SCH-03 - Third Schedule - Finance (No. 2) Act, 1967

THE THIRD SCHEDULE (See section 33) Amendments in the Income-Tax Act 1. Section 10-After clause (28), insert - (29) in the case of an authority constituted under any law for the time being in force for the marketing of commodities, any income derived from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities. . 2. Section 32 (a) in sub-section (1), after clause (iv), insert - (v) in the case of any new building, the erection of which is completed after the 31st day of March, 1967, where the building is owned by an Indian company and used by such company as a hotel and such hotel is for the time being approved in this behalf by the Central Government, a sum equal to twenty-five per cent. of the actual cost of erection of the building to the assessee, in respect of the previous year in which the erection of the building is completed or, if such building is first brought into use as a hotel in the immediately succeeding previous year, then in respect of that previous year; but any such sum shall not be deductible in determining the written down value for the purposes of clause (ii). ; (b) in sub-section (2), after clause (iv) , insert or clause (v) . 3. Section 33 (a) for sub-section (1), substitute - (1)(a) In respect of a new ship or new machinery or plant (other than office appliances or road transport vehicles) which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section and of section 34, be allowed a deduction, in respect of the previous year in which the ship was acquired or the machinery or plant was installed or, if the ship, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, a sum by way of development rebate as specified in clause (b). (b) The sum referred to in clause (a) shall be - (A) in the case of a ship, forty per cent. of the actual cost thereof to the assessee; (B) in the case of machinery or plant, - (i) where the machinery or plant is installed for the purpose of business of construction, manufacture or production of any one or more of the articles or things specified in the list in the First Schedule, - (a) thirty-five per cent. of the actual cost of the machinery or plant to the assessee, where it is installed before the 1st day of April, 1970, and (b) twenty-five per cent. of such cost where it is installed after the 31st day of March, 1970; (ii) where the machinery or plant is installed after the 31st day of March, 1967, by an assessee being an Indian company in premises used by it as a hotel and such hotel is for the time being approved in this behalf by the Central Government - (a) thirty-five per cent. of the actual cost of the machinery or plant to the assessee, where it is installed before the 1st day of April, 1970, and (b) twenty-five per cent. of such cost, where it is installed after the 31st day of March, 1970; (iii) where the machinery or plant is installed after the 31st day of March, 1967, being an asset representing expenditure of a capital nature on scientific research related to the business carried on by the assessee, - (a) thirty-five per cent. of the actual cost of the machine or plant to the assessee, where it is installed before the 1st day of April, 1970, and (b) twenty-five per cent. of such cost, where it is installed after the 31st day of March, 1970; (iv) in any other case, - (a) twenty per cent. of the actual cost of the machinery or plant to the assessee, where it is installed before the 1st day of April, 1970, and (b) fifteen per cent. of such cost where it is installed after the 31st day of March, 1970. ; (b) in sub-section (2) for [the total income for this purpose being computed without making any allowance under sub-section (1) or sub-section (1A) of this section or sub-section (1) of section 33A] , in both places, substitute - [the total income for this purpose being computed without making any allowance under sub-section (1) or sub-section (1A) of this section or sub-section (1) of section 33A or any deduction under Chapter VIA or section 280-O] . (c) in sub-section (6), add at the end - Provided that the provisions of this sub-section shall not apply in the case of an assessee being an Indian company, in respect of any machinery or plant installed by it in premises used by it as a hotel, where the hotel is for the time being approved in this behalf by the Central Government. . 4. Section 33A- In sub-section (2), for [the total income for this purpose being computed after making the allowance under sub-section (1) or sub-section (1A) or clause (ii) of sub-section (2) of section 33 but without making any allowance under sub-section (1) of this section] , in both places, substitute - [the total income for this purpose being computed after deduction of the allowance under sub-section (1) or sub-section (1A) or clause (ii) of sub-section (2) of section 33, but without making any deduction under sub-section (1) of this section or any deduction under Chapter VIA or section 280-O] . 5. Section 35- In sub-section (2), - (i) for clause (i), substitute - (i) in a case where such capital expenditure is incurred before the 1st day of April, 1967, one-fifth of the capital expenditure incurred in any previous year shall be deducted for that previous year; and the balance of the expenditure shall be deducted in equal installments for each of the four immediately succeeding previous years; (ia) in a case where such capital expenditure is incurred after the 31st day of March, 1967, the whole of such capital expenditure incurred in any previous year shall be deducted for that previous year; ; (ii) in clause (ii), after an asset representing expenditure of a capital nature , insert incurred before the 1st day of April, 1967 ; (iii) in clause (v), for where the asset is used , substitute where the asset mentioned in clause (ii) is used . 6. Section 36- In clause (viii) of sub-section (1), for of the total income carried to such reserve account , substitute of the total income (computed before making any deduction under Chapter VIA) carried to such reserve account . 7. Section 41- In sub-section (3), after the total amount of the deductions made under clause (i) , insert or, as the case may be, the amount of the deduction under clause (ia) . 8. Section 43- For the proviso to clause (1), substitute - Provided that where the actual cost of an asset, being a motor car which is acquired by the assessee after the 31st day of March, 1967, and is used otherwise than in a business of running it on hire for tourists, exceeds twenty-five thousand rupees, the excess of the actual cost over such amount shall be ignored, and the actual cost thereof shall be taken to be twenty-five thousand rupees. . 9. Section 66- Omit and any amount in respect of which the assessee is entitled to a deduction from the amount of income-tax on his total income with which he is chargeable for any assessment year in accordance with, and to the extent provided in sections 87, 87A and 88 . 10. Section 71- For sub-section (2), substitute - (2) Where in respect of any assessment year the net result of the computation under any head of income other than Capital gains is a loss and the assessee has income assessable under the head Capital gains , such loss may, subject to the provisions of this Chapter, be set off - (i) against the income, if any, of the assessee assessable for that assessment year under any head including income assessable under the head Capital gains (whether relating to short-term capital assets or any other capital assets), or (ii) if the assessee so desires, only against his income, if any, under the head Capital gains , in so far as such income relates to short-term capital assets, and income under any other head. (3) Where in respect of any assessment year the net result of the computation under section 48 to 55 in respect of capital gains relating to short-term capital assets is a loss and the assessee has income assessable under any head of income other than Capital gains , the assessee shall, subject to the provisions of this Chapter, be entitled to have such loss set off against the income aforesaid. 11. Section 72- In sub-section (1), after Capital gains , insert relating to capital assets other than short-term capital assets . 12. Section 74- In sub-clause (i) of clause (a) of sub-section (1), for as relates to short-term capital assets , substitute relating to short-term capital assets as cannot be or is not wholly set off against income under any head in accordance with the provisions of section 71 . 13. For Chapter VIA, Substitute Chapter VIA Deductions to be Made in Computing total Income A. - General 80A. Deductions to be made in computing total income. - (1) In computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of this Chapter, the deductions specified in sections 80C to 80T. (2) The aggregate amount of the deductions under this Chapter shall not, in any case, exceed the gross total income of the assessee. (3) Where, in computing the total income of a firm, association of persons or body of individuals, any deduction is admissible under section 80G or section 80H or section 80J or section 80K or section 80L or section 80S or section 80T, no deduction under the same section shall be made in computing the total income of a partner of the firm or, as the case may be, of a member of the association of persons or body of individuals in relation to the share of such partner in the income of the firm or the share of such member in the income of the association of persons or body of individuals. 80B. Definitions. - In this Chapter - (1) displaced person means a person who, on account of the setting up of the Dominions of India and Pakistan, or on account of civil disturbances or the fear of such disturbances in any area now forming part of East Pakistan, has - (a) in the case of a person having a place of residence in the district of Noakhali or of Comilla, on or after the 1st day of October, 1946, and (b) in the case of a person having a place of residence in any other area now forming part of East Pakistan, on or after the 1st day of June, 1947, left, or been displaced from, his place of residence in such area and who has been subsequently residing in India; (2) domestic company means an Indian company, or any other company which, in respect of its income liable to tax under this Act, has made the prescribed arrangements for the declaration and payment, within India, of the dividends (including dividends on preference shares) payable out of such income; (3) earned income and unearned income shall have the meanings respectively assigned to them in the Finance Act of the relevant year; (4) foreign company means a company which is not a domestic company as defined in clause (2); (5) gross total income means the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter or under section 280-O and without applying the provisions of section 64; (6) income , in relation to a handicapped dependent, means the aggregate income of such person from all sources; (7) priority industry means the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule or the business of any hotel where such business is carried on by an Indian company and the hotel is for the time being approved in this behalf by the Central Government; (8) relative , in relation to an individual, means - (a) the mother, father, husband or wife of the individual, or (b) a son, daughter, brother, sister, nephew or niece of the individual, or (c) a grand-son or grand-daughter of the individual, or (d) the spouse of any person referred to in sub-clause (b); (9) repatriate means a person of Indian origin who was ordinarily residing in a foreign country and who, on leaving, or being forced to leave, such country, has - (a) in the case of a person leaving Mozambique, on or after the 25th day of June, 1962, or (b) in the case of a person leaving Burma, on or after the 1st day of June, 1963, or (c) in the case of a person leaving Ceylon, on or after the 1st day of November, 1964, or (d) in the case of a person leaving any other country, on or after such date or dates as may be notified in this behalf by the Central Government in the Official Gazette, returned to India with the intention of permanently residing therein. Explanation : A person shall be deemed to be of Indian origin if he, or either of his parents or any of his grand-parents, was born in undivided India. B. - Deductions in respect of certain payments 80C. Deduction in respect of life insurance premia, contributions to provident fund etc. - (1) In computing the total income of an assessee there shall be deducted, in accordance with and subject to the provisions of this section, an amount equal to sixty per cent. of the first five thousand rupees of the aggregate of the sums specified in sub-section (2) and fifty per cent. of the balance, if any, of such aggregate. (2) The sums referred to in sub-section (1) shall be the following, namely :- (a) where the assessee is an individual, any sums paid in the previous year by the assessee out of his income chargeable to tax - (i) to effect or to keep in force an insurance on the life of the assessee or on the life of the wife or husband of the assessee; or (ii) to effect or to keep in force a contract for a deferred annuity on the life of the assessee or on the life of the wife or husband of the assessee, notwithstanding that such contract contains a provision for the exercise by the insured of an option to receive a cash payment in lieu of the payment of the annuity; or (iii) as a contribution to any provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies; (b) where the assessee is a Hindu undivided family, any sums paid in the previous year by the assessee out of its income chargeable to tax, to effect or to keep in force an insurance on the life of any male member of the family or of the wife of any such member. Explanation : For the purposes of sub-clause (i) of clause (a) and clause (b) of this sub-section, an insurance on the life of any person referred to therein shall include - (i) a policy of insurance on the life of such person securing the payment of a specified sum on the stipulated date of maturity of the policy, if such person is alive on such date, notwithstanding that the policy of insurance provides only for the return of premiums paid (with or without any interest thereon) in the event of such person dying before the said stipulated date; (ii) a policy of insurance effected by a person for the benefit of a minor (being the assessee, or a male member of a Hindu undivided family where such family is the assessee) with the object of enabling the minor, after he has attained majority, to secure an insurance on his own life by adopting the policy and on his being alive on a date (after such adoption) specified in the policy in this behalf; (c) any sum deducted in the previous year from the salary payable by or on behalf of the Government to any individual being a sum deducted in accordance with the conditions of his service, for the purpose of securing to him a deferred annuity or making provision for his wife or children, in so far as the sum so deducted does not exceed one-fifth of the salary; (d) if the assessee is an employee participating in a recognised provident fund, his own contributions to his individual account in the fund in the previous year, in so far as the aggregate of such contributions does not exceed one-fifth of his salary in that previous year or eight thousand rupees, whichever is less. Explanation : In clause (d) of this sub-section, salary shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule; (e) if the assessee is an employee participating in an approved superannuation fund, any sum paid in the previous year by him by way of contribution towards the superannuation fund; (f) where the assessee is an individual, any sums deposited, in the previous year by the assessee out of his income chargeable to tax, in a ten-year account or a fifteen-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959, as amended from time to time. (3) The provisions of clauses (a) and (b) of sub-section (2) shall apply only to so much of any premium or other payment made on a policy other than a contract for a deferred annuity as is not in excess of ten per cent. of the actual capital sum assured. Explanation : In calculating any such capital sum, no account shall be taken - (i) of the value of any premiums agreed to be returned, or (ii) of any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person. (4) The aggregate of the sums referred to in sub-section (2), which qualifies for the purposes of computing the deduction under sub-section (1), shall not exceed - (i) in the case of an individual being an author, play-wright, artist, musician or actor, such percentage of his gross total income, or such amount, as may be prescribed : Provided that such individual has effected an insurance referred to in sub-clause (i) of clause (a) of sub-section (2) prior to the 1st day of March, 1964, and has paid any sum in the previous year to keep in force such insurance; (ii) in the case of any other individual [including an author, play-wright, artist, musician or actor, to whom the provisions of clause (i) do not apply], thirty per cent. of his gross total income, or fifteen thousand rupees, whichever is less; (iii) in the case of a Hindu undivided family, thirty per cent. of its gross total income, or thirty thousand rupees, whichever is less. (5) If the gross total income of the assessee includes earned income chargeable under any head, the deduction under sub-section (1) shall, to the extent possible, be made in computing such earned income and, as to the balance, if any, in computing any other income; and if there is no earned income, the deduction shall be made in computing any other income under any head. 80D. Deduction in respect of medical treatment, etc., of handicapped dependants. - (1) Where an assessee who is resident in India, being an individual or Hindu undivided family, who has, during the previous year, incurred out of his or its income chargeable to income-tax, any expenditure for the medical treatment (including nursing) of a person who - (a) is a relative of the individual, or, as the case may be, is a member of the Hindu undivided family and is not dependent on any person other than such individual or Hindu undivided family for his support or maintenance, and (b) is suffering from a physical or mental disability which is certified by a registered medical practitioner to have the effect of reducing considerably such persons capacity for normal work or engaging in a gainful employment (hereinafter in this section referred to as handicapped dependant), the assessee shall, in accordance with and subject to the provisions of this section, be allowed a deduction of the amount specified in sub-section (2) in the computation of his total income in respect of the previous year. (2) The deduction under sub-section (1) shall be - (i) in a case where the handicapped dependant has, for a period of one hundred and eighty-two days or more during the previous year, been admitted in a hospital or a nursing home or a medical institution or in such other institution as may be notified by the Central Government in the Official Gazette to be an institution for the care of handicapped persons, and fees and charges for his medical treatment (including nursing) are payable to such hospital or nursing home or medical or other institution, as the case may be, a sum of two thousand four hundred rupees, or (ii) in any other case, a sum of six hundred rupees, as reduced, in either case, by an amount equal to the income, if any, of the handicapped dependant in respect of the previous year : Provided that where the assessee has, during the previous year, incurred expenditure on more than one handicapped dependant, the deduction under sub-section (1) shall be allowed only with reference to one such handicapped dependant as may be chosen by the assessee. (3) If the gross total income of the assessee includes earned income chargeable under any head, the deduction under sub-section (1) shall, to the extent possible, be made in computing such earned income and, as to the balance, if any, in computing any other income; and if there is no earned income, the deduction shall be made in computing any other income under any head. 80E. Deduction in respect of payment for securing retirement annuities. - (1) Where, in the case of an assessee, being an individual who is a citizen of India and is resident in India, his share in the income of a registered firm which renders professional service as chartered accountant, solicitor, lawyer, architect, or such other professional service as may be notified in this behalf by the Central Government in the Official Gazette, is chargeable to tax and he has paid out of his income chargeable to tax a premium (by whatever name called) in any previous year under an annuity contract for the time being approved by the Commissioner as having for its main object the provision for the individual of a life annuity in old age (hereafter in this section referred to as qualifying premium), then the assessee shall, in accordance with and subject to the provisions of this section, be allowed a deduction of the amount of the qualifying premium in the computation of his total income in respect of the previous year : Provided that the amount which may be so deducted shall not exceed the sum of five thousand rupees, or one-tenth of his gross total income, whichever is less : Provided further that any annuity payable to the individual shall be deemed to be his earned income to the extent to which it is attributable to the amount in respect of which deduction has been allowed under this section and chargeable to tax accordingly. (2) Subject to sub-section (3) and any rules made by the Board in this behalf, the Commissioner shall not approve a contract unless he is satisfied that it does not - (a) provide for the payment during the life of the individual of any sums except sums payable by way of annuity to the individual; or (b) provide for the annuity payable to the individual to commence before he attains the age of fifty-eight or after he attains the age of sixty-eight; or (c) provide for the payment of any other sums except sums payable by way of annuity to the individuals widow or widower and any sums which, in the event of no annuity becoming payable either to the individual or to a widow or widower of the individual, are payable to the individuals legal representative by way of return of premiums, by way of reasonable interest on premiums and by way of bonus out of profits; or (d) provide for the payment of annuity, if any, payable to a widow or widower of the individual to be of a greater annual amount than that paid or payable to the individual; or (e) provide for the payment of any annuity otherwise than for the life of the annuitant, and that it does include a provision that no annuity payable under it shall be capable in whole or in part of surrender, commutation or assignment. (3) The Commissioner may, if he thinks fit, and subject to any conditions the Board may, by rules, prescribe and subject to any conditions he thinks proper to impose, approve a contract, notwithstanding that the contract provides for one or more of the following matters, that is to say, - (a) for the payment after the individuals death of an annuity to a dependant other than the widow or widower of the individual; (b) for the payment to the individual of an annuity commencing before he attains the age of fifty-eight, if the annuity is payable on his becoming incapable through infirmity of mind or body of being actively engaged in his profession or any profession of a similar nature for which he is trained or fitted; (c) for the annuity payable to any person to continue for a specified term (not exceeding ten years), notwithstanding his death within that term; (d) in the case of an annuity which is to continue for such specified term, for the annuity to be assignable by will. (4) The foregoing provisions of this section shall apply in relation to a contribution (by whatever name called) to a fund approved by the Commissioner as they apply in relation to any premium under an annuity contract so approved, provided the fund satisfies also the conditions set out below and any other conditions which the Board may, by rules, prescribe, namely :- (a) the fund shall be a fund established in India under an irrevocable trust for the benefit of individuals engaged in any profession referred to in sub-section (1); (b) the fund shall have for its sole purpose the provision of annuities for individuals engaged in such profession on attaining a specified age or on their becoming incapacitated prior to attaining such age, or for the widow, children or dependants of such persons on their death; (c) all annuities, pensions and other benefits granted from the fund shall be payable only in India. (5) The Commissioner may, at any time, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the persons by and to whom premiums are payable under any contract for the time being approved under this section, or to the trustees of any fund so approved, withdraw the approval. (6) Notwithstanding anything contained in sub-sections (1) and (4), no deduction under this section shall be allowed in the case of any individual - (i) whose gross total income includes unearned income of more than ten thousand rupees; or (ii) who is entitled to any person or is participating in any pension or superannuation scheme. (7) The deduction under this section shall be made in computing the earned income of the assessee included in his gross total income, so, however, that the amount of deduction shall not in any case exceed the amount of the income computed under the head Profits and gains of business or profession , included in the gross total income. (8) Any annuity payable under an approved contract referred to in sub-section (1) or from any fund referred to in sub-section (4), to a person other than the individual who pays the premium or makes the contribution and any interest on premiums or bonus out of profits payable to such person, shall be deemed to be his unearned income to the extent it is attributable to the amount of deduction allowed under sub-section (1) and chargeable to tax accordingly. (9) Where any payment by way of annuity or otherwise is made by a person to whom premiums or contributions are payable under sub-section (1) or sub-section (4), such person shall, subject to any rules made by the Board in this behalf, deduct from the total amount so paid during any financial year, tax at such rate or rates in force in that year as would be applicable to such amount, if it were the total income and shall pay the amount so deducted to the credit of the Central Government within the prescribed time and in such manner as the Board may direct and the provisions of section 201 shall, so far as may be, apply to such person if he does not deduct, or after deducting fails to pay, such tax. (10) Where a deduction under this section is claimed and allowed for any assessment year in respect of any payment, relief shall not be given in respect of it under any other provision of this Act for the same or a later assessment year nor (in the case of a payment under an annuity contract) in respect of any other premium or consideration for an annuity under the same contract. (11) (a) The Board may, by notification in the Official Gazette, make rules for carrying out the purposes of this section. (b) In particular and without prejudice to the generality of the foregoing power, such rules may - (i) prescribe the statements and other information to be submitted along with an application for approval; (ii) prescribe the returns, statements, particulars or information which the Income-tax Officer may require from a person by and to whom premiums or contributions are payable under this section; (iii) provide for the assessment by way of penalty of any consideration received by an individual for an assignment of, or creation of a charge upon, any annuity or other sum receivable by him under any contract or from any fund approved for the time being under this section; and (iv) provide for securing such further control over the approval granted under this section and administration of funds approved under this section as it may deem requisite. 80F. Deduction in respect of educational expenses in certain cases. - (1) Where an individual, being a resident, who is not a citizen of India, has expended any sum in the previous year out of his income chargeable to tax for the full time education of his child wholly or mainly dependent on him and who is not more than twenty-one years of age, at any University, college, school or other educational institution situate in a country outside India, he shall, in accordance with and subject to the provisions of this section, be allowed a deduction of the amount specified in sub-section (2) in the computation of his total income. (2) The amount referred to in sub-section (1) shall be - (i) in the case of an individual who has one such child, one thousand five hundred rupees; and (ii) in the case of an individual who has more than one such child, three thousand rupees. (3) If the gross total income of the assessee includes earned income chargeable under any head, the deduction under sub-section (1) shall, to the extent possible, be made in computing such earned income and, as to the balance, if any, in computing any other income; and if there is no earned income, the deduction shall be made in computing any other income under any head. 80G. Deduction in respect of donations to certain funds, charitable institutions, etc. - (1) In computing the total income of an assessee, there shall be deducted, in accordance with and subject to the provisions of this section, an amount equal to, - (a) where the assessee is a company, fifty per cent., and (b) in the case of any other assessee, fifty-five per cent. of the aggregate of the sums specified in sub-section (2). (2) The sums referred to in sub-section (1) shall be the following, namely :- (a) any sums paid by the assessee in the previous year as donations to - (i) the National Defence Fund set up by the Central Government; or (ii) the Jawaharlal Nehru Memorial Fund referred to in the Deed of Declaration of Trust adopted by the National Committee at its meeting held on the 17th day of August, 1964; or (iii) the Prime Ministers Drought Relief Fund; or (iv) any other fund or any institution to which this section applies; or (v) the Government or any local authority, to be utilised for any charitable purpose; (b) any sums paid by the assessee in the previous year as donations for the renovation or repair of any such temple, mosque, gurdwara, church or other place as is notified by the Central Government in the Official Gazette to be of historic, archaeological or artistic importance or to be a place of public worship of renown throughout any State or States. (3) No deduction shall be allowed under sub-section (1) if the aggregate of the sums referred to in sub-section (2) is less than two hundred any fifty rupees. (4) The deduction under sub-section (1) shall not be allowed in respect of such part of the aggregate of the sums referred to in sub-clauses (iv) and (v) of clause (a) and in clause (b) of sub-section (2) as exceeds ten per cent. of the gross total income (as reduced by any portion thereof on which income-tax is not payable under any provision of this Act and by any amount in respect of which the assessee is entitled to a deduction under any other provision of this Chapter), or two hundred thousand rupees, whichever is less : Provided that where such aggregate includes any sums referred to in clause (b) of sub-section (2) and such aggregate exceeds the limit of two hundred thousand rupees specified in this sub-section, then such limit shall be raised to cover that portion of the donation which is equal to the difference between such aggregate and the said limit, so, however, that the limit so raised shall not exceed ten per cent. of the assessees gross total income as reduced as aforesaid, or five hundred thousand rupees, whichever is less. (5) This section applies to donations to any institution or fund referred to in sub-clause (iv) of clause (a) of sub-section (2), only if it is established in India for a charitable purpose and if it fulfils the following conditions, namely :- (i) where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 and 12 or clause (22) of section 10; (ii) the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose; (iii) the institution or fund is not expressed to be for the benefit of any particular religious community or caste; (iv) the institution or fund maintains regular accounts of its receipts and expenditure; and (v) the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India or under section 25 of the Companies Act, 1956 (1 of 1956), or is a University established by law, or is any other educational institution recognised by the Government or by a University established by law, or affiliated to any University established by law or is an institution financed wholly or in part by the Government or a local authority. Explanation 1 : An institution or fund established for the benefit of Scheduled Castes, backward classes, Scheduled Tribes or of women and children shall not be deemed to be an institution or fund expressed to be for the benefit of a religious community or caste within the meaning of clause (iii) of sub-section (5). Explanation 2 : For the removal of doubts, it is hereby declared that a deduction to which the assessee is entitled in respect of any donation made to an institution or fund to which sub-section (5) applies shall not be affected merely by reason of the fact that subsequent to the donation any part of the income of the institution or fund has become chargeable to tax due to non-compliance with any of the provisions of section 11. Explanation 3 : In this section, charitable purpose does not include any purpose the whole or substantially the whole of which is of a religious nature. (6) If the gross total income of the assessee includes earned income chargeable under any head, the deduction under sub-section (1) shall, to the extent possible, be made in computing such earned income and, as to the balance, if any, in computing any other income; and if there is no earned income, the deduction shall be made in computing any other income under any head. C. - Deductions in respect of certain incomes 80H. Deduction in case of new industrial undertakings employing displaced persons, etc. - (1) Where the gross total income of any assessee includes any profits and gains derived from any industrial undertaking to which this section applies, there shall be allowed, in accordance with and subject to the provisions of this section, a deduction from such profits and gains of an amount equal to fifty per cent. thereof in computing the total income of the assessee, so, however, that the amount of the deduction under this section shall not, in any case, exceed one hundred thousand rupees. (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely :- (i) it is not formed by the splitting up, or reconstruction, of a business already in existence; (ii) it is not formed by the transfer to a new business of a building, machinery or plant previously used for any purpose; (iii) it has begun or begins to manufacture or produce articles in any part of India at any time within a period of three years next following the 1st day of April, 1967; (iv) it employs, on every working day throughout the previous year, forty or more workers in a manufacturing process (where carried on with or without the aid of power); and (v) it employs displaced persons or repatriates or members of the families of displaced persons or repatriates (all such employees being, hereinafter, referred to as rehabilitated employees) and the daily average number of rehabilitated employees, as certified by the prescribed authority, is not less than sixty per cent. of the daily average number of all the persons employed in the undertaking, throughout the previous year. Explanation 1 : Member of the family , in relation to any person who is a displaced person or repatriate, means any member of the family of such person if such member was, before his employment in the undertaking, dependent on such person. Explanation 2 : Daily average number , in relation to rehabilitated employees or, as the case may be, all the persons employed in the undertaking, shall be taken to be the number arrived at by dividing the aggregate of the number of rehabilitated employees or, as the case may be, the total number of persons employed in the undertaking on each working day of a month by the total number of working days in that month. (3) The provisions of this section shall, in relation to an industrial undertaking, apply to the assessment for the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles, and the nine assessment years immediately succeeding. 80-I. Deduction in respect of profits and gains from priority industries in the case of certain companies. - (1) In the case of a company to which this section applies, where the gross total income includes any profits and gains attributable to any priority industry, there shall be allowed, in accordance with and subject to the provisions of this section, a deduction from such profits and gains of an amount equal to eight per cent. thereof, in computing the total income of the company. (2) This section applies to a domestic company, save in a case where such company is a company which is referred to in section 108 and has a gross total income of fifty thousand rupees or less. (3) Where a company to which this section applies is entitled also to the deduction under section 80H, the deduction under sub-section (1) of this section shall be allowed with reference to the amount of the profits and gains attributable to the priority in industry or industries as reduced by the deduction under section 80H in relation to such profits and gains. 80J. Deduction in respect of profits and gains from newly established industrial undertakings or ships or hotel business in certain cases. - (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking or a ship or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains (reduced by the aggregate of the deductions, if any, admissible to the assessee under section 80H and section 80-I) of so much of the amount thereof as does not exceed the amount calculated at the rate of six per cent. per annum on the capital employed in the industrial undertaking or ship or business of the hotel, as the case may be, computed in the prescribed manner in respect of the previous year relevant to the assessment year (the amount calculated as aforesaid being hereafter, in this section, referred to as the relevant amount of capital employed during the previous year). (2) The deduction specified in sub-section (1) shall be allowed in computing the total income in respect of the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or to operate its cold storage plant or plants or the ship is first brought into use or the business of the hotel starts functioning (such assessment year being hereinafter, in this section, referred to as the initial assessment year) and each of the four assessment years immediately succeeding the initial assessment year : Provided that in the case of an assessee, being a co-operative society, the provisions of this sub-section shall have effect as if for the words four assessment years , the words six assessment years had been substituted. (3) Where the amount of the profits and gains derived from the industrial undertaking or ship or business of the hotel, as the case may be, included in the total income (as computed without applying the provisions of section 64 and before making any deduction under Chapter VIA or section 280-O) in respect of the previous year relevant to an assessment year commencing on or after the 1st day of April, 1967 (not being an assessment year prior to the initial assessment year or subsequent to the fourth assessment year as reckoned from the end of the initial assessment year) falls short of the relevant amount of capital employed during the previous year, the amount of such shortfall, or, where there are no such profits and gains, an amount equal to the relevant amount of capital employed during the previous year (such amount, in either case, being hereafter, in this section, referred to as deficiency) shall be carried forward and set off against the profits and gains referred to in sub-section (1) [as computed after allowing the deductions if any, admissible under section 80H, section 80-I and the said sub-section (1)] in respect of the previous year relevant to the next following assessment year and, if there are no such profits and gains for that assessment year, or where the deficiency exceeds such profits and gains, the whole or balance of the deficiency, as the case may be, shall be set off against such profits and gains for the next following assessment year and if and so far as such deficiency cannot be wholly so set off, it shall be set off against such profits and gains assessable for the next following assessment year and so on : Provided that - (i) in no case shall the deficiency or any part thereof be carried forward beyond the seventh assessment year as reckoned from the end of the initial assessment year; (ii) where there is more than one deficiency and each such deficiency relates to a different assessment year, the deficiency which relates to an earlier assessment year shall be set off under this sub-section before setting off the deficiency in relation to a later assessment year : Provided further that in the case of an assessee being a co-operative society, the provisions of this sub-section shall have effect as if for the words fourth assessment year , the words sixth assessment year had been substituted. (4) This section applies to any industrial undertaking which fulfils all the following conditions, namely :- (i) it is not formed by the splitting up, or the reconstruction, of a business already in existence; (ii) it is not formed by the transfer to a new business of a building (not being a building taken on rent or lease), machinery or plant previously used for any purpose; (iii) it manufactures or produces articles, or operates one or more cold storage plant or plants, in any party of India, and has begun or begins to manufacture or produce articles or to operate such plant or plants, at any time within the period of twenty-three years next following the 1st day of April, 1948, or such further period as the Central Government may, by notification in the official Gazette, specify with reference to any particular industrial undertaking; (iv) in a case where the industrial undertaking manufactures or produces articles, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power : Provided that the condition in clause (i) shall not apply in respect of any industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section. (5) This section applies to any ship, where all the following conditions are fulfilled, namely :- (i) it is owned by an Indian company and is wholly used for the purposes of the business carried on by it; (ii) it was not, previous to the date of its acquisition by the Indian company, owned and used in Indian territorial waters by a person resident in India; and (iii) it is brought into use by the Indian company at any time within a period of twenty-three years next following the 1st day of April, 1948. (6) This section applies to the business of any hotel, where all the following conditions are fulfilled, namely :- (a) the business of the hotel starts functioning on or after the 1st day of April, 1961, and is not formed by the splitting up, or the re-construction, of a business already in existence or by the transfer to a new business of a building previously used as a hotel or of any machinery or plant previously used for any purpose; (b) the business of the hotel is owned and carried on by a company registered in India with a paid-up capital of not less than five hundred thousand rupees; (c) the hotel has such number and types of guest rooms and provides such amenities as may be prescribed, having regard to the population and the tourist importance of the place in which the hotel is located; and (d) the hotel is for the time being approved for the purposes of this sub-section by the Central Government. Explanation : Where - (a) in the case of an industrial undertaking, any building, machinery or plant, or any part thereof previously used for any purpose, or (b) in the case of the business of a hotel, any building, or any part thereof, previously used as a hotel, or any machinery or plant, or any part thereof, previously used for any purpose; is, in either case, transferred to a new business, and the total value of the building, machinery or plant or part so transferred does not exceed twenty per cent. of the total value of the building, machinery or plant used in the business, then, for the purposes of clause (ii) of sub-section (4) and clause (a) of sub-section (6), the condition specified therein shall be deemed to have been complied with and the total value of the building, machinery or plant or part so transferred shall not be taken into account in computing the capital employed in the industrial undertaking or the business of the hotel. (7) The Central Government may, after making such inquiry as it may think fit, direct, by notification in the Official Gazette, that the exemption conferred by this section shall not apply to any class of industrial undertakings with effect from such date as it may specify in the notification. 80K. Deduction in respect of dividends attributable to profits and gains from new industrial undertakings or ships or hotel business. - Where the gross total income of an assessee, being the holder of any share or shares in a company, includes any income by way of dividends paid or deemed to have been paid to him by the company in respect of such share or shares, there shall, subject to any rules that may be made by the Board in this behalf, be allowed, in computing his total income, a deduction from such income by way of dividends of an amount equal to such part thereof as is attributable to the profits and gains derived by the company from an industrial undertaking or ship or the business of a hotel, on which no tax is payable by the company under this Act for any assessment year commencing prior to the 1st day of April, 1968, or in respect of which the company is entitled to a deduction under section 80J. 80L. Deduction in respect of dividends in certain cases. -(1) Where, in the case of any assessee, the amount of his income by way of dividends included in his gross total income does not exceed five hundred rupees, there shall, in accordance with and subject to the provisions of this section, be deducted, in computing the total income of the assessee, the whole of the income by way of dividends from an Indian company or Indian companies included in the gross total income. (2) In a case where the assessee is entitled also to the deduction under section 80K, in relation to the whole or any part of the income by way of dividends referred to in sub-section (1), the deduction under sub-section (1) shall be allowed in respect of such income as reduced by the deduction under section 80K. 80M. Deduction in respect of certain inter-corporate dividends. - (1) Where the gross total income of an assessee being a company includes any income by way of dividends received by it from a domestic company, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such income by way of dividends of an amount equal to - (a) where the assessee is a foreign company (i) in respect of such income by way of dividends received by it from an Indian company which is not such a company as is referred to in section 108 and which is mainly engaged in a priority industry . . . . . . 80 per cent. of such income; (ii) in respect of such income by way of dividends other than the dividends referred to in sub-clause (i) . . . . . . 65 per cent. of such income; (b) where the assessee is a domestic company - in respect of any such income by way of dividends . . . . . . . . 60 pr cent. of such income. Explanation : For the purposes of this section, a company shall be deemed to be mainly engaged in a priority industry if the income attributable to any such industry or industries included in its gross total income for the previous year is not less than fifty-one per cent. of such gross total income. (2) Where a company to which this section applies is entitled also to the deduction under section 80K or section 80L, the deduction under sub-section (1) of this section shall be allowed in respect of income by way of dividends referred to therein as reduced by any such income in relation to which the company is entitled to a deduction under section 80K or section 80L. 80N. Deduction in respect of dividends received from certain foreign companies. - Where shares in a foreign company have been allotted to an assessee being an Indian company in consideration of any patent, invention, model, design, secret formula or process, or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to the foreign company by the assessee, or in consideration of technical services rendered or agreed to be rendered to the foreign company by the assessee, under an agreement approved by the Central Government in this behalf before the 1st day of October of the relevant assessment year, and any income by way of dividend on such shares is included in the gross total income of the assessee, there shall be allowed a deduction from such income of an amount equal to sixty per cent. thereof, in computing the total income of the assessee. 80-O. Deduction in respect of royalties, etc., received from certain foreign companies. - Where the gross total income of an assessee being an Indian company includes any income by way of royalty, commission, fees or any similar payment received by it from a foreign company in consideration for the use of any patent, invention, model, design, secret formula or process, or similar property right, or information concerning industrial, commercial or scientific knowledge, experience or skill made available or provided or agreed to be made available or provided to the foreign company by the assessee, or in consideration of technical services rendered or agreed to be rendered to the foreign company by the assessee, under an agreement approved by the Central Government in this behalf before the 1st day of October of the relevant assessment year, there shall be allowed a deduction from such income of an amount equal to sixty per cent. thereof, in computing the total income of the assessee. 80P. Deduction in respect of income of co-operative societies. - (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely :- (a) in the case of a co-operative society engaged in - (i) carrying on the business of banking or providing credit facilities to its members, or (ii) a cottage industry, or (iii) the marketing of the agricultural produce of its members, or (iv) the purchase of agricultural implements, seeds, live-stock or other articles intended for agricultural for the purpose of supplying them to its members, or (v) the processing, without the aid of power, of the agricultural produce of its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities; (b) in the case of a co-operative society, being a primary society engaged in supplying milk raised by its members to a federal milk co-operative society, the whole of the amount of profits and gains of such business; (c) in the case of a co-operative society engaged in activities other than those specified in clause (a) or clause (b) [either independently of, or in addition to, all or any of the activities so specified], so much of its profits and gains attributable to such activities as does not exceed fifteen thousand rupees; (d) in respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income; (e) in respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income; (f) in the case of a co-operative society, not being a housing society or an urban consumers society or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of power, where the gross total income does not exceed twenty thousand rupees, the amount of any income by way of interest on securities chargeable under section 18 or any income from house property chargeable under section 22. Explanation : For the purposes of this section, an urban consumers co-operative society means a society for the benefit of the consumers within the limits of a municipal corporation, municipality, municipal committee, notified area committee, town area or cantonment. (3) In a case where the assessee is entitled also to the deduction under section 80H or section 80J, the deduction under sub-section (1) of this section, in relation to the sums specified in clause (a) or clause (b) or clause (c) of sub-section (2), shall be allowed with reference to the income, if any, as referred to in those clauses included in the gross total income as reduced by the deductions under section 80H and section 80J. (4) Nothing contained in this section shall apply to a co-operative society carrying on insurance business in respect of the profits and gains of that business computed in accordance with section 44. 80Q. Deduction in respect of dividends from co-operative society. - Where the gross total income of an assessee who is a member of a co-operative society includes any income by way of dividends received by him from the society, the whole of such income shall be allowed as a deduction in computing his total income. 80R. Deduction in respect of remuneration from certain foreign sources in the case of professors, teachers, etc. -Where the gross total income of an individual who is a citizen of India includes any remuneration received by him outside India from any University or other educational institution established outside India or such other association or body established outside India as may be notified in this behalf by the Central Government in the Official Gazette, for any service rendered by him during his stay outside India in his capacity as a professor, teacher or research worker in such University, institution, association or body, there shall be allowed a deduction from such remuneration of an amount equal to fifty per cent. thereof, in computing the total income of the individual : Provided that where the individual renders continuous service outside India in such University, institution, association or body for a period exceeding thirty-six months, no deduction under this section shall be allowed in respect of the remuneration for such service relating to any period after the expiry of the thirty-six months aforesaid. 80S. Deduction in respect of compensation for termination of managing agency, etc., in the case of assessees other than companies. - Where the gross total income of an assessee not being a company includes any income by way of compensation or other payment which is chargeable as the profits and gains of business or profession in accordance with the provisions of clause (ii) of section 28, there shall be allowed, in computing the total income of the assessee, a deduction from such income of an amount equal to twenty-five per cent. thereof, so, however, that the amount of the deduction under this section shall not, in any case, exceed one hundred thousand rupees. 80T. Deduction in respect of long-term capital gains in the case of assessees other than companies. - Where the gross total income of an assessee not being a company includes any income chargeable under the head Capital gains relating to capital assets other than short-term capital assets (such income being, hereinafter, referred to as long-term capital gains), there shall be allowed, in computing the total income of the assessee, a deduction from such income of an amount equal to, - (a) in a case where the gross total income does not exceed ten thousand rupees or where the long-term capital gains do not exceed five thousand rupees, the whole of such long-term capital gains; (b) in any other case, five thousand rupees as increased by a sum equal to - (i) forty-five per cent. of the amount by which the long-term capital gains relating to capital assets, being buildings or lands, or any rights in buildings or lands, exceed five thousand rupees; (ii) sixty-five per cent. of the amount by which the long-term capital gains relating to any other capital assets exceed five thousand rupees : Provided that in a case where the long-term capital gains relate to buildings or lands, or any rights in buildings or lands, as well as to other assets, the sum referred to in sub-clause (ii) of clause (b) shall be taken to be - (A) where the amount of the long-term capital gains relating to the capital assets mentioned in sub-clause (i) is less than five thousand rupees, sixty-five per cent. of the amount by which the long-term capital gains relating to any other capital assets exceed the difference between five thousand rupees and the amount of the long-term capital gains relating to the capital assets mentioned in sub-clause (i); and (B) where the amount of the long-term capital gains relating to the capital assets mentioned in sub-clause (i) is equal to or more than five thousand rupees, sixty-five per cent. of the long-term capital gains relating to any other capital assets.. 14. Omit Sections 81, 82, 83, 84, 85, 85A, 85B And 85C. 15. CHAPTER VIII (a) For REBATES AND RELIEFS , substitute RELIEF IN RESPECT OF INCOME-TAX ; (b) Omit A. - Rebate of income-tax , sections 87, 87A and 88, and B. - Relief for income-tax . 16. Section 104- In the Explanation to sub-section (4), for included in its total income for the relevant previous year , substitute included in its gross total income for the relevant previous year . 17. Section 109- (a) For For the purposes of sections 104, 105 and 107A , substitute For the purposes of section 104, 105 and 107A and this section ; (b) in clause (i), - (i) for total income of a company , substitute gross total income of a company ; (ii) for sub-clause (c), substitute - (c) any sum with reference to which a deduction is allowable to the company under the provisions of section 80G; ; (iii) for sub-clause (d), substitute - (d) losses under the head Capital gains relating to capital assets other than short-term capital assets;; (iv) in sub-clause (h), for included in the total income , substitute included in the gross total income ; (c) in clause (ii), for total income , substitute gross total income ; (d) in clause (iia), for total income , in both places, substitute gross total income ; (e) in clause (iii), for total income , in all places, substitute gross total income ; (f) after clause (iii), insert - (iv) gross total income means the total income computed in accordance with the provisions of this Act before making any deduction under Chapter VIA.. 18. Chapter XII (a) Omit section 112; (b) in section 112A, - (i) in clause (b), omit plus ; (ii) omit clause (c); (iii) in Explanation 2, for sections 112, 114 and 193 , substitute section 193 ; (c) omit section 114. 19. Section 197-For sub-section (3), substitute - (3) Where the principal officer of a company considers that, by reason of the provisions of section 80K, the whole or any portion of the dividend referred to in section 194 will be deductible in computing the total income of the recipient, he may, before paying the dividend to the shareholder or issuing any cheque or warrant in respect thereof, make an application to the Income-tax Officer to determine the appropriate proportion of the dividend to be deducted under the provisions of section 80K; and on such determination by the Income-tax Officer no tax shall be deducted on such proportionate amount. . 20. Section 236-In Explanation 2, - (a) for the total income assessed for that year , substitute the total income (as computed before making any deduction under Chapter VIA) assessed for that year ; (b) in clause (i), for the said total income , substitute its total income ; (c) for clause (iii), substitute - (iii) any sum with reference to which a deduction is allowable to the company under the provisions of section 80G; and ; (d) in clause (a), for total income , substitute total income (as computed before making any deduction under Chapter VIA) . 21 Section 280B-In clause (1), - (a) in sub-clause (b)(v), omit and ; (b) after sub-clause (b)(vi), insert - (vii) any income arising outside India in a country the laws of which prohibit or restrict the remittance of money to India; . 22. Section 280X- In the proviso to sub-section (1), - (i) in clause (a), for seventy years , substitute sixty years ; (ii) in clause (b), for rupees , substitute rupees; or ; (iii) after clause (b), insert - (c) the annuity deposit required to be made does not exceed one hundred rupees; or (d) the deficiency does not exceed an amount equal to ten per cent. of the annuity deposit required to be made or one hundred rupees, whichever is higher. . 23. Section 295- In clause (e) of sub-section (2), for under clause (i) of sub-section (3) of section 87 or clause (i) of sub-section (4) of section 80A, as the case may be , substitute under clause (i) of sub-section (4) of section 80C . 24. Fourth Schedule- In rule 7 of Part A, for section 80A or as the case may be, to a deduction from the amount of income-tax with which he is chargeable on his total income of an amount of income-tax determined in accordance with section 87 , substitute section 80C . 25. Fifth Schedule- For [See sections 33(1)(iii)(c), 80E and 85A] , substitute [See sections 33(1)(b)(B)(i) and 80B(7)] . S. P. SEN-VARMA, Secy. to the Govt. of India.