Section 21 - Amendment of section 109 - Finance Act, 1966

21. Amendment of section 109 In section 109 of the Income-tax Act,- (a) in clause (i), after sub-clause (f), the following sub-clauses shall be inserted, namely:- '(g) any expenditure actually incurred for the purposes of the business, but not deducted in computing the income changeable under the head Profits and gains of business or profession being- (1) a bonus or gratuity paid to an employee, (2) legal charges, (3) any such expenditure as is referred to in clause (c) of section 40, (4) any expenditure claimed as a revenue expenditure but not allowed to be deducted as such and not resulting in the creation of an asset or enhancement in the value of an existing asset; (h) any expenditure wholly and exclusively incurred far the purpose of making or earning any income (other than income chargeable under the head Profits and gains of business or profession ) included in the total income but not allowed to be deducted in computing such income and not resulting in the creation of an asset or enhancement in the value of an existing asset;'; (b) for clause (ii), the following clause shall be substituted, namely:- '(ii), investment company means a company whose total income consists mainly of income which, if it had been the income of an individual, would have been regarded as unearned income. Explanation.-In this clause, the expression unearned income has the meaning assigned to it in the Finance Act of the relevant year;'; (c) in clause (iia), the words wholly or shall be omitted; (d) in clause (iii),- (i) in sub-clause (1), after the words an investment company , the words other than an investment company which falls under sub-clause (3) of this clause shall be inserted; (ii) for sub-clause (3), the following sub-clause shall be substituted, namely:- (3) in the case of an Indian company [not being an Indian company which falls under the provisions of clause (a) of sub-section (4) of section 104], a part only of whose total income consists of profits and gains attributable to the business of construction of ships or of manufacture or processing of goods or of mining or of generation or distribution of electricity or any other form of power- (a) in: relation to the profits and gains attributable to such business Nil; (b) in relation to the remaining part of its total income- (1) if it is an investment company or a company which satisfies the conditions specified in sub-clause (4) (a) of this clause 90%; (2) in any other case 60%. Explanation.-The provisions of this Chapter shall, in relation to the remaining part of the total income aforesaid, apply as if such part were the total income of the company; and, for the purposes of section 104, the amount of dividends actually distributed shall be deemed to be such proportion thereof as the part aforesaid bears to the total income of the company; .