed on his furnishing the Income-tax Officer with the receipt issued by the Post Office or any other deposit officer in respect of the deposit. Instructions have already been issued to the Income-tax Department for intimating to the assessee at the time of issuing the demand notice for the assessment year 1963-64 the amount which he may deposit under the Compulsory Deposit (Income-tax Payers) Scheme, 1963.

The additional surcharge is also payable as a part of the advance tax payable by an assessee during the current financial year. It is also to be deducted as a part of the tax deductible at source from income under the head Salaries paid during the current financial year. The amount of additional surcharge to be deducted from the salary income will be the amount which would have been leviable if the estimated income under that head had been the total income. Assessees who are liable to pay advance tax or who are in receipt of any income under the head Salaries during the financial year are entitled to make a deposit under the Compulso­ry Deposit (Income-tax Payers) Scheme during the financial year. On making the deposit, they will been entitled to a deduction from the additional surcharge payable by them as a part of the advance tax or deductible at source from their salary income of a sum equal to the maximum amount specified in the first sub-para­graph of this paragraph or the amount actually deposited during the financial year, whichever is less. In order to obtain this deduction the person in receipt of the salary income will have to forward a statement to the person responsible for paying the salary declaring the amount he has already deposited under the Compulsory Deposit (Income-tax Prayers) Scheme, and the amount, if any, which he would further deposit before the close of the financial year. The person responsible for paying the salary may also require the depositor to produce the pass book showing the deposits actually made during the financial year. In the case of a person liable to pay additional surcharge as a part of the ad­vance tax payable by him, the aforesaid deduction will be admis­sible if the assessee files before the Income-tax Officer on or before the 31st day of March a statement declaring the amount already deposit by him under the Compulsory Deposit (Income-tax Payers) Scheme. The Income tax Officer may also require the assessee to produce the receipts in respect of the deposits in order to verify the fact of the deposits having been made.

4. Tax concession for export profits

Finance Act, 1963

Export profits relief to exporter/manufacturer

10. The tax concession, which was introduced in the Finance (No. 2) Act, 1962, for the assessment year 1962-63 in respect of profits derived from the export of goods or merchandise out of India, has been continued for the assessment year 1963-64 also vide section 2(5)(i) of the Finance Act, 1963. As in the last year, this concession will be available to all assessees except companies which have not made the prescribed arrangements for the declaration and payment of dividends within India. The concession has been given in the form of an abatement of tax on the amount of export profits included in the total income equal to one-tenth of the tax calculated on such profits at the average rate of income-tax and super tax applicable to the total income. The procedure for determining the amount of profits from exports qualifying for this tax rebate has been laid down in the Income-tax (Determination of Export Profits) Rules, 1963, vide Central Board of Revenue Notification No. SO 1981, dated 9-7-1963, pub­lished in the Gazette of India, Extraordinary, of 10-7-1963. These Rules are on the lines of the Income-tax (Determination of Export Profits) Rules, 1962.

Finance Act, 1963

11. The above concession is available only to the person who actually exports goods or merchandise out of India, whether they are manufactured by himself or by any one else. In addition, a new concession has been introduced this year, which will be available to a manufacture of commodities listed in the First Schedule to the Industries (Development and Regulation) Act, 1951, where such commodities are exported out of India either by the manufacturer himself or by a person who first purchases such commodities from the manufacturer vide clauses (ii) to (vi) of section 2(5) of the Finance Act, 1963. This new concession con­sists of a deduction of tax or a rebate at the average rate of income-tax and super tax applicable to the manufacturer, on an amount equal to 2 per cent of the sale proceeds receivable by him in respect of such commodities exported by him directly or sold to a person who exports them. In case the manufacturer himself exports the specified commodities, this concession is available on the sale proceeds of such commodities exported within the assessees previous year, after 28-2-1963. In case the manufac­turer sells the specified commodities to an exporter, the conces­sion is applicable in respect of the sale proceeds of the goods sold by the manufacturer to the exporter at any time after 28-2-1963, during the relevant previous year, provided that evidence is produced at the time of assessment that these commodities have actually been exported by the purchaser directly. It is to be noted that this concession will be admissible only if the export is effected by the person to whom the manufacturer sells the goods. This new concession is not applicable to manufactures engaged in certain industries, viz., fuels, textiles (including those dyed, printed or otherwise processed), sugar, vegetable oils and vanaspati, cement and gypsum products and cigarettes, as specified in clause (v) of section 2(5) of the Finance act, 1963. It is to be particularly noted that this abatement is not to be computed in such a manner as to reduce the amount of income-tax and super tax payable by the assessee to a negative figure. In other words, if the deduction of tax on 2 per cent of the sale proceeds exceeds the total tax otherwise payable by the assessee (before giving credit for tax deducted at source or paid by way of advance tax, etc.), the said deduction will be limited to a sum which is enough to reduce the tax payable to nil, if the manufacturer is also the exporter, he is entitled to both conces­sions and this limit applies to the total of the two concessions.

5. Amendments to Income-tax Act

Interest for delay in filing returns

12. Under section 139, the interest to be paid by an assessee for delay in the filing of the return was to be calculated with reference to the tax determined on regular assessment, and no adjustments were subsequently admissible in respect of such interest. Section 8 of the Finance Act, 1963 introduces two modifications in respect of this position. In the first place, if the assessment is modified as a result of appeal, reference, review or rectification, and the amount of tax payable by the assessee is reduced provision has been made for reduction the amount of interest pro rata, and for refunding the excess inter­est paid, if any. Secondly, the Income-tax Officer has been given power in certain circumstances to reduce or waive the interest. The circumstances in which this power of reduction or waiver can be exercised will be prescribed by rules to be made for this purpose.

It is to be noted that this provision enables a modification of the amount of interest only in the assessees favour, and not in the other direction. If the assessment is enhanced as a result of appeal, revision or rectification, the amount of interest payable is not to be enhanced and no additional interest is to be demand­ed.

Finance Act, 1963

Self-assessment

13. Tax is now payable by the following methods :

(a) by deduction at source from certain types of receipts, e.g., salaries, interest on securities, dividends and interest received by non-residents ;

(b) by way of advance tax in the year preceding the assess­ment year (i.e., more or less concurrently with the earning of the income), on incomes other than salary exceeding particular amounts;

(c) against demands raised on provisional assessments, based on the assessees return, in cases where some delay is anticipated in completing the assessment; and

(d) against demands raised on regular assessment.

In order to ensure early collections, a new section 141A has been inserted in the Act with the object of encouraging assessees to pay the full amount of tax payable in accordance with the return of income (after giving credit for any tax already paid through deduction at source or by way of advance tax) on or before 31st December of the assessment year. With this object in view, the section pro­vides both

(a) an incentive, in the form of a discount for payment of tax on or before that date, and

(b) a deterrent, by levying an additional amount, in the nature of interest, in cases where payment is delayed beyond that date.

Finance Act, 1963

14. If an assessee files a return on or before 31st December of the relevant assessment year and a provisional or regular assess­ment is also completed before that date, he will become entitled, if he pays by the said date the full amount of tax payable on such (provisional or regular) assessment, to a discount equal to 1 per cent of the amount so paid. If an assessee has filed a return before that date, but no provisional or regular assessment is made before that date, it is open to him to pay voluntarily before 1st January of the relevant assessment year, the full amount of tax payable in accordance with his return (after taking credit for deductions at source and advance tax paid). If he does so, he will become entitled to a deduction of 1 per cent of the amount so paid, out of the tax with which he is chargeable.

Finance Act, 1963

15. In a case where no provisional or regular assessment has been made before 1st January of the assessment year, and the assessee has also not paid tax voluntarily before that date in accordance with a return made by him, he will become liable to pay interest at 2 per cent per annum from 1st January to the date specified below:

(a) if he files a return, whether before or after 1st January, the date on which the provisional assessment, if any, is made; if no provisional assessment is made, the date on which a regular assessment under section 143 or 144 is made;

(b) if he does not file a return at all, the date on which a regular assessment is made under section 144.

Finance Act, 1963

16. In cases falling under (a), the interest will be calculated on the tax payable in accordance with the return of income, after giving credit for the tax deducted at source and advance tax paid. In cases falling under (b), the interest will be calculated on the tax determined as payable on the completion of the regular assessment after giving credit for tax deducted at source and advance tax paid.

Finance Act, 1963

17. The different circumstances in which interest is payable by the assessee either under section 139 or section 141A, or a discount is admissible under section 141A, will be readily apparent from the tabular statement in the Annexure. In addition, penalty may also become exigible under section 271(1)(a) in appropriate circumstances.

Finance Act, 1963

18. Where the return of income is filed by an assessee before 1st January of the relevant assessment year and a provisional or regular assessment is made before that date, the Income-tax Officer will calculate the amount of the discount which will be allowable to the assessee in the event of the tax being paid before 1st January. Two challans will be issued to the assessee, one for the net amount of tax payable after deducting the dis­count and the other for the balance representing the amount of the discount. If the payment is made against the former challan for the net amount of the tax due before 1st January of the relevant assessment year, no payment need be made against the challan for the balance amount which represents the discount. Under this procedure it will not be necessary for the assessee to make a claim for a refund on account of the discount allowable to him.

Finance Act, 1963

Disallowance of remuneration, etc., exceeding Rs. 5,000 per mensem

19. Section 6 of the Finance Act, 1963 introduces a new sub-clause (iii) in section 40(c), providing for the disallowance of any expenditure incurred by a company for providing any remunera­tion or benefit or amenity to its employees in excess of an amount calculated at the rate of Rs. 5,000 per month for each employee for any period after 28-2-1963. Such disallowance is to be made only in cases where the employee concerned is an Indian citizen. In calculating the total expenditure in respect of a particular employee, certain extraordinary items are to be ex­cluded, namely, gratuities the transferred balance of an employee in a newly recognised provident fund, and any compensation or other payments falling within section 17(3). It has to be noted that section 40(c)(iii) relates to disallowance in the assessment of the company, and what is important is, therefore, the expendi­ture incurred by the company and not necessarily the quantum of assessable income to which it gives rise in the hands of the employee.

Finance Act, 1963

Advance tax

20. Revision of demands on the basis of subsequent assessments – Two important amendments have been made relating to advance tax. Under the proviso to section 210(3), as in force till 31-3-1963, it was obligatory on the Income-tax Officer to issue an amended notice of demand for advance tax whenever an assessment of the assessee himself or of a registered firm of which he is a part­ner, was completed for a previous year later than that on the basis of which the original demand was issued and it was found that such later assessment would lead to a smaller liability to advance tax. Section 12 of the Finance Act, 1963 amends this sub-section by omitting the aforesaid proviso. the effect of this amendment is that a revised demand need be issued only when the original demand falls short of the demand based on the last completed assessment.

Finance Act, 1963

21. The second important modification made is that the Income-tax Officer is empowered to raise a revised demand not only when a regular assessment for a subsequent year is completed but even when he makes a provisional assessment for any subsequent assess­ment year.

In this connection, it may be mentioned that the amendments under reference do not make any change in the existing provision in regard to the issue of the first demand notice for advance tax under section 209. The first demand for advance tax will be based, as before, on the latest completed regular assessment of the assessee. If, for instance, the regular assessment for 1960-61 and a provisional assessment for 1961-62 have been completed before 31-3-1963, the demand for advance tax payable for the financial year 1963-64 will be based on the regular assessment for 1960-61 irrespective of whether the provisional assessment for the assessment year 1961-62 was on a higher or lower income than the regular assessment. Having issued such a demand the Income-tax Officer cannot also issue an amended notice on the basis of the provisional assessment for 1961-62; he can, of course, revise the demand in accordance with the provisional assessment for either the assessment year 1962-63 or 1963-64, if one happens to be made after issue of the original demand before 15-2-1964 and discloses a liability which is higher than the existing liability.

Finance Act, 1963

22. Interest for under-payment of advance tax – In view of the fact that assessees may now pay tax before the 1st January of the assessment year under section 141A, suitable modifications have been made in the calculation of interest on advance tax under section 215. Where any such payment is made, either in pursuance of a provisional assessment or on the assessees own volition, interest under section 215 will hereafter be calculated up to the date of such payment on the amount by which the advance tax paid falls short of 75 per cent of the tax determined on regular assessment (as adjusted); after that date, the interest will be payable on the amount by which the total tax paid falls short of 75 per cent of the tax on regular assessment (as adjusted).

Finance Act, 1963

Revision of interest for delayed payment of tax

23. Section 220(2) provides for the charging of simple interest at 4 per cent per annum in cases of delayed payment of tax. As the Act originally stood, there was no provision for the reduc­tion of this interest in case the relevant demand was reduced. Section 14 of the Finance Act, 1963 introduces a new proviso to this sub-section, the effect whereof is that, whenever the demand is reduced on appeal, revision, reference or rectification, the interest will also be reduced accordingly and excess interest paid, if any, will be refunded.

Finance Act, 1963

Proceedings under section 23A of the 1922 Act

24. Section 297(2)(e) provides that, in relation to 1961-62 and earlier assessment years, section 23A of the 1922 Act, as in force for the relevant year, will apply and not the provisions of sections 104 to 109 of the 1961 Act. However, when action has once been taken under section 23A of 1922 Act, it is desirable that any subsequent proceeding for imposition of penalty or recovery of tax should be continued under the 1961 Act. Provision to this effect has been made by section 19 of the Finance Act, 1963 which amends section 297(2)(e).

Finance Act, 1963

25. Amendments made by sections 5, 7, 10, 15, 16, 17 and 18 of the Finance Act, 1963 are comparatively minor and do not need any explanation.

6. Amendment to Wealth-tax Act

Finance Act, 1963

Exemptions
26. Section 21 of the Finance Act makes certain modifications in the Wealth-tax Act. In the first place, the existing exemption in respect of jewellery owned by an assessee up to the amount of Rs. 25,000 has been withdrawn. For the assessment year 1963-64 and subsequent assessment years, therefore, the full value of jewel­lery owned by an assessee will be included in his net wealth for the purposes of assessment. Another important amendment is that investments in the new certificates issued sometime back, viz., 12-year National Plan Savings certificates, 10-year Defence Deposit Certificates and 12-year National Defence Certificates, will be excluded from computation of the net wealth, provided that a particular assessee’s holdings do not exceed the maximum amount permitted to be invested or deposited by the rules of the relevant schemes. Also in respect of 10-year Defence Deposit Certificates, and 12-year National Defence Certificates, the normal condition that exemption will be available only in respect of investments held by the assessee for a period of at least six months before the valuation date, has been relaxed; all such certificates held by an assessee on the valuation date will be excluded from the computation, irrespective of the period for which he has held them.
ANNEXURE
Chart showing combined effect of proviso (iii) to section 139(1) and section 141A
Sl. No.
Whether tax paid before 1st January
Interest under section 139(1), proviso (iii), at the rate of 6 per cent per annum
Relief under section 141A(1) at the rate of 1 per cent of tax paid
Interest under section 141A(2) or (3)
1
2
3
4
5
1. Return filed in time or within the extended time, i.e., by 30th September or 31st December, as the case may be
Paid
Not chargeable
Admissible
Not chargeable
2. Return due by 30th June, and filed after 30th September but on or before 31st December
Paid
Chargeable with effect from 1st October to date of filing
Admissible
Not chargeable
3. As in 1 above
Not paid
Not chargeable
Not admissible
If provisional or regular assessment has been made on or before 31st December no interest will be chargeable under section 141A; if such assessment has not been made by that date, interest will be chargeable under section 141A at the rate of 2 per cent per annum payable from 1st January to date of provisional or regular assessment whichever is earlier
4.As in 2 above
Not paid
Chargeable with effect from 1st October to date of filing
Not admissible
If provisional or regular assessment has been made on or before 31st December no interest will be chargeable under section 141A; if such assessment has not been made by that date, interest will be chargeable under section 141A at the rate of 2 per cent per annum payable from 1st January to date of provisional or regular assessment, whichever is earlier
5. Return filed on or after 1st January
Not paid
Chargeable with effect from 1st October or 1st January (as the case may be) to date of filing
Not admissible
Interest under section141A(2) will be chargeable at the rate of 2 per cent per annum from 1st January to date of provisional or regular assessment, whichever is earlier
6. Return not filed
Not paid
Not Chargeable
Not admissible
Interest under section141A(2) will be chargeable at the rate of 2 per cent per annum from 1st January to the date of the regular assessment if it is made after date; if such assessment was made before that date, interest
is not chargeable

More Under Income Tax

Posted Under

Category : Income Tax (25012)
Type : Circulars (7468) Notifications/Circulars (30024)

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