Section 6 - Amendment of section 10 - Finance Act, 1961

6. Amendment of section 10 In section 10 of the Income-tax Act, in sub-section (2),- (i) in clause (vi), after the words in the case of machinery or plant, to twenty per cent. of the cost thereof to the assessee: and before the proviso, the following paragraph shall be inserted, namely:- and where the buildings have been newly erected after the 31st day of March, 1961, such buildings being used solely for the purpose of residence of persons employed in the business and drawing remuneration not exceeding two hundred rupees per mensem or such buildings being used solely or mainly for the welfare of such persons as hospitals, creches, schools, canteens, libraries, recreational centres, shelters, rest rooms and lunch rooms, a sum (which shall not be deductible in determining the written down value for the purposes of this clause) equal to twenty per cent. of the actual cost of the building to the assessee in respect of the previous year of erection of the building: ; (ii) in clause (vib), (1) for sub-clause (i) and sub-clause (ii), the following sub-clauses shall be substituted, namely:- (i) in the case of a ship acquired after the 31st day of December, 1957, forty per cent. and in the case of a ship acquired before the 1st day of January, 1958, twenty-five per cent. of the actual cost of the ship to the assessee; and (ii) in the case of machinery or plant installed before the 1st day of April, 1961, twenty-five per cent. and in the case of machinery or plant installed after the 31st day of March, 1961, twenty per cent. of the actual cost of the machinery or plant to the assessee. ; (2) in the first proviso, after the words any person other than the Government , the words or for any consideration not connected with any amalgamation or succession referred to in clause (vic) shall be inserted; (iii) after clause (vib), the following clause shall be inserted, namely:- '(vic) (i) where in a scheme of amalgamation, a company (hereinafter in this sub-clause referred to as the predecessor) sells or otherwise transfers to the company formed in pursuance of the predecessor's amalgamation with that company (hereinafter in this sub-clause referred to as the successor) any ship, machinery or plant in respect of which development rebate has been allowed to the predecessor under clause (vib),- (1) the successor shall continue to fulfil the conditions mentioned in the first proviso to clause (vib) in respect of the reserve created by the predecessor and in respect of the period within which such ship, machinery or plant shall not be sold or otherwise transferred and in default of any of these conditions, the provisions of sub-section (11) of section 35 shall apply to the successor as it would have applied to the predecessor had it committed the default; (2) the balance of development rebate, if any, still outstanding to the predecessor in respect of such ship, machinery or plant shall be allowed to the successor in accordance with Explanations I and II of clause (vib), so, however, that the total period for which the balance of development rebate shall be carried forward in the assessments of the predecessor and the successor shall not exceed the period of eight years specified in Explanation I to clause (vib) and the successor shall be treated as the assessee in respect of such ship, machinery or plant for the purposes of clause (vib) and this sub-clause; Explanation. - For the purposes of this sub-clause, amalgamation means the merger of two companies (each of which is hereinafter in this Explanation referred to as the amalgamating company) to form one company (hereinafter in this Explanation referred to as the amalgamated company) in such a manner that- (a) all the property of the amalgamating companies immediately before the amalgamation becomes the property of the amalgamated company by virtue of the amalgamation; (b) all the liabilities of the amalgamating companies immediately before the amalgamation become the liabilities of the amalgamated company by virtue of the amalgamation; and (c) all the shareholders of the amalgamating companies immediately before the amalgamation become shareholders of the amalgamated company by virtue of the amalgamation, otherwise than as a result of the acquisition of property of one company by another company pursuant to the purchase of such property by the other company or as a result of the distribution of such property to the other company after the winding up of the company; (ii) where a firm is succeeded to by a private company, as defined in the Companies Act, 1956(1 of 1956), in the business carried on by it as a result of which the firm sells or otherwise transfers to the private company any ship, machinery or plant, the provisions of sub-clause (i) of this clause shall, so far as may be, apply to the firm and the company; Explanation.-The provisions of this sub-clause shall apply only where- (a) all the property of the firm immediately before the succession becomes the property of the company; (b) all the liabilities of the firm immediately before the succession become the liabilities of the company; and (c) all the partners of the firm immediately before the succession become shareholders of the company;'; (iv) after clause (xiv), the following clause shall be inserted, namely:- (xiva) in respect of any special reserve created by a financial corporation which is engaged in providing long term finance for industrial development in India, an amount not exceeding ten per cent. of the total income carried to such reserve account: Provided that the corporation is for the time being approved by the Central Government for the purposes of this clause: Provided further that where the aggregate of the amounts carried to such reserve account from time to time exceeds the paid-up share capital (excluding the amounts capitalised from reserves) of the corporation no allowance under this clause shall be made in respect of such excess; ; (v) in clause (xv), the following proviso shall be inserted, namely:- Provided that in the case of a company, no expenditure in the nature of entertainment expenditure shall be allowed which exceeds the aggregate amount computed as hereunder- (i) on the first Rs. 10,00,000 of the profits and gains of the business [computed before making any allowance under clause (vib) or in respect of entertainment expenditure]..at the rate of 1% or Rs. 5,000 whichever is higher; (ii) on the next Rs. 40,00,000 of the profits and gains of the business (computed in the manner aforesaid) ..at the rate of 3/4%; (iii) on the next Rs. 1,20,00,000 of the profits and gains of the business (computed in the manner aforesaid)..at the rate of 1/2%; (iv) on the balance of the profits and gains of the business (computed in the manner aforesaid)..nil. .