Amendments at a glance , Amendments to Income-tax Act , Amendments to Wealth-tax Act , Amendments to Gift-tax Act , Amendments to Companies (Profits) Surtax Act - Income Tax - 56/1971

CIRCULAR NO. 56 DATED 19-3-1971 TAXATION LAWS (AMENDMENT) ACT, 1970 Amendments at a glance Amendments to Income-tax Act Amendments to Wealth-tax Act Amendments to Gift-tax Act Amendments to Companies (Profits) Surtax Act 10 Taxation Laws (Amendment) Act, 1970 Amendments at a glance Section/Schedule Particulars Income-tax Act 10(1) Definition of "agricultural income" 91-95 10(5), (6)(i) Exemption from tax of the value of travel concession/assistance received by Indian citizens, and passage moneys or the value of free/concessional passage received by individuals of foreign nationality, employed in India 96-98 10(6)(viia), 40(a)(v) Exemption from tax of remuneration of foreign technicians 68-75 10(26) Exemption from tax of income of members of Scheduled Tribes 100 10(30) Exemption of subsidy granted to tea industry for replantation or replacement of tea bushes 60-62 23(1), 2nd prov. Liberalisation of tax holiday for newly constructed residential units let out on rent 63 23(2) Computation of income from house property occupied by the owner for purposes of his residence 64-66 32(1A), 32(2), Amortisation of expenditure on renovation or extension of, 34(1)/(2), or improvement to, leased business premises 56-57 35(2)(iv), 38(2), 41(2A)/(5), 43(1), Explns. 1 4, 55(1), 57(ii), 59(3) 35D Amortisation of certain preliminary expenses 42-47 35E Amortisation of expenditure on prospecting for, and development of, certain minerals 48-55 64(2), 10(2), Conversion of separate property of an individual into 295(2)(b) joint Hindu family property 81-85 80B(5) Definition of "gross total income" 101-102 80G(4), prov. Deduction in respect of charitable and other donations 103-104 80K Deduction in respect of dividends attributable to "tax holiday" profits 105-106 80QQ Tax concession to book publishing industry 58-59 80U Tax relief to blind or physically handicapped individuals 99 89(1), (2) Relief in cases where salary, etc., is paid in arrears or in advance 76 112A and Calculation of tax in a case where the total income includes Expln. 1 income by way of interest on National Savings Certificates (First Issue) 107-109 119 Powers of CBDT to issue administrative instructions 13-16 139(1), prov., Interest for delay in furnishing the return of income, (1A), (2) and the time for furnishing the return of loss 17-21 prov., (3), (4)(d), (8) 140A(3), Penalties for non-payment of tax 23-24 221(1) 141, 209(d), Omission of the provisions for provisional assessment and 210(3), consequential changes 10-12 215(2), 233, 234 141A(2) Provisional assessment for refund 10-12 143 New procedure for making regular assessment 3-9, 12 153(2A) Time limit for completion of assessment set aside in appeal or reopened 22 183(b) Assessment of unregistered firms 86-87 184(7), 185(2)/ Procedure for grant of registration to partnership firms (3) 110-111, 113 185(1), Expln. Registered firms having benamidars as partners 88-90 235, Expln. Tax relief on dividends attributable to the agricultural income of company paying the dividends 114-115 243(1), 244(1)/ Expeditious settlement of refund claims 25-27 (2) 246(j) Appeal against ITO's orders refusing registration to a firm because of certain defect in application/declaration 112-113 253(6), 256(1) Fees payable by assessees along with their appeals and reference applications to Tribunal 40 255(3) Jurisdiction of Single Member Benches of the Tribunal 41 271(4A) Monetary limit for obtaining previous approval of the Board to reduction or waiver of penalty in cases of voluntary disclosure of income 30-31 274(2) Revision of monetary limit for imposition of penalty by IAC in cases of concealment of income 28-29 275 Time limit for completion of penalty proceedings 32-34 276C, 276, Prosecutions for default in furnishing return of income or 276D, 279(3) in producing accounts and documents called for by notice 35-39 280ZA Tax credit certificates for shifting industrial undertakings from urban areas 67 295(2)(kk) Rule making power vested in Board for laying down procedure for interest calculation 77 Rule 60 of 2nd Rate of interest chargeable on arrears of tax in the case of Sch. sale of immovable property in recovery proceedings 116 Rule 15(1)(bb) Procedure for grant of approval to superannuation funds of Part A, and gratuity funds and investment or deposit of the moneys rules 4(1), of recognised provident funds, etc. 78-80 11 (1)(cc) of Part B, and rules 4(1), 8A, 9(1)(bb) of Part C of 4th Sch. Wealth-tax Act 5(1)(via) Exemption from wealth-tax of the value of annuities due on annuity deposits 117-118 15B(3) Penalty for failure to pay tax on self-assessment 119 18(2A), prov. Procedure for waiver or reduction of penalty in cases of voluntary disclosure of wealth 121 18(3) Procedure for levy of penalties for concealment of wealth 120 18(5) Time limit for completion of penalty proceedings 122 24(4) 26(2), Enhancement of fees payable by assessees along with 27(1) their appeals and reference applications in wealth-tax cases to the Tribunal 123 44C, 44D Rounding off of net wealth and also wealth-tax payable or refundable 124 46(2)(dd) Rule making power vested in Board for laying down procedure for calculation of interest 125 Gift-tax Act 23(4), 25(2), Enhancement of fees payable by assessees with their 26 (1) appeals and reference applications to the Appellate Tribunal in gift-tax cases 126 44A, 44B Rounding off of taxable gifts and gift-tax, etc. 127 46(2)(ee) Rule making power vested in Board for laying down procedure for calculation of interest 128 Surtax Act 12(6) Enhancement of fees payable by assessees with their appeals to the Appellate Tribunal in surtax matters 129 14 Amendment of orders relating to surtax in certain circumstances 130 25(2)(dd) Rule making power vested in Board for laying down procedure for calculation of interest 131 Amendments to Income-tax Act Streamlining the assessment procedure, including procedure and time limits for grant of refunds and imposition of penalties, and connected matters, so as to achieve expeditious disposal of work and securing better voluntary compliance by taxpayers with the tax laws The Taxation Laws (Amendment) Act, 1970 New procedure for making regular assessments 3. Under the existing provisions of section 143, a regular assessment can be made on the basis of the return without hearing the assessee or examining his books of account and other evidence only where the Income-tax Officer is satisfied that the return is correct and complete. Sub-section (1) of section 143, presently, does not empower the Income-tax Officer to make any adjustment to the income or loss declared in the return even for obvious errors. Where the Income-tax Officer is not satisfied that the return is correct and complete, he is required to allow an opportunity to the assessee to attend before the Income-tax Officer or to produce his account books and other evidence in support of his return and an assessment can be made only after the examination of such account books and evidence and after hearing the assessee. This procedure has resulted in avoidable delays in completion of regular assessments even though, in the bulk of cases, no substantial point of dispute is involved and the income returned by the assessee is subjected only to certain routine adjustments so as to correct obvious errors. The Taxation Laws (Amendment) Act, 1970 4. With a view to enabling the administration to speed up the work of regular assessments in the bulk of cases which do not involve any substantial point of dispute, while guarding against leakage of revenue cases where the income declared in the return happens to be grossly understated, section 143 has been replaced by a new section. Under sub-section (1) of section 143 as substituted, it will be open to the Income-tax Officer, after receipt of the return of income, to make a regular assessment without requiring the presence of the assessee or the production by him of any evidence in support of the return, and without being satisfied that the return is correct and complete in all respects. In making such a "summary" assessment, the Income-tax Officer will have the authority to make certain adjustments to the income or loss declared in the return. These adjustments will be by way of: a. rectifying any arithmetical errors in the return and the accounts and documents, if any, accompanying it; b. allowing any deduction, allowance or relief which, on the basis of the information available in such return, accounts and documents is, prima facie , admissible though not claimed in the return; and c. disallowing any deduction, allowance or relief claimed in the return but which, on the basis of the information available in such return, accounts and documents, is prima facie, inadmissible. The Income-tax Officer will also be required, in making a summary assessment, to give due effect to the deduction on account of unabsorbed depreciation brought forward from the preceding assessment year under section 32(2); unabsorbed development rebate brought forward under section 33(2)( ii ); unabsorbed development allowance under section 33A(2)( ii ); the appropriate instalment of capital expenditure incurred on scientific research prior to 1-4-1967 under section 35(2)( i ); capital expenditure on acquisition of patent rights and copyrights under section 35A(1); certain preliminary expenses which are amortisable against profits under new section 35D(1); expenditure on prospecting for or development of specified minerals amortisable against profits under new section 35E(1); capital expenditure on family planning incurred by an Indian company under the first proviso to section 36(1)( ix ); unabsorbed losses brought forward from the earlier years which are admissible as a set off under section 72(1); or section 73(2); or section 74(1); and the deficiency in "tax holiday" profits which is eligible for set off under section 80J(3). The amount to be allowed in the summary assessment in regard to these items is to be based on the computation made in the regular assessment, if any, for the earlier assessment year or years. [It may, however, be noted that in making a summary assessment, the record of past assessments in the case of the assessee may be referred to only for the purpose of making the adjustments mentioned in section 143(1)( b )( iv ), and these cannot be made use of for any other purpose. For instance, it is not open to the Income-tax Officer to make an addition to the profits by applying a higher rate of gross profit than that shown in the books, even though in the earlier year's assessment the profit was estimated in this manner and was confirmed in appeal. Similarly, it will not be open to the Income-tax Officer while making a summary assessment to disallow any claim in respect of interest on loans even though the amounts on which interest is claimed to have been paid were added to the assessee's income in a past assessment as unexplained cash credits. The assessment made under section 143(1) will be final, except where proceedings are initiated under section 143(2) for making a fresh assessment. The Taxation Laws (Amendment) Act, 1970 5. Sub-section (2) of section 143 as substituted provides for initiation of proceeding calling for the books of account and other evidence in certain circumstances. Where a return of income has been received, the Income-tax Officer may, without making a "summary" assessment under section 143(1), straightaway issue a notice under section 143(2) to the assessee requiring the presence of the assessee or the production of account books and other evidence, in support of the return. In such a case, the procedure for completion of regular assessments will be virtually the same as under the existing law. The Taxation Laws (Amendment) Act, 1970 6. A notice under section 143(2) may be issued also in a case where an assessment has been made under section 143(1). The issue of a notice in such cases will, however, be subject to the requirement that the previous approval of the Inspecting Assistant Commissioner is obtained. The basis for issue of such notice will be that the Income-tax Officer considers it necessary or expedient to verify the correctness and completeness of the return by requiring the presence of the assessee or the production of evidence in this behalf. The Taxation Laws (Amendment) Act, 1970 7. A notice under section 143(2) calling upon the assessee to produce the account books and other evidence in support of the return must be issued by the Income-tax Officer in a case where the assessee objects to the "summary" assessment made under section 143(1) and makes an application to the Income-tax Officer in that behalf. Such application is to be made within one month from the date of service of the notice of demand issued in consequence of the assessment under section 143(1). In this type of cases, the previous approval of the Inspecting Assistant Commissioner will not be required to be obtained before the issue of the notice under section 143(2). As a further safeguard to the assessee against an excessive assessment under section 143(1), it is specifically provided, in the second proviso to section 143(2), that where the assessee has objected to the assessment under section 143(1) by an application made to the Income-tax Officer within the specified period of one month, the assessee shall not be deemed to be in default in respect of the disputed tax insofar as it does not relate to the rectification of arithmetical errors in the return, accounts or documents. In other words, where the assessee objects to any adjustment of the nature referred to in sub-clauses ( ii ), ( iii ) and ( iv ) of clause ( b ) of section 143(1), the tax attributable to such adjustments shall not be recoverable from the assessee on the basis of the assessment under section 143(1). Further, no interest shall also be chargeable in relation to such tax under section 220(2). It may, however, be noted that the bar to the recovery of the disputed tax and to the levy of interest thereon, operates only in relation to demand made in pursuance of the assessment under section 143(1). It will have no relevance to the recovery of the demand which may be raised in pursuance of the fresh assessment under section 143(3). The Taxation Laws (Amendment) Act, 1970 8. Sub-section (3) of section 143 as substituted envisages the completion of regular assessment after examining the account books and other evidence and after hearing the assessee. Where no assessment has been made under section 143(1), the assessment under section 143(3), will be the first regular assessment, and in this respect the new provision is broadly, similar to the existing provision. Where a "summary" assessment has been made under section 143(1), the assessment under section 143(3) will be a "fresh" regular assessment. While such a fresh assessment is mandatory in cases where the assessee has objected to the assessment made under section 143(1), the position is different in cases in which notice under section 143(2) has been issued by the Income-tax Officer on his own volition after obtaining the previous approval of the Inspecting Assistant Commissioner. A fresh assessment in the latter type of case needs to be made only where the Income-tax Officer is of opinion that the assessment made under section 143(1) is incorrect, inadequate or incomplete in any material respect. The Explanation to section 143(3) specifies the circumstances in which an assessment under section 143(1) shall be regarded as being incorrect, inadequate or incomplete in a material respect. These circumstances are the following : 1. The amount of the total income as determined in that assessment is greater or smaller than the amount of total income on which the assessee is properly chargeable to tax. 2. The amount of the tax payable as determined in that assessment is greater or smaller than the amount of tax properly payable by the assessee. 3. The amount of any loss as determined in that assessment is greater or smaller than the amount of the loss, if any, determinable on a proper computation. 4. The amount of depreciation allowance, development rebate or any other allowance or deduction as determined in that assessment is greater or smaller than the amount of the depreciation allowance, development rebate or, as the case may be, other allowance or deduction properly allowable under the Income-tax Act. 5. The amount of the refund as determined in that assessment is greater or smaller than the amount of the refund, if any, due on a proper computation. 6. The status in which the assessee has been assessed under sub-section (1) is different from the status in which he is properly assessable. For this purpose, "status" means the classification of the assessee as an individual, a Hindu undivided family or any other category of persons who are listed as taxable entities in section 2( 31 ), and where the assessee is a partnership firm, its classification as a registered firm or an unregistered firm. The Taxation Laws (Amendment) Act, 1970 9. It may be noted that the time limit specified in section 153(1) is applicable to all assessments under section 143. Accordingly, assessments under section 143(1) as also those under section 143(3) [irrespective of whether such assessments are made after the completion of summary assessments under section 143(1) or otherwise] will have to be completed within the period of limitation specified in section 153(1). Thus, assessments for the assessment year 1969-70 or any later year will have to be completed within two years from the end of the assessment year or one year from the date of filing of a return or revised return, whichever is later. The alternative time limit of 8 years from the end of the assessment year will, of course, apply in cases falling under section 271(1)( c ). The Taxation Laws (Amendment) Act, 1970 Provisional assessment 10. As the new scheme of making regular assessments under section 143(1) authorises the Income-tax Officer to make certain adjustments to the returned income or loss for obvious matters, the existing provision in section 141 for the making of a provisional assessment to demand tax has been omitted. However, the existing provision in section 141A for the making of a provisional assessment to grant refund of the tax paid in excess, has been retained with certain modifications. Under one of these modifications, the Income-tax Officer is authorised, while making a provisional assessment under that section, to make certain adjustments to the income or loss declared in the return. These adjustments are similar in all respects to the adjustments which may be made in a summary assessment under section 143(1). The other modification is to the effect that where the regular assessment is not made within 6 months from the date of receipt of the return, the Income-tax Officer will be bound to make a provisional assessment under section 141A so as to grant refund of the excess tax paid by the assessee. The Taxation Laws (Amendment) Act, 1970 11. Consequential to the omission of section 141, certain amendments have been made in sections 209, 210, 215, 233 and 234 so as to omit the reference in those sections to section 141. The Taxation Laws (Amendment) Act, 1970 12. Scope of operation of the new assessment procedure - The new procedure for making regular assessments, omission of the existing provision for making a provisional assessment to demand tax modifications in the existing provision for the making of a provisional assessment to grant refund of tax paid in excess, and the consequential amendments referred to in the preceding paragraph, will come into force on 1-4-1970 and, accordingly, the new procedure will be operative with effect from the assessment year 1971-72. As these are procedural provisions, the new procedure will be operative also in relation to assessment for the assessment year 1970-71 and earlier years where the return of income is made on or after 1-4-1971 as also where the return is made before that date but no proceedings have been started before 1-4-1971 by way of provisional assessment or regular assessment under the existing law. It may also be noted that after 31-3-1971, it will not be permissible for the Income-tax Officer to make a "provisional" assessment to demand tax, as the relevant section 141 will cease to be part of the law from 1-4-1971. This will be so even if a return of income is received before that date. [Sections 28, 29, 30, 35, 36, 37, 39 and 40 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Powers of the Central Board of Direct Taxes to issue administrative instructions in regard to certain matters 13. Section 119 relating to the powers of the Central Board of Direct Taxes to issue instructions to subordinate authorities has been replaced by a new section with effect from 1-4-1971. Under section 119(1) as substituted, the Board will have the power, as at present, to issue orders, instructions and directions to other income-tax authorities for the proper administration of the Act and such authorities and all other persons employed in the execution of the Act will be bound to observe and follow the orders, instructions and directions of the Board. It has, however, been made clear that the orders, instructions or directions of the Board shall not be such as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner. This position has already been established by court decisions. As under the existing section 119(1), the orders, instructions or directions of the Board should not interfere with the discretion of the Appellate Assistant Commissioner in the exercise of his appellate functions. The Taxation Laws (Amendment) Act, 1970 14. Under a new sub-section (2) of section 119, the Board has been specifically empowered to issue administrative directions and instructions for the purpose of proper and efficient management of the work of assessment and collection of revenue. Such directions or instructions may be by way of general or special orders in respect of any class of incomes or class of cases. Such orders may set forth the guidelines, principles or procedures to be followed by other income-tax authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties. Such orders may be even in relaxation of any of the provisions of section 143 (procedure of regular assessment), section 144 (best judgment assessment made ex parte ), sections 147 and 148 (proceeding for assessment or reassessment of escaped income), sections 154 and 155 (rectification or amendment of assessments) and section 210 (orders of Income-tax Officer for demanding advance tax), or of the provisions relating to initiation of penalty proceedings contained in sections 271 and 273 (penalties for defaults in furnishing return of income, production of accounts, etc., concealment of income and default in payment of advance tax on the taxpayer's own estimate). Such orders shall not, however, be prejudicial to assessees. It has also been specifically provided that where the Board is of opinion that it is necessary in the public interest so to do, cause such orders to be published and circulated for general information. The Taxation Laws (Amendment) Act, 1970 15. Another area in which the powers of the Board have been enlarged is in regard to cases where the provisions of the Act bar the income-tax authorities from entertaining any application or claim for any exemption, deduction, refund or any other relief due under the Act, for the reason that the time limit specified for the making of such application or claim has expired. The Board has been empowered under section 119(2( b ) to authorise the Commissioner or the Income-tax Officer to admit such application or claim even after the expiry of the time limit and to deal with it on merits in accordance with law. The Board may, for this purpose, make general or special orders with reference to any case or class of cases where it considers this to be desirable or expedient for avoiding genuine hardship. The Taxation Laws (Amendment) Act, 1970 16. Sub-section (3) of section 119 as substituted, retains the existing provision in section 119(2) to the effect that every Income-tax Officer shall observe and follow the instructions issued to him for his guidance by the Director of Inspection or the Commissioner of Income-tax or the Inspecting Assistant Commissioner within whose jurisdiction he is functioning. [Section 25 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Modifications in the provisions relating to charge of interest for delay in furnishing the return of income, and the time for furnishing return of loss 17. Section 139 has been amended so as to place on a more sound footing the provision relating to charge of interest for delays in furnishing returns of income and the time available for furnishing return showing losses. Under the existing section 139, simple interest at 9 per cent per annum is chargeable for the delay in furnishing the return beyond the specified date in cases where the Income-tax Officer has extended the time for submission of the return on an application made by the assessee in this behalf. The specified date for this purpose, in the generality of cases, is 30th September of the assessment year and in cases where accounts of the business or profession are maintained for a year ending after 31st December interest is chargeable only for delays in furnishing the return of income beyond 31st December of the assessment year. No interest is, however, chargeable in cases where the assessee fails to furnish the return and the assessment is made ex parte under section 144. The Taxation Laws (Amendment) Act, 1970 18. The above-mentioned provisions for charge of interest, which are presently contained in the proviso to section 139(1), have now been incorporated in a modified form in a new sub-section (8) which replaces the existing sub-section (8) of that section. Under the new sub-section (8) of section 139, it has been specifically provided that interest will be chargeable in all cases where the return of income is not furnished by the specified date. Such interest will be chargeable not only in cases where the return is furnished after specified date but also in cases where the return is not furnished at all. As under the existing provision, interest will be reckoned, in the generality of cases, from 1st October of the assessment year. However, in cases where the total income includes any income from business or profession for which the previous year expired after 31st December of the year immediately preceding the assessment year, the interest will be reckoned from 1st January of the assessment year. It has also been made clear that in cases where the return is furnished after the specified date, the interest will be calculated and charged up to the date of furnishing of the return, whereas, in cases where the return is not furnished at all, interest will be calculated and charged up to the date of completion of the assessment under section 144. The base for charge of interest will, in all cases, be the amount of tax payable on the total income as determined on regular assessment as reduced by the advance tax, if any, paid and any tax deducted at source. Liability for interest will arise without regard to the consideration whether or not the Income-tax Officer has extended the date for furnishing the return of income. As the provision for charging interest for the delay in furnishing the return, in cases where no return is furnished, is newly introduced in the law from 1-4-1971, there will be no liability for interest in such cases relating to the assessment year 1970-71 or any earlier year. The Taxation Laws (Amendment) Act, 1970 19. The new sub-section (8) of section 139 further provides, in an Explanation, that the base for calculating the interest in the case of a registered firm or an unregistered firm which is assessed as a registered firm under section 183( b ) will be the tax that would be payable on the total income of the firm on the footing that it is an unregistered firm. This provision is on the lines of the existing provision in sub-clause ( a ) of clause ( iii ) of the proviso to section 139(1). Similarly, the existing provision in sub-section (1A) of section 139 to the effect that in a case where the amount of tax on which interest was payable is reduced as a result of a proceeding by way of appeal, rectification or revision, the interest shall be reduced accordingly and any excess interest paid, refunded, is being continued under clause ( b ) of new sub-section (8). Sub-section (1A) of section 139 has accordingly been omitted. The Taxation Laws (Amendment) Act, 1970 20. The existing provision in sub-section (8) of section 139 which empowers the Income-tax Officer to reduce or waive the interest payable by any person for delay in furnishing the return of income under certain circumstances is being retained in the second proviso to clause ( a ) of the new sub-section (8). Further, specific power has been vested in the Board, under a new clause ( kk ) of section 295(2), to specify in the Income-tax Rules the procedure to be followed in calculating interest payable by assessees or interest payable by Government to assessees, including the rounding off of the period for which such interest is to be calculated in cases where such period includes a fraction of a month, and also specify the circumstances in which and the extent to which petty amounts of interest payable by assessees may be ignored. The Taxation Laws (Amendment) Act, 1970 21. Sub-section (3) of section 139 relating to the furnishing of return showing a loss under the head "Profits and gains of business or profession" or under the head "Capital gains", has been amended so as to empower the Income-tax Officer to extend in his discretion, the time for furnishing such a return on an application being made to him for this purpose. At present, there is no provision specifically empowering the Income-tax Officer to extend the time for furnishing such a return. [Sections 26 and 55( b ) of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Time limit for completion of assessments set aside in appeal or reopened under section 146 22. Section 153, relating to time limits for completion of assessments and reassessments, has been amended so as to provide a time limit for completion of fresh assessments, to be made in cases where : ( i ) the original assessment made under section 144 has been cancelled by the Income-tax Officer on an application by the assessee under section 146; or ( ii ) the original assessment is set aside or cancelled in appeal by the Appellate Assistant Commissioner or the Appellate Tribunal or in revision by the Commissioner. For this purpose, a new sub-section (2A) has been inserted in section 153. Under this sub-section, the fresh assessment in the cases mentioned at ( i ) may be made at any time before the expiry of two years from the end of the financial year in which the original assessment was cancelled by the Income-tax Officer under section 146. In the cases mentioned at ( ii ), the fresh assessment may be made at any time before the expiry of two years from the end of the financial year in which the order of the Appellate Assistant Commissioner or the Appellate Tribunal is received by the Commissioner or, as the case may be, the order in revision is passed by the Commissioner. Such fresh assessments may be completed within the above-mentioned time limit even if the time limit specified in sub-section (1) or sub-section (2) of section 153 for the completion of assessments or reassessments has expired. Under the existing provisions of section 153(3), such fresh assessments are not subject to any time limit. The time limit laid down under new sub-section (2A) of section 153 will be operative only in relation to assessments for the assessment year 1971-72 or any subsequent year. [Section 31 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Penalties for non-payment of tax 23. Non-payment of tax due on self-assessment - Section 140A, relating to payment of tax on self-assessment, has been replaced by a new section with effect from 1-4-1971. Besides consequential amendments, arising out of the omission of section 141, sub-section (3) of section 140A, as substituted, provides that where the assessee fails to pay the tax on self-assessment as required under sub-section (1), he shall be liable to a penalty up to 50 per cent of the tax payable and such penalty may be imposed, in the case of continuing default in successive instalments instead of at one time. The aggregate of the penalty imposable will, however, be limited to 50 per cent of the tax due. Under the existing provision in section 140A(3), the power to impose penalty can be exercised only once. Under the provision as amended, it will be possible to regulate the quantum of penalty according to the gravity of the default. As under the existing provision, before levying any such penalty, the assessee will be given a reasonable opportunity of being heard. As the power to levy penalty on more than one occasion in such cases will become effective from 1-4-1971, in cases where the default in payment of tax on self-assessment for any past year, having occurred before 1-4-1971, continues on or after that date (without a provisional assessment or regular assessment having been made), it will be open to the Income-tax Officer to levy a penalty or penalties under the section as substituted, subject to the ceiling of 50 per cent of the tax, provided the power to levy penalty has not already been exercised before 1-4-1971. [Section 27 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 24. Penalty for non-payment of tax demanded - Section 221 has been amended with effect from 1-4-1971, by way of substituting a new sub-section (1) for the existing sub-section (1) of that section. The sub-section as substituted makes it clear that penalty in cases of default in payment of the tax demanded is leviable by the Income-tax Officer, and, further, it provides that such penalty shall not be levied when the Income-tax Officer is satisfied that the default was for good and sufficient reasons. Under the existing sub-section (1), the authority empowered to levy the penalty has not been specified and no discretion is given to the Income-tax Officer not to impose a penalty even in cases where he is satisfied that the default was for good and sufficient reasons. The amendment will secure that the penalty is related to the gravity of the default. In cases where default has occurred before 1-4-1971 but no penalty has, in fact, been levied till that date, it will be open to the Income-tax Officer to refrain from levying the penalty if, after hearing the assessee, he is satisfied that the default was for good and sufficient reasons. [Section 38 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Expeditious settlement of refund claims 25. Sections 243 and 244, relating to payment of interest by the Central Government to the assessee where the refund due to the latter is not granted within a specified period, have been amended with a view to generally reducing the period after which interest will be payable in such cases. Under the existing section 243, interest is payable by the Central Government if the refund is delayed beyond six months from the receipt of the claim in cases where the total income of the assessee consists solely of income from interest on securities or dividends or both. In cases where the assessee has income also from sources other than these, the interest runs from the date of expiry of three months from the date on which the total income is determined on assessment. Under the existing section 244, interest becomes payable by the Central Government if a refund arising out of an order in appeal, revision or other proceeding is not granted within six months from the date of such order. A similar period of six months also applies in cases where the refund arising out of any order is withheld with the previous approval of the Commissioner on the ground that the order giving rise to the refund is the subject matter of an appeal or further proceeding or that any other proceeding under the Act is pending. The Taxation Laws (Amendment) Act, 1970 26. With a view to expediting the grant of refunds, a uniform period of three months has now been specified in sections 243 and 244, beyond which any delay in grant of refund will entitle the assessee to payment of interest to him by the Central Government. However, with a view to facilitating the adherence to this reduced time limit, it has been secured that the three-month period will expire at the end of a calendar month. Thus : 1. In cases where the total income of the assessee consists solely of interest on securities or dividends or both, the three-month period will be reckoned from the end of the month in which the claim for refund is made. 2. In the case of refunds arising on assessment, the three-month period will be reckoned from the end of the month in which the total income is determined. 3. In the case of refund arising as a result of any order in appeal, revision or any other proceeding, the three-month period will be reckoned from the end of the month in which the order in appeal, revision or other proceedings is passed. 4. In cases where the refund arising out of any order is withheld, on the ground that the order giving rise to the refund is the subject matter of appeal, etc., the three-month period will be reckoned from the end of the month in which such order is passed. As action for calculating the refund and issuing the refund order can be taken by the Income-tax Officer only after receipt by him of the order of the Appellate Assistant Commissioner or the Appellate Tribunal or the order in revision of the Commissioner, any delay in the communication of such orders to the Income-tax Officer will correspondingly reduce the period of 3 months available to him for granting the refund. Expeditious action on the part of appellate and the revisionary authorities is accordingly called for in order to ensure that refunds are granted within the specified period of 3 months and liability for payment of interest by the Central Government is thereby obviated. The Taxation Laws (Amendment) Act, 1970 27. The amendments to sections 243 and 244 will come into effect from 1-4-1971. The revised time limits will, therefore, apply only to refund claims made on or after that date, and to refunds arising on assessments completed, or out of orders in appeal, revision or other proceedings passed on or after 1-4-1971. In the case of refund claims made prior to 1-4-1971 and refunds arising on assessments completed, or out of orders in appeal, revision or other proceedings passed, prior to 1-4-1971, interest will accrue if the refund is not granted before the expiry of the existing time limit. [Sections 42 and 43 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Streamlining of provisions relating to imposition of penalties 28. Revision of monetary limit for imposition of penalty by the Inspecting Assistant Commissioner in cases of concealment of income - Section 274 presently provides that cases where the minimum penalty imposable for concealment of income exceeds Rs. 1,000 should be referred by the Income-tax Officer to the Inspecting Assistant Commissioner and that the latter alone shall have the power to impose the penalty in such cases. This provision was made at a time when the minimum penalty imposable for concealment of income was an amount equal to 20 per cent of the tax sought to be avoided. However, with effect from 1-4-1968, the minimum penalty for concealment of income has been increased to an amount equal to the concealed income. In the context of this change in the scale of penalty for concealment of income, the monetary limit specified in section 274 has been revised upwards. Under section 274 as amended, the Income-tax Officer will be required to refer to the Inspecting Assistant Commissioner only those cases in which the concealed income as determined by the Income-tax Officer on assessment exceeds Rs. 25,000. In other cases, penalty for concealment of income will be imposable by the Income-tax Officer himself. The Taxation Laws (Amendment) Act, 1970 29. The amendment of section 274 will take effect from 1-4-1971, and, accordingly, the increased limit of Rs. 25,000 in terms of concealed income will apply in cases where the proceedings for imposition of penalty are commenced on or after that date. Where such proceedings are commenced before 1-4-1971, the existing limit of Rs. 1,000 in terms of minimum penalty imposable, will apply. [Section 49 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 30. Revision of the monetary limit for obtaining the previous approval of the Board to reduction or waiver of penalty in cases of voluntary disclosure of income - Under the existing proviso to section 271(4A), the Commissioner of Income-tax is required to obtain the previous approval of the Board to the waiver or reduction of the minimum penalty, imposable under section 271(1)( i ), for default in furnishing the return of income, or the minimum penalty leviable in cases of concealment of income, only where such minimum penalty, for all the years covered by the disclosure, exceeds Rs. 50,000 in the aggregate. In view of the increase in the scale of minimum penalty imposable for concealment of income to an amount equal to the concealed income, under the Finance Act, 1968, this monetary limit of Rs. 50,000 has been revised upward. Under the proviso to section 271(4A) as amended, the Commissioner of Income-tax will be required to obtain the previous approval of the Board to the waiver or reduction of the minimum penalty imposable for concealment of income only where the concealed income in respect of which the penalty is imposable exceeds Rs. 5 lakhs in the aggregate for all the years covered by the disclosure. In cases where the concealed income is Rs. 5 lakhs or less, the Commissioner will be competent to reduce or waive the minimum penalty without referring the matter to the Board. The monetary limit of Rs. 50,000 continues to apply in regard to the requirement of obtaining the Board's approval to the waiver or reduction of the penalty imposable for defaults in furnishing the return of income. The Taxation Laws (Amendment) Act, 1970 31. The amendment of section 271 will take effect from 1-4-1971, and, accordingly, the revised limit of Rs. 5,00,000 in terms of concealed income will apply in cases where the order waiving or reducing the minimum penalty imposable for concealment of income is passed on or after that date. [Section 48 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 32. Time limit for completion of penalty proceedings - Section 275 which specifies the time limit for completion of penalty proceedings has been substituted by a new section. Under the existing section, penalty proceedings for concealment of income or defaults in furnishing the return or accounts called for by notice or failure to pay advance tax on the taxpayer's own estimate, etc., are required to be completed within two years from the date of completion of the proceedings in the course of which the penalty proceedings were commenced. The operation of this time limit has resulted in practical difficulties in cases where the Appellate Assistant Commissioner remands the appeal against the assessment for further enquiry by the Income-tax Officer or deletes or reduces the addition made on account of concealed income and the Department takes up the matter in further appeal before the Appellate Tribunal. Sometimes, a final decision on the quantum of the concealed income becomes available only after the expiry of the two-year time limit. The Taxation Laws (Amendment) Act, 1970 33. Section 275, as substituted, aims at obviating difficulties in such cases, reducing infructuous work and avoiding hardship to assessees. Under the section as substituted, the time limit for making an order imposing a penalty under the provisions of Chapter XXI will, ordinarily, be two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed. However, in a case where the relevant assessment or other order is the subject matter of an appeal to the Appellate Assistant Commissioner or an appeal by the Income-tax Officer to the Appellate Tribunal, the time limit for completing the penalty proceeding will be either the two-year period as stated above or a period of six months from the end of the month in which the order of the Appellate Assistant Commissioner or, as the case may be, of the Appellate Tribunal is received by the Commissioner, whichever period expires later. It may be noted that the two-year period will henceforth expire at the end of a financial year, instead of on different dates during the financial year at present, and the six-month period will expire at the end of a calendar month. This will facilitate the exercise of vigilance by the tax administration on the expiry of the limitation period and ensure that penalty proceedings are completed in all cases in good time. The Explanation to section 275 - which provides that the time taken in rehearing the assessee (due to change in the incumbent of the office of Income-tax Officer, Inspecting Assistant Commissioner or Appellate Assistant Commissioner having jurisdiction) and any period during which the penalty proceedings have been stayed by an order of the court, will be excluded in computing the period of limitation - has been retained. The Taxation Laws (Amendment) Act, 1970 34. The amendment of section 275 will come into effect from 1-4-1971. Accordingly, the revised time limit will apply to penalty proceedings commenced on or after that date as also to penalty proceedings commenced before that date and pending on 1-4-1971, provided the period of limitation specified in the existing provisions of section 275 has not already expired. [Section 50 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Prosecutions for defaults in furnishing the return of income or in producing the accounts and documents called for by notice 35. Under the existing provisions of section 276, there is no liability to prosecution in the case of a person who fails to furnish his return of income voluntarily as required under section 139(1). A person who fails without reasonable cause or excuse to furnish the return of income called for by a notice under section 139(2) or fails to produce the accounts and documents called for by a notice under section 142(1) is liable to prosecution but the punishment on conviction before a court in such cases is only a fine up to Rs. 10 for every day during which the default continues. The absence of a provision for prosecution in the former case and a very light punishment on conviction in the latter case is likely to be abused by tax evaders to avoid the steep penalties for concealment of income by the simple device of withholding the return of income deliberately or by refraining from producing the accounts and documents for examination by the tax authorities. The only consequence of such delinquency is an ex parte assessment, which may fall far short of the true income, besides a penalty up to 50 per cent of the tax determined on the ex parte assessment for failure to furnish the return of income. The Taxation Laws (Amendment) Act, 1970 36. With a view to providing an effective deterrent against defaults in furnishing the return of income voluntarily, as also when called for by notice, or in producing the accounts and documents called for by notice, two new sections 276C and 276D have been inserted in the Income-tax Act. New section 276C provides for the award of punishment of rigorous imprisonment up to one year or a fine ranging from Rs. 4 to Rs. 10 for every day during which the default continues, or both, at the discretion of the court, in cases where a person is convicted of the offence of wilfully failing to furnish in due time the return of income which he is required to furnish under section 139(1) or by notice under section 139(2) or section 148. Thus, this section covers defaults in furnishing the return of income voluntarily, as also cases where no return is furnished even after a notice is given under section 139(2) or section 148. However, as the provision for prosecution for defaults in furnishing the return of income voluntarily has been newly introduced in the law, it has been specifically provided that no prosecution will lie for such a default for any assessment year up to and inclusive of the assessment year 1970-71. Further, as a safeguard against hardship to assessees in the lower and middle income brackets and in cases where the bulk of the tax is either withheld at source or paid by way of advance tax, it has been specifically provided that no prosecution shall lie for failure to furnish the return of income voluntarily in cases where the net tax determined on regular assessment ( i.e., the gross tax as reduced by the tax deducted at source and the advance tax paid, if any) does not exceed Rs. 3,000. As an inducement for furnishing the return of income voluntarily within a reasonable period even after the expiry of the due date, it has been also provided that no prosecution shall lie for the delay in furnishing such return of income if the return is furnished at any time up to the last day of the relevant assessment year. The Taxation Laws (Amendment) Act, 1970 37. The new section 276C will come into effect from 1-4-1971. Accordingly, defaults in furnishing the return of income called for by notice given under section 139(2), or under section 148, on or after that date will come within the purview of the new section. The new section will apply also to such defaults where these occur after 31-3-1971, i.e., where the return of income becomes due after that date. The Taxation Laws (Amendment) Act, 1970 38. New section 276D provides that the punishment on conviction of a person for wilful defaults in producing the accounts and documents called for by a notice under section 142(1) shall be rigorous imprisonment up to one year, or fine ranging from Rs. 4 to Rs. 10 for every day during which the default continues, or both, at the discretion of the court. This provision will also come into effect from 1-4-1971 and, accordingly, it will apply to such defaults arising on or after that date. The Taxation Laws (Amendment) Act, 1970 39. Consequential to the insertion of new sections 276C and 276D, the existing provisions in section 276 relating to prosecution for defaults in furnishing the return of income called for under section 139(2) or in producing the accounts and documents called for by notice under section 142(1), have been omitted. Section 279 has also been amended so as to secure that the prosecution for an offence under the new section 276C or 276D shall not be launched except at the instance of the Commissioner. It may be noted that the provisions of section 292 will be applicable in relation to offences under the new sections 276C and 276D as they apply in relation to other sections relating to prosecution for tax offences. Accordingly, no court inferior to that of a Presidency Magistrate or a Magistrate of the First Class will be competent to try any such offence. [Sections 51, 52 and 53 of the Amending Act] Modifications in the provisions relating to appeals to the appellate tribunal The Taxation Laws (Amendment) Act, 1970 Fees payable by assessees along with their appeals and reference applications to the Income-tax Appellate Tribunal 40. Section 253(6) presently provides that an appeal by an assessee to the Appellate Tribunal shall be accompanied by a fee of Rs. 100. Section 256(1) similarly provides for the payment of a fee of Rs. 100 by the assessee along with his application to the Appellate Tribunal to refer to the High Court any question of law arising out of the Tribunal's order. The quantum of fee in such cases has been increased from Rs. 100 to Rs. 125, by amendments to the relevant provisions of sections 253 and 256. These amendments take effect from 1-4-1971. [Sections 45 and 47 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Jurisdiction of single member Benches of the Tribunal 41. Section 255(3) presently provides, inter alia, that the President or any other member of the Appellate Tribunal authorised in this behalf by the Central Government may, sitting singly, dispose of any case which has been allotted to the Bench of which he is a member and which pertains to an assessee whose total income as computed by the Income-tax Officer does not exceed Rs. 25,000. With a view to facilitating speedier disposal of appeals by the Appellate Tribunal, the monetary limit of Rs. 25,000 specified in section 255(3) has been increased to Rs. 40,000 so that a single member Bench of the Appellate Tribunal will be empowered to dispose of appeals in any case which pertains to an assessee whose total income as computed by the Income-tax Officer does not exceed Rs. 40,000. The amendment of section 255(3) for this purpose takes effect from 1-4-1971. [Section 46 of the Amending Act] Tax incentives for promoting development of the economy in certain spheres The Taxation Laws (Amendment) Act, 1970 Amortisation of certain preliminary expenses 42. Section 8 of the Amending Act has introduced two new sections 35D and 35E, with effect from 1-4-1971. New section 35D provides for the amortisation of certain preliminary expenses incurred by an Indian company or a resident assessee other than a company before the commencement of business or in connection with the extension of an industrial undertaking or the setting up of a new industrial unit. The amortisation will be allowed against the profits of the company or other taxpayer in 10 equal instalments over a period of 10 years beginning with the previous year in which the business commences or, as the case may be, the previous year in which the extension of the industrial undertaking is completed or the new industrial unit commences production or operation. Such amortisation will be allowed only in respect of expenditure incurred after 31-3-1970 under specified heads. The heads of qualifying expenditure specified for this purpose are the following : 1. Expenditure in connection with : ( i ) preparation of feasibility report; ( ii ) preparation of project report; ( iii ) conducting market survey or any other survey necessary for the business of the assessee; and ( iv ) engineering services relating to the business of the assessee. These items of expenditure will qualify for amortisation where the work in connection with the preparation of the feasibility report or the project report or the conducting of the market survey or other survey or the engineering services, is carried out within the organisation of the company or other assessee himself, or, where it is entrusted to an outside concern, such concern is, for the time being, approved for the purpose of this provision by the Central Board of Direct Taxes. 2. Legal charges for drafting any agreement between the assessee and any other person for any purpose relating to the setting up or conduct of the business of the assessee. 3. In the case of a company, in addition to the expenditure falling under items ( 1 ) and ( 2 ) above, the following items of expenditure will also qualify for amortisation: a. legal charges for drafting the memorandum and articles of association of the company; b. expenditure on printing of the memorandum and articles of association; c. fees for registering the company under the provisions of the Companies Act, 1956; d. expenditure in connection with the issue, for public subscription, of share in or debentures of the company, by way of underwriting commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus. [This will include legal charges and auditors' fees for drafting of the prospectus] The Central Board of Direct Taxes is also empowered to specify in the Income-tax Rules any other item or items of expenditure in respect of which the law does not provide for any allowance or deduction, and, thereupon, the items of expenditure so specified will also be eligible for amortisation under section 35D. The Taxation Laws (Amendment) Act, 1970 43. The aggregate amount of the expenditure under all the specified heads will, for the purpose of amortisation be limited to 2½ per cent of the cost of the project. The "cost of the project" has been defined to mean the actual cost of the fixed assets, namely, land, buildings, leaseholds, plant, machinery, furniture, fittings and railway sidings (including expenditure on development of land and buildings), which are shown in the books of the assessee as on the last day of the previous year in which the business of the assessee commences. Where the amortisation is to be allowed with reference to expenditure incurred in connection with the extension of an existing industrial undertaking or in connection with the setting up of a new industrial unit, the "cost of the project" is defined to mean the actual cost of the fixed assets as stated above which are shown in the books of the assessee as on the last day of the previous year in which the extension of the industrial undertaking is completed or, as the case may be, the new industrial unit commences production or operation insofar as such fixed assets have been acquired or developed in connection with the extension of the industrial undertaking or setting up of the new industrial unit of the assessee. The Taxation Laws (Amendment) Act, 1970 44. The ceiling limit of 2½ per cent of the cost of the project over the amount of the preliminary expenses eligible for amortisation applies to all categories of taxpayers to whom the benefit is available. However, in the case of an Indian company, an alternative ceiling of 2½ per cent of the capital employed in the business of the company may be elected by the company, if it so desires. "Capital employed in the business of the company" has been defined to mean, in a case where the preliminary expenses to be amortised were incurred before the commencement of the business, the aggregate of the issued share capital, debentures and long-term borrowings as on the last day of the previous year in which the business of the company commences. Where the preliminary expenses to be amortised are those incurred in connection with the extension of the industrial undertaking of the company or the setting up of a new industrial unit, "the capital employed in the business of the company" will be the aggregate of issued share capital, debentures and long-term borrowings as on the last day of the previous year in which the extension of the industrial undertaking is completed or, as the case may be, the new industrial unit commences production or operation, insofar as such capital, debentures and long-term borrowings have been issued or obtained in connection with the extension of the industrial undertaking or the setting up of the new industrial unit of the company. The term "long-term borrowings", in this context, will comprise ( i ) any moneys borrowed by the company from Government or the Industrial Finance Corporation of India or the Industrial Credit and Investment Corporation of India or any other financial institution which is, for the time being, approved by the Central Government for the purposes of section 36(1)( viii ) or any banking institution; and ( ii ) any moneys borrowed or debt incurred by the company in a foreign country in respect of purchase outside India of capital plant and machinery, where the terms under which such moneys are borrowed or debt is incurred, provide for the repayment thereof during a period of not less than 7 years. The Taxation Laws (Amendment) Act, 1970 45. It may be noted that the provision for amortisation is not intended to supersede any other provision in the income-tax law under which the expenditure is allowable as a deduction against profits. For instance, where a company which is already in business, incurs expenditure on issue of debentures, and such expenditure is admissible as a deduction against profits of the year in which it is incurred by virtue of the decision of the Supreme Court in the case of India Cements Ltd. v. CIT [1966] 60 ITR 52, section 35D will not have the effect of bringing that expenditure within the scope of the expenditure to be amortised against profits over a 10-year period. As a corollary to this, where any expenditure has been included for the purpose of amortisation under section 35D on a claim being made by the assessee in that behalf, such expenditure will not qualify for deduction under any other provision of the Act for the same or any other assessment year vide sub-section (6) of section 35D. The Taxation Laws (Amendment) Act, 1970 46. In the case of an assessee other than a company or a co-operative society, amortisation of preliminary expenses will be admissible only where the amounts of the assessee for the year or years in which the qualifying expenditure is incurred have been audited by a chartered accountant or a person who is entitled to be appointed to act as an auditor of companies under the terms of section 226(2) of the Companies Act, 1956. In such a case, the assessee is further required to furnish along with his return of income for the first year in which the deduction under the section is claimed, the report of such audit in a form to be prescribed for this purpose, duly signed and verified by such Chartered Accountant or other person and setting forth such particulars, as may be prescribed. The Taxation Laws (Amendment) Act, 1970 47. The benefit of amortisation of preliminary expenses under section 35D will ordinarily be available only to the Indian company or other assessee who incurred the expenditure. However, the benefit will not be lost in a case where the undertaking of an Indian company which is entitled to the amortisation is transferred to another Indian company in a scheme of amalgamation within the 10-year period of amortisation. In that event, the deduction in respect of the previous year in which the amalgamation takes place and the following previous years within the 10-year period, will be allowed to the amalgamated company and not to the amalgamating company. [Section 8 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Amortisation of expenditure on prospecting for, and development of, certain minerals 48. New section 35E, also inserted by section 8 of the Amending Act, provides for the amortisation of expenditure incurred wholly and exclusively on any operations relating to prospecting for the specified minerals or groups of associated minerals or on the development of a mine or other natural deposit of any such mineral or group of associated minerals. The minerals and the groups of associated minerals for the purposes of this provision have been specified in a new Seventh Schedule inserted by section 58 of the Amending Act. The Taxation Laws (Amendment) Act, 1970 49. As in the case of preliminary expenses, amortisation in respect of expenditure on prospecting for, and development of, the specified minerals, will also be allowed only in the case of Indian companies and resident assessees other than companies. The benefit of amortisation will not be available to a foreign company even if such company declares its dividends in India, and regardless of the pattern of its shareholding. It will also not be available to non-resident taxpayers generally. The Taxation Laws (Amendment) Act, 1970 50. The expenditure to be amortised under section 35E will be the expenditure incurred under the specified heads after 31-3-1970, during a 5-year period ending with the "year of commercial production", i.e., the previous year in which, as a result of any operation relating to prospecting commercial production of any one or more of the specified minerals or associated minerals commences. The term "operation relating to prospecting" comprises operation undertaken for the purpose of exploring, locating or proving deposits of any mineral and in particular includes any such operation which turns out to be infructuous or abortive. Where the expenditure on prospecting for, or development of, the specified minerals is wholly or partly met directly or indirectly by any other person or authority, the amortisation will be admissible only in respect of the balance, if any, of such expenditure. Further, where any property or rights are brought into existence as a result of the expenditure and the assessee realises any sale, salvage, compensation or insurance moneys in respect of such property or rights, the amount so realised will be set off against the expenditure and only the balance, if any, will be eligible for amortisation. The Taxation Laws (Amendment) Act, 1970 51. The following categories of expenditure are specifically excluded from the expenditure eligible for amortisation under section 35E : 1. Expenditure on the acquisition of the site of the source of any of the specified minerals or groups of associated minerals or of any rights in or over such site. 2. Expenditure on the acquisition of the deposits of any of the specified minerals or groups of associated minerals or of any rights in or over such deposits. 3. Expenditure of a capital nature in respect of any building, machinery, plant or furniture for which allowance by way of depreciation is admissible under section 32. The Taxation Laws (Amendment) Act, 1970 52. The amortisation of the qualifying expenditure will be allowed in equal instalments over a 10-year period against the profits arising from the commercial exploitation of any mine or other natural deposit of any of the specified minerals or associated minerals in respect of which the expenditure was incurred, not only where such commercial exploitation resulted from the operations of prospecting or development in question but also where commercial production had been established as a result of operations undertaken earlier. However, the amortisation will not be allowable against any other income of the assessee. Accordingly, it has been specifically provided that where the instalment of amortisable expenditure relating to a given year cannot be wholly absorbed by the profit against which the amortisation is to be allowed, the unabsorbed amount shall be carried over to the subsequent year and added to that year's instalments and so on for succeeding previous years. Such carry over will be allowed only up to and including the 10th previous year as reckoned from the year of commercial production. If there is any unabsorbed amount at the end of the 10th year, it will lapse. The Taxation Laws (Amendment) Act, 1970 53. As in the case of amortisation of preliminary expenses under section 35D, the amortisation of expenditure on prospecting for, and development of, specified minerals is also subject to the requirements that, where the assessee is a person other than a company or a co-operative society, his accounts for the year or years in which the expenditure is incurred have been audited by a chartered accountant or other person as stated in paragraph 46 and also subject to the requirement that the assessee furnishes along with his return of income for the first year in which the amortisation is claimed, the report of such audit in a form to be prescribed for the purpose, duly signed and verified by the chartered accountant or other person setting forth such particulars as may be prescribed. The Taxation Laws (Amendment) Act, 1970 54. The amortisation under section 35E is also available only to the assessee who incurs the expenditure. However, in the case of an Indian company the benefit of amortisation is preserved where the undertaking of the company is transferred to another Indian company under a scheme of amalgamation within the 10-year period of amortisation. In such an event, the amortisation of the outstanding instalments in respect of the previous year in which the amalgamation takes place and the remaining previous years of the 10-year period will be allowed to the amalgamated company and not to the amalgamating company. The Taxation Laws (Amendment) Act, 1970 55. As under section 35D, it has been specifically provided in section 35E(8) that where deduction under section 35E is claimed and allowed for any assessment year in respect of any expenditure qualifying for amortisation, the expenditure in respect of which the deduction is so allowed shall not qualify for deduction under any other provision of the Act for the same or any other assessment year. [Sections 8 and 58 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Amortisation of expenditure on renovation or extension of, or improvement to, leased business premises 56. Under the existing provisions of the Income-tax Act, an assessee is not entitled to depreciation or any other deduction in respect of capital expenditure incurred by him on renovation or extension of, or improvements to, a building not belonging to him which is used for the purposes of his business or profession. Under a new sub-section (1A), inserted in section 32 by section 5 of the Amending Act, with effect from 1-4-1971, provision has been made for the grant of depreciation on capital expenditure incurred by the assessee for the purpose of his business or profession on the construction of any structure or doing of any work, in or in relation to, and by way of renovation or extension of, or improvement to, any building which is used for the purpose of the business or profession, where such building is not owned by the assessee but in respect of which the assessee holds a lease or other right of occupancy. The depreciation will be allowed only in respect of capital expenditure incurred after 31-3-1970 and it will be allowed with reference to the written down value of the structure or work at rates to be prescribed in the Income-tax Rules. Where the structure or work is sold, discarded, demolished, destroyed or surrendered as a result of the determination of the lease or other right of occupancy in respect of the building (in any previous year other than the previous year in which it was constructed or done), the assessee will be entitled to a "terminal allowance" equal to the shortfall of the moneys payable taken together with the scrap value, if any, from the written down value of the structure or work. The term "moneys payable", in respect of any structure or work, has been defined to include any insurance or compensation moneys payable in respect thereof and, where the structure or work is sold, the price for which it is sold. The word "sold" will have the same meaning as it has under the existing provisions of section 32, i.e., it will include a transfer by way of exchange or a compulsory acquisition under any law but would not include a transfer from a company to an Indian company in a scheme of amalgamation. The Taxation Laws (Amendment) Act, 1970 57. The following consequential amendments have also been made to the other provisions of the Income-tax Act in this connection: 1. Section 32(2) relating to carry forward of unabsorbed depreciation allowance has been amended to secure that the unabsorbed depreciation allowance in respect of the structure or work referred to in section 32(1A) will be carried forward in the same manner and to the same extent as depreciation in respect of other assets. 2. Section 34(1) has been amended so as to secure that depreciation in respect of any structure or work referred to in section 32(1A) will be allowed only if the particulars to be prescribed in the Income-tax Rules have been furnished in respect thereof. Section 34(2) has also been amended so as to secure that the aggregate of all deductions under section 32(1A) does not exceed the actual cost of the structure or work and further that no deduction is allowed under section 32(1A) in respect of any previous year in which the structure or work is sold, discarded, demolished or destroyed, or is surrendered on the determination of the lease or other right of occupancy in respect of the building. 3. Section 35(2)( iv ) has been amended to secure that in a case where any deduction is allowed under section 35 in respect of scientific research expenditure represented wholly or partly by any asset, no depreciation in respect of that asset is allowed under section 32(1A). 4. Section 38(2) has been amended so as to secure that in a case where the building is only partly used for the purposes of the business or profession, depreciation under section 32(1A) will be restricted to a proportionate amount. 5. Section 41 has been amended by insertion of a new sub-section (2A). Under the new sub-section, where any structure or work referred to in section 32(1A) is sold, discarded, demolished, destroyed or surrendered as a result of the determination of the lease or other right of occupancy in respect of the building, and the "moneys payable" taken together with the "scrap value", if any, exceeds the written down value of the structure or work, a "balancing charge" shall be made in respect of such excess, as in the case of other depreciable assets. The expressions "moneys payable" and "sold" will, for this purpose, have the same meanings as they have for the purposes of section 32(1A). Section 41(5) has also been amended to provide that in the case of a business or profession which has been discontinued, any unabsorbed loss in respect of such business or profession (excluding any loss in speculation business or under the head "Capital gains") will be set off against any income which is chargeable to tax under section 41(2A). 6. Section 43 has been amended in regard to the following matters : ( 1 ) Explanation 1 to section 43( 1 ) provides that for the purpose of calculation of depreciation and "terminal allowance" in respect of an asset representing capital expenditure on scientific research related to the business which is subsequently used for the business itself, "actual cost" will mean the actual cost as reduced by the deductions already allowed under section 35(1)( iv ). This Explanation has been amended to secure that a structure or work referred to in section 32(1A) in relation to a rented building for scientific research related to the business is treated in the same manner as any other asset representing capital expenditure on scientific research related to the business. ( 2 ) Explanation 4 to section 43( 1 ) provides that in a case where an asset, having once belonged to the assessee and having been used by him for the purpose of his business or profession but thereafter ceased to be his property, is required by him, the depreciation is calculated on the basis of the actual cost when he first acquired the asset - reduced by the depreciation actually allowed, and further diminished by the "terminal allowance" allowed to him or, as the case may be, increased by any "balancing charge" made under section 41(2), or the actual repurchase price, whichever is less. This Explanation has been amended to secure that the depreciation allowed under section 32(1A) in respect of a structure or work referred to in that section is deducted in computing the actual cost and, further, the "terminal allowance" under section 32(1A) deducted or, as the case may be, the "balancing charge" under section 41(2A) added, for the purpose of this provision. 7. Section 55(1) has been amended so as to secure that in determining the "cost of acquisition" of a capital asset, the terminal allowance admissible under section 32(1A)( ii ) in respect of the structure or work as referred to in that section or, as the case may be, the "balancing charge" under section 41(2A) in respect of such structure or work, receives the same treatment as is being presently accorded to the terminal allowance or, as the case may be, the "balancing charge" in the case of other depreciable assets. 8. Section 57( ii ) has been amended to secure that depreciation under section 32(1A) is allowed in respect of a structure or work referred to in that section in or in relation to a building, even where such building is used for the purpose of earning any income chargeable to tax under the head "Income from other sources". 9. Section 59 has been amended by the insertion of a new sub-section (3) so as to secure that the "balancing charge" under section 41(2A) will be made in respect of a structure or work referred to in section 32(1A) even where the building is used for the purpose of earning any income chargeable to tax under the head "Income from other sources". [Sections 5, 6, 7, 9, 11, 12, 13, 14 and 15 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Tax concession to the book publishing industry 58. With a view to encouraging the publication of books in India, a new provision has been introduced in section 80QQ under which any person carrying on a business in India of the printing and publication of books, or only publication of books without the activity of printing, will be entitled to a deduction in the computation of his taxable income of an amount equal to 20 per cent of the profits from such business. The deduction will be admissible for the five assessment years 1971-72, 1972-73, 1973-74, 1974-75 and 1975-76. It may be noted that the deduction under this section is not admissible to an assessee who carries on the business of "printing" of books, unless the books so printed are "published" by him. For the purposes of this provision, "books" will not include newspapers, journals, magazines, diaries, brochures, tracts, pamphlets and other publications of a similar nature by whatever name called. Where the assessee is entitled also to the deduction under section 80H (in respect of profits derived from a new industrial undertaking employing displaced persons) or section 80J (in respect of profits and gains from newly established industrial undertakings, generally) or section 80P (in respect of certain categories of the income of co-operative societies), the deduction under the new section 80QQ will be admissible to the extent of 20 per cent of the profits and gains from publication of books (or printing and publication of books) included in the gross total income as reduced by the deductions under sections 80H, 80J and 80P. The Taxation Laws (Amendment) Act, 1970 59. By virtue of a consequential amendment to section 80A(3), it has been secured that where the person carrying on the business of publication of books (or printing and publication of books) is a firm, association of persons or body of individuals, the deduction under new section 80QQ will be available in computing the total income of the firm, association or body, but will not again be available in computing the taxable incomes of the partners of the firm or members of the association or body. [Sections 17 and 21 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Exemption of subsidy granted to the tea industry for replantation or replacement of tea bushes 60. With a view to encouraging replantation of tea estates in India, the Government of India has been granting a subsidy to cover a part of the expenses on such replantation. This subsidy is being granted since October 1968 and it is routed through the Tea Board. The subsidy is being granted not only for planting of tea bushes in replacement of those which have become old and non-productive in areas already planted, but also for planting of tea bushes in new areas to replace those which were destroyed or washed away during the floods in Darjeeling district. Under rule 8 of the Income-tax Rules, expenditure incurred in replantation of tea estate, i.e., planting tea bushes in replacement of bushes that have died or become permanently useless in an area already planted which had not previously been abandoned, is deductible as revenue expenditure in computing the income derived from the sale of tea grown and manufactured by the seller in India. [This provision in rule 8 is not, however, applicable to expenditure incurred in planting the bushes in a new area, even if such planting is undertaken with a view to replacing tea bushes which had been planted in another area and destroyed or washed away due to any reason.] The subsidy received by a tea estate from the Government of India as stated above may be exhibited in the accounts either as a revenue receipt or, alternatively, as a reduction in the expenses on replanting. With a view to securing to tea estate the full benefit of the subsidy, the amount of the subsidy, where it is exhibited as a revenue receipt in the accounts, has been specifically exempted from tax under a new clause ( 30 ) inserted in section 10. This amendment is deemed to have come into effect from 1-4-1969 and will, accordingly, be applicable for the assessment year 1969-70 and subsequent years. Simultaneously, rule 8 of the Income-tax Rules is being amended retrospectively so as to secure that the subsidy shall not be set off against the expenditure on replanting for the purpose of the deduction of such expenditure in computing the income in terms of that rule. Accordingly, for the assessment year 1969-70 and subsequent years, the full amount of the expenditure on replantation will continue to be admissible as a deduction in computing the income of a tea estate in India, without its being reduced by the amount of the subsidy. The Taxation Laws (Amendment) Act, 1970 61. New clause ( 30 ) of section 10 requires that the scheme for grant of subsidy should be notified in the Official Gazette by the Central Government. Steps are being taken to have the requisite notification issued at an early date. The new clause also requires that in order to be eligible for exemption under that clause, the assessee should furnish to the Income-tax Officer, along with his return of income for the assessment year concerned or within such further time as the Income-tax Officer may allow, a certificate from the Tea Board as to the amount of such subsidy paid to the assessee during the relevant previous year. As the exemption is applicable for the assessment year 1969-70 onwards, assessments of tea estates for assessment years 1969-70 and 1970-71 where claim is made for exemption of the subsidy should be disposed of in the light of the provisions in the new clause ( 30 ) of section 10. The Taxation Laws (Amendment) Act, 1970 62. It may be noted in this connection that for the purpose of computing the development allowance under section 33A with reference to the cost of replanting, the expenditure on replantation will stand reduced by the amount of the subsidy. This is in view of the position that the definition of the term "actual cost of planting" in section 33A(7) specifically provides for the reduction of the cost by such portion thereof as has been met directly or indirectly by any other person or authority. The provision in clause ( 30 ) of section 10 does not have the effect of overriding the provision in section 33A(7). Accordingly, the development allowance admissible in a case of replantation of tea estate will be 30 per cent of the net cost, i.e., the gross expenses on such replanting as reduced by the amount of the subsidy. It will be kept in view that the development allowance with reference to replantation of tea estates is available only in cases where the work of replanting has been completed before 1-4-1970. [Section 3( e ) of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Provisions for encouraging construction of low cost residential tenements to be let out on rent and also construction of house property for self-occupation 63. Liberalisation of "tax holiday" for newly constructed residential units let out on rent - Under the existing second proviso to section 23(1), income from house property constructed after 1-4-1961 which is let out on rent is taxed on a concessional basis for an initial period of 3 years. During this period, the annual value of such property is reduced to the extent of Rs. 600 per year in respect of each residential unit. With a view to encouraging construction of house property to be let out on rent to low and middle income groups, and having regard to the general rise in rents of such property, the second proviso to section 23(1) has been substituted by a new proviso, so as to liberalise the tax concession presently available in such cases. Under the proviso as substituted, in the case of house property the erection of which is completed after 31-3-1970, the annual value will be reduced by an amount up to Rs. 1,200 in respect of each residential unit for each year for a total period of 5 years from the date of completion of the construction. In other words, exemption from tax will be available up to a rental value of Rs. 100 per month in respect of each tenement for a total period of 5 years, as against 3 years at present. As under the existing provision the exemption will be available only where the net income from the property as computed otherwise is not a loss. It may also be noted that the exemption under this provision is available only in respect of house property which is let out on rent and not in respect of house property which is occupied by the owner for his own residence. The Taxation Laws (Amendment) Act, 1970 64. Computation of income from house property occupied by the owner for the purpose of his own residence - Under the existing provisions of section 23(2), income from house property occupied by the owner for the purposes of his own residence is taxed on a concessional basis inasmuch as the annual value of such property is reduced by an amount equal to one-half thereof or Rs. 1,800, whichever is less, and the resultant value is further limited, where appropriate, to one-tenth of the other taxable income, if any, of the assessee. However, in computing the annual value of house property occupied by the owner for his own residence, no deduction is admissible, at present, for the local taxes on the property. This is because, under the first proviso to section 23(1), the deduction for such taxes is specifically allowed only where the property is in the occupation of a tenant. The Taxation Laws (Amendment) Act, 1970 65. With a view to rationalising the provision in section 23(2) and to provide a fillip to construction of house property for self-occupation, sub-section (2) of section 23 has been substituted by a new sub-section. Under sub-section (2) as substituted, the annual value of house property used by the owner for the purposes of his own residence will first be computed in the same manner as if the property had been let, i.e., by deducting from the gross annual value the whole of the taxes levied by any local authority in respect of the property. The balance of the annual value will then be reduced by one-half thereof or Rs. 1,800, whichever is less. Where the assessee has two houses, both of which are used for the purposes of his own residence, the annual value of each such house will be computed in this manner. Where the assessee owns more than two houses and uses them for his own residence, the concessional basis of computation of the annual value as stated above will be allowed only in respect of two houses of the assessee's choice. [The annual value of the remaining houses will be determined as if they were let out.] The resultant annual value of the house or two houses owned and occupied by the taxpayer for the purposes of his own residence will, as at present, be further limited, where appropriate, to 10 per cent of the other taxable income of the taxpayer and the excess, if any, will be disregarded. The Taxation Laws (Amendment) Act, 1970 66. The amendments to section 23, as explained in paragraphs 63 and 65, will come into effect on 1-4-1971 and will, accordingly, be applicable for the assessment year 1971-72 and subsequent years. [Section 4 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Tax credit certificates for shifting of industrial undertakings from urban areas 67. Section 280ZA relating to the grant of tax credit certificates for shifting of industrial undertakings from urban areas so as to relieve congestion, presently, applies only in the case of public companies. As industrial undertakings in urban areas are, in several cases, owned by private companies and even foreign companies, and the shifting of such undertakings to other areas would help to relieve congestion, section 280ZA has been amended so as to extend the benefit of tax credit certificates under that section to all companies. This amendment will come into effect on 1-4-1971 and, accordingly, private companies or foreign companies shifting their industrial undertakings from an urban area to any other area on or after that date will be eligible for the grant of tax credit certificates under that section, subject to the satisfaction of the other conditions specified therein. [Section 54 of the Amending Act] Measures for rationalisation and simplification of some of the provisions of the income-tax act The Taxation Laws (Amendment) Act, 1970 Modification of the scheme of tax exemption of the remuneration of foreign technicians 68. The income-tax law has, for several years past, provided for the exemption from tax of the remuneration of foreign technicians employed in India. These provisions, which were first introduced in the law on 1-4-1955, have been liberalised from time to time. Under the existing provisions in this behalf, a foreign technician whose contract of service is approved by the Central Government within a specified period is entitled to exemption from tax on his remuneration in India for a period of 36 months from the date of his arrival in India. Further, where the foreign technician continues in employment in India after the expiry of the 36 months period, and his employer pays the tax due on his salary income to the Government, the perquisite represented by the payment of his tax dues by the employer is exempt from further tax in the hands of the technician for a further period of 60 months. Thus, a foreign technician may be employed in India on a tax-free remuneration for a total period of 8 years. This provision has enabled Indian industry to secure the services of foreign technicians at a reasonable cost. However, in order that our industry may not lean too heavily on the employment of foreign technicians for long periods in preference to Indian technicians having comparable qualifications, expertise and experience, and also to make our industrial enterprises bear a higher share of the cost of employing foreign experts, the provisions relating to the tax exemption of the remuneration of foreign technicians have been modified in certain directions. The modified scheme has been incorporated in a new sub-clause ( viia ) inserted in clause ( 6 ) of section 10 and will be applicable to foreign technicians entering employment in India after 31-3-1971. The salient features of the new provisions are explained in the following paragraphs. The Taxation Laws (Amendment) Act, 1970 69. Period of exemption - Under the new provisions, a foreign technician having specialised knowledge and experience in industrial and business management techniques will not be entitled to any exemption from tax in India. Presently, such a technician enjoys exemption from tax for a period of 6 months from the date of his arrival in India. The Select Committee which considered the Taxation Laws (Amendment) Bill, 1969, was of the view that, having regard to the availability of Indian technicians in this field, there would be no justification for continuing the tax exemption for management technicians any longer. The Taxation Laws (Amendment) Act, 1970 70. In the case of other foreign technicians, the period of exemption of the remuneration from tax has been reduced from 36 months to 24 months. During this period, the foreign technician will be entitled to exemption on his remuneration up to an amount calculated at the rate of Rs. 4,000 for every month of his employment in India during the relevant year. The remuneration, if any, in excess of Rs. 4,000 per month will be liable to tax but, if the employer pays the tax on such excess to the Central Government, the perquisite represented by the tax so paid by the employer will also be exempt from further taxation in the hands of the technician. After the initial period of 24 months from the date of his arrival in India, the whole of the remuneration of the technician will be chargeable to tax. However, if the employer pays the tax on the whole of the remuneration to the Central Government, the perquisite represented by the tax so paid will be exempt from further taxation in the hands of the foreign technician. This latter exemption will be available for a period of 24 months next following the initial period of 24 months as stated above. Thus the total period for which a foreign technician may be employed in India after 31-3-1971 on a tax-free remuneration will be 4 years, as against 8 years at present. The Taxation Laws (Amendment) Act, 1970 71. Definition of "foreign technician" - The definition of the term "technician" has been modified so as to cover - besides persons having specialised knowledge and experience in constructional or manufacturing operations or in mining or in the generation of electricity or any other form of power - also those having similar knowledge and experience in agriculture, animal husbandry, dairy farming, deep sea fishing or ship-building with a view to enabling the employment of foreign experts in these fields for the development of our food resources and our ship-building industry. At the same time, industrial or business management experts and also persons having specialised knowledge and experience in distribution of electricity or any other form of power (as distinct from generation) have been excluded from the purview of the term "technician". The Taxation Laws (Amendment) Act, 1970 72. Categories of enterprises or agencies which may employ foreign technicians - Presently, the tax exemption is available to foreign technicians employed by Government or any local authority or any corporation set up under any special law or in any business carried on in India. Under the new provisions, the tax exemption will be available also in the case of foreign technicians employed by any institution or body established in India for carrying on scientific research, which is approved in this behalf by the prescribed authority. The authorities already prescribed in the Income-tax Rules for the purpose of approving scientific research associations, universities, colleges, and other institutions for the purpose of the tax concessions, in respect of scientific research expenditure, namely, the C.S.I.R. (Council of Scientific and Industrial Research) the I.C.A.R. (Indian Council of Agricultural Research) and the I.C.M.R. (Indian Council of Medical Research) will be the authorities for granting approval to scientific research institutions or bodies for the purpose of the new provision in section 10( 6 )( viia ) also. The Taxation Laws (Amendment) Act, 1970 73. As under the existing provisions in section 10( 6 )( vii ), the foreign technician should not have been resident in India in any of the four financial years immediately preceding the financial year in which he arrived in India in order to be eligible for the exemption from tax on his remuneration. The existing requirement of approval of the contract of service of the technician by the Central Government also continues to apply, with the modifications that such approval will, hereafter, be required to be obtained in all cases, and that the application for the approval should be made to the Central Government before the commencement of service of the technician in India or within 6 months of such commencement. The exemption from tax under the new provisions will not be available in any case in the absence of such approval. Presently, the exemption from tax is available, without requirement of approval, for a period of 12 months in the case of technicians other than industrial or business management experts. This provision has now been discontinued. The Taxation Laws (Amendment) Act, 1970 74. As stated earlier, the new provisions in sub-clause ( viia ) of section 10( 6 ) will apply to foreign technicians who enter employment in India after 31-3-1971. Foreign technicians who are already in employment or who enter employment in India up to 31-3-1971 will be eligible for the tax concessions under the existing provision in sub-clause ( vii ) of section 10( 6 ). The Taxation Laws (Amendment) Act, 1970 75. By a consequential amendment to section 40, it has been secured that in applying the limit specified in sub-clause ( v ) of clause ( a ) of that section over the deductible amount of expenditure incurred in a business or profession for providing benefits, amenities or perquisites to employees, the tax paid by the employer on the salary of a foreign technician, which is eligible for exemption from further taxation as income of the foreign technician under the new sub-clause ( viia ) of section 10( 6 ), will not be taken into account. [Section 3( c )( ii ) and ( iii ) and section 10 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Relief in cases where salary, etc., is paid in arrears or in advance 76. Section 89, relating to the grant of tax relief by the Commissioner of Income-tax in cases where salary income or "interest on securities" is received in arrears thereby attracting a higher rate of tax than would otherwise have been applicable, has been amended so as to simplify its operation. Under the law, salary income is taxable in the year in which it is due or is paid. Where salary is paid in arrears or in advance or where any sum which is a "profit in lieu of salary" ( e.g., retirement benefits) or salary for more than 12 months is received in any one financial year, the income of that year may become liable to tax at a rate higher than what would have applied if the salary had been received in the year to which it pertains. A similar situation may arise in a case where interest on securities is received in arrears. Under the existing provisions of section 89, the Commissioner of Income-tax is empowered to grant such relief as he considers appropriate, in such cases, subject to administrative instructions issued by the Board. Under the amendment, the power to grant relief under this section has been vested in the Income-tax Officer and the Board is empowered to provide in the Income-tax Rules the nature of the relief that is to be granted in different categories of cases and the manner in which it is to be granted. [Section 23 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Simplification of interest calculations 77. With a view to simplifying calculation of interest payable by assessees for various delays under the Income-tax Act and also interest payable by Central Government to assessees in certain circumstances, and eliminating infructuous work in having to demand and recover small amounts of interest, power has been vested in the Central Board of Direct Taxes, under new clause ( kk ) inserted in section 295(2), to make rules laying down the procedure to be followed in calculating the interest chargeable from and payable to assessees under the Income-tax Act. Such rules may include provisions for the rounding off, to whole months, of the period for which the interest is to be calculated and may also specify the circumstances under which and the extent to which petty amounts of interest payable by assessees may be ignored. [Section 55( b ) of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Rationalisation of the procedure for grant of approval to superannuation funds and gratuity funds 78. The rules for the grant of approval to superannuation funds and gratuity funds, contained in the Fourth Schedule, presently require that in the case of a superannuation fund, the accounts for one year and in the case of a gratuity fund, the accounts for 3 years, should be furnished along with the application for approval. This leads to the position that a superannuation fund can make an application for approval only after it has been in existence for one year and a gratuity fund, only after it has completed 3 years of existence. With a view to obviating delays in applying for approval of such funds and the grant of such approval, the relevant provisions in Parts B and C of the Fourth Schedule have been amended. Under the amended provisions, the trustees of a superannuation fund or a gratuity fund will have to furnish, along with their application to the Income-tax Officer for approval of the fund, two copies of the accounts of the fund for each one of the three years prior to the financial year in which the fund was in existence and for which its accounts have been made up. This requirement is applicable only where the fund has been in existence during any year or years prior to the financial year in which the application is made. Accordingly, where the application is made in the first year of the institution of the fund, there will be no requirement of furnishing copies of the accounts of the fund. The Taxation Laws (Amendment) Act, 1970 79. Under another amendment, a new rule 8A has been inserted in Part C of the Fourth Schedule. Under the new rule 8A, which corresponds to rule 10 of Part B of the Fourth Schedule relating to approved superannuation funds, the Income-tax Officer is authorised to call for relevant returns, statements, particulars and information from the trustees of an approved gratuity fund and from any employer, who contributes to such a fund. Such returns, statements, particulars, etc., can be called for by a notice allowing time of not less than 21 days for compliance. [Section 57( b )( i ), ( c )( i ) and ( c )( ii ) of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Investment or deposit of the moneys of recognised provident funds and approved superannuation funds and gratuity funds 80. Parts A, B and C of the Fourth Schedule, which specify the rules for the recognition of provident funds and the approval of superannuation funds and gratuity funds, have been amended so as to empower the Central Board of Direct Taxes to regulate by rules, made in the Income-tax Rules, the investment or deposit of the moneys of a recognised provident fund or an approved superannuation fund or gratuity fund. However, it has been specifically provided that any rule made under this power shall not require the investment of more than 50 per cent of the moneys of any such fund in Government securities. Compliance with the rules to be made by the Board in this behalf will be one of the conditions for recognition or continuation of recognition of provident funds or approval or continuance of approval of superannuation funds or gratuity funds. [Section 57( a ), ( b )( ii ) and ( c )( iii ) of the Amending Act] Measures for countering evasion or avoidance of tax The Taxation Laws (Amendment) Act, 1970 Conversion of separate property of an individual into joint Hindu family property 81. Section 64 presently provides that income derived from assets transferred by an individual to his spouse or minor child in certain circumstances shall continue to be included in the taxable income of the transferor. This provision, which has been in the law for over 3 decades, has been held by the courts to be inapplicable in a case where an individual, being a member of a Hindu undivided family, converts his separate property into joint family property by impressing such separate property with the character of property belonging to the family or throwing it into the common stock of the family. With a view to closing this loophole for avoidance or reduction of tax liability through the device of converting separate property of an individual into a property belonging to the Hindu undivided family of which he is a member, section 64 has been amended by the insertion of a new sub-section (2) therein, the existing provision being numbered as sub-section (1). Under new sub-section (2) of section 64, in a case where an individual being a member of a Hindu undivided family, converts at any time after 31-12-1969, his separate property into property belonging to the Hindu undivided family, he will be deemed to have transferred the property through the family to the members of the family for being held by them jointly. Further, the income derived from the converted property or any part thereof by the family shall be deemed to arise to the individual himself and not to the family insofar as it is attributable to the interest of the individual in the property of the family. Moreover, the income from such property insofar as it is attributable to the interest of the spouse or any minor son of the individual in the property of the family will be deemed to arise to the spouse or minor son from assets transferred to them indirectly by the individual and accordingly, such income will be includible in the total income of the individual in accordance with the existing provisions of section 64. In the event of a partial or total partition in the family, the income arising to the spouse or minor son from the whole or any part of the converted property allotted to the spouse or minor son in such partition will also, similarly, be deemed to arise to them from assets transferred to them indirectly by the individual, and be includible in the income of the individual under the existing provisions of section 64. Where the income from the converted property or any part thereof falls due to be included in the income of the individual by virtue of these provisions, such income will be excluded from the total income of the family or, as the case may be, from the total income of the spouse or the minor son. The Taxation Laws (Amendment) Act, 1970 82. The term "property" has been defined in the Explanation to section 64(2), to include any interest in property, movable or immovable, the proceeds of sale thereof and any money and investment for the time being representing the proceeds of sale and where the property is converted into any other property by any method, such other property. For the purpose of determining the amount of the income from the converted property which is attributable to the interest of the individual in the property of the family or the interest of the spouse or the minor son of the individual in the property of the family, a notional partition will be assumed to take place in the family as on the last day of the relevant previous year and the share of the family property which would have been allotted to the individual, his spouse and minor sons on such partition will be ascertained. The income attributable to the interest of the individual or his spouse or minor son will be taken to be that part of the income from the converted property which is proportionate to the share of the respective persons in the family property. The Taxation Laws (Amendment) Act, 1970 83. It may be noted that where the circumstances specified in new sub-section (2) of section 64 exist, the appropriate amount of income must be included in the total income of the individual making the conversion and excluded from the total income of the Hindu undivided family or, as the case may be, of the spouse or minor son, even if this course does not result in a benefit to the revenue. The provisions of section 65 to the effect that where income from any asset of a person other than the assessee is included in the total income of the assessee by reason of the provisions of Chapter V, the recovery of the tax attributable to the income so included shall be enforceable against the person in whose name such asset stands - will be applicable also in relation to the separate property of an individual converted into property belonging to the Hindu undivided family of which he is a member. The Taxation Laws (Amendment) Act, 1970 84. Under a consequential amendment to section 295(2)( b ), the Central Board of Direct Taxes has been empowered to provide in the Income-tax Rules for the manner in which and the procedure by which the income shall be arrived at in the case of an individual who is liable to be assessed under the new sub-section (2) of section 64. Accordingly, the Board will be in a position to make rules providing for the determination of the income to be assessed as the income of the individual making the conversion of his separate property into Hindu undivided family property in circumstances, such as, where due to the sale or exchange of the converted property and merging of the funds with the other funds of the joint family the converted property loses its identity and it becomes difficult to ascertain the income yielded by such property in subsequent years. By another consequential amendment to clause ( 2 ) of section 10 it has been secured that the exemption under that clause of any sum received by any individual as a member of a Hindu undivided family out of the income of the family from being included in the total income of the individual, will be subject to the provision in new sub-section (2) of section 64. Accordingly, section 10( 2 ) will not operate to frustrate the purpose underlying the provision in section 64(2). The Taxation Laws (Amendment) Act, 1970 85. The amendment of section 64 and the consequential amendments to sections 10 and 295 will come into effect on 1-4-1971. Accordingly, the new provision will be applicable for the assessment year 1971-72 and subsequent assessment years, but it will apply to income derived from separate property converted into Hindu undivided family property from 1-1-1970 onwards. [Sections 3( a ), 16 and 55( a ) of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Assessment of unregistered firms 86. Section 183 presently provides that in the case of an unregistered firm, the Income-tax Officer may either determine the tax payable by the firm itself on its total income or may, in certain circumstances, proceed to assess the firm as a registered firm and charge tax on the partners in respect of their shares in the income of the firm. The latter course is to be adopted where the Income-tax Officer finds that the aggregate amount of the tax payable by the partners if the firm were treated as registered firm would be greater than the aggregate amount of tax which would be payable by the firm if it is treated as an unregistered firm and the tax which would be payable by the partners individually in respect of their other income, if any (the share from the unregistered firm being merely taken for the purpose of ascertaining the rate of tax applicable to the other income of the partners). Where this latter course is adopted, no tax is, presently, charged on the firm itself, but the shares of the partners in the income of the firm are charged to the tax in their hands along with their other income, if any. The Taxation Laws (Amendment) Act, 1970 87. This provision in section 183( b ) has been amended to provide that an unregistered firm may be assessed by the Income-tax Officer in the manner of a registered firm where he finds that the tax payable by the firm if it is assessed as a registered firm taken together with the tax payable by partners individually if the firm were so assessed, would be greater than the aggregate amount of the tax payable by the firm as an unregistered firm and the tax payable by the partners individually. The amendment further provides that where this procedure is adopted, the firm will be liable to tax on its total income in the same manner as a registered firm and the partners will be chargeable to tax on their respective shares in the income of the firm along with their other incomes, if any. This amendment will be effective from 1-4-1971 and will, accordingly, apply for the assessment year 1971-72 and subsequent years. [Section 32 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Registered firms having benamidars as partners 88. Section 185 specifies the procedure for the grant of registration to a partnership firm. Under the existing provisions of this section, the Income-tax Officer is required to enquire into the genuineness of the firm and its constitution as specified in the instrument of partnership, and grant registration to the firm only if he is satisfied that there is or was during the previous year in existence a genuine firm with the constitution so specified. The Taxation Laws (Amendment) Act, 1970 89. In the case of CIT v. A. Abdul Rahim Co. [ 1965 ] 55 ITR 651, the Supreme Court held that registration could not be refused to a firm merely on the ground that one of the partners is a benamidar of another partner. According to the Court, "the beneficial interest in the income pertaining to the share of the said benamidar may have relevance to the matter of assessment (of the real owner of the income) but none in regard to the question of registration". This position in law gives room for introduction of benami partners in partnership firms with a view to reducing tax liability. In order to counter such devices, section 185(1) has been amended by the insertion of an Explanation, under which a firm shall not be regarded as a genuine firm, if any partner of the firm was, in relation to the whole or any part of his share in the income or property of the firm, at any time during the previous year, a benamidar of any other partner to whom the first mentioned partner does not stand in the relationship of a spouse or minor child. The Explanation will apply for the purpose of grant of registration to the firm under section 185, as also for the purpose of the provision in section 186(1) that in the case of a firm which has been granted registration, or which is entitled to the continuance of registration by virtue of section 184(7), if the Income-tax Officer is of opinion that there was during the previous year, no genuine firm in existence as registered, he may cancel the registration of the firm for that assessment year. The refusal of registration to a firm in which one partner is a benamidar of another, as also the cancellation of registration granted to such a firm, will be secured under the Explanation regardless of whether the other partners are aware of the benami arrangement or it is not disclosed to them. The exclusion of cases where the benamidar is related to the beneficial owner as a spouse or minor child of the latter from the scope of the Explanation is based on the consideration that the share of the spouse or minor child in the income of the firm is in any event assessable as the income of the other partner by virtue of the provision in section 64. Accordingly, a firm in which both the spouses are partners or one in which the minor child of one of the partners is admitted to the benefits of the partnership, will not be denied registration even where the spouse or minor child happens to be merely a benamidar of the other partner. The Taxation Laws (Amendment) Act, 1970 90. The amendment of section 185(1) will be effective from 1-4-1971. Accordingly, registration may be refused to a partnership firm by virtue of the Explanation only for the assessment year 1971-72 and subsequent years. Similarly, a firm which has been enjoying the benefit of registration for assessment years up to and including the assessment year 1970-71, is liable to lose the benefit if the Explanation applies to it for the previous year relevant to the assessment year 1971-72 or any sub-sequent years. [Section 34( a ) of the Amending Act] Measures for providing tax relief in certain directions The Taxation Laws (Amendment) Act, 1970 Definition of "agricultural income" 91. Section 10( 1 ) exempts agricultural income from income-tax and also provides for its exclusion in computing the total income of the assessee. The exemption of agricultural income from Central taxation is based on the provision in the Constitution according to which Parliament has exclusive power to make laws with respect to taxes on income other than agricultural income, whereas a State Legislature has exclusive power to make laws with respect to taxes on agricultural income, under article 246(1) of the Constitution read with entry 82 of List I (Union List) in the Seventh Schedule, and article 246(3) read with entry 46 of List II (State List). The expression "agricultural income", for the purpose of the above-mentioned entries, means agricultural income as defined for the purposes of the enactments relating to Indian income-tax vide article 366(1) of the Constitution. Under the definition of "agricultural income" in clause ( 1 ) of section 2, the expression means : a. any rent or revenue derived from land which is used for agricultural purposes and which is either assessed to land revenue in India or is subject to a local rate, assessed and collected by officers of the Government as such; b. any income derived from such land by agricultural operations including processing of the agricultural produce raised or received as rent-in-kind so as to render it fit for the market, or the sale of such produce; and c. income attributable to farm houses, i.e., any building owned and occupied by the receiver of rent or revenue of any such land or by the cultivator or receiver of rent-in-kind, subject to the condition that the building is on or in the immediate vicinity of the land and is a building which the receiver of the rent or revenue or the cultivator or the receiver of rent-in-kind, by reason of his connection with the land, requires as a dwelling house or as a store house or other out-building. The Taxation Laws (Amendment) Act, 1970 92. In recent years, agricultural operations have been extended to lands in terai areas or cantonments, forest lands, etc., where the land is not assessed to land revenue and is not subject to any local rate as required under the above-mentioned definition of agricultural income. Accordingly, income derived by agricultural operations on such lands is presently outside the scope of "agricultural income" and becomes liable to Central income-tax. Apart from this, in several States, lands up to specified limits have been exempted from land revenue assessment. Hence, income derived by the performance of agricultural operations on such land in these States would also come within the purview of Central income-tax. The Taxation Laws (Amendment) Act, 1970 93. As the character of the income derived by agricultural operations remains the same whether or not the land is subject to land revenue or a local rate, it would be anomalous to subject to Central income-tax such income in those cases where there is no land revenue assessment while exempting income of the same nature in other cases. With a view to removing this anomaly and providing tax relief to the agriculturists who cultivate forest lands, lands in terai areas or cantonments or in States which have abolished land revenue on small holdings, the definition of "agricultural income" in clause ( 1 ) of section 2 has been amended so as to drop the condition that the land from which the income is derived should be assessed to land revenue or any local rate. This change will bring within the purview of the expression "agricultural income", income derived from cultivation of forest lands, lands in terai areas and cantonments as also lands in respect of which the State Government does not levy any land revenue. The Taxation Laws (Amendment) Act, 1970 94. In regard to income attributable to farm buildings, the amended definition of 'agricultural income" provides that income attributable to such a building will be treated as agricultural income subject to the condition that the building is situated on, or in the immediate vicinity of, land which is assessed to land revenue or a local rate, as at present, or, in the alternative, the building is on or in the immediate vicinity of land which (though not assessed to land revenue or any local rate) is situated outside "urban areas", i.e., any area which is comprised within the jurisdiction of any municipality or cantonment board having a population of not less than ten thousand persons (according to the last preceding census of which the relevant figures have been published before the first day of the previous year) or within such distance (up to a maximum of 8 kilometres) from the limits of any such municipality or cantonment board as the Central Government may notify in the Official Gazette. Such notification is to be issued by the Central Government only where it is satisfied that the pace of urbanisation outside any such municipality or cantonment board justifies the treatment of such areas as "urban areas". The effect of this modification will be that income attributable to farm houses situated in such "urban areas" will not be treated as agricultural income unless the land on which the farm house is situated is assessed to land revenue or any local rate. However, in the case of farm houses situated in "rural areas", i.e., any area which is outside the jurisdiction of any municipality or cantonment board having a population of not less than ten thousand persons and also beyond the notified distance outside the limits of any such municipality or cantonment board, the income will be treated as agricultural income even where the land on which the farm house is situated is not assessed to land revenue or any local rate. For the purpose of this definition, municipality will include a municipal corporation, notified area committee, town area committee, town committee or other similar authority by whatever name called, e.g., "Nagar Nigam". The Taxation Laws (Amendment) Act, 1970 95. The amendment of the definition of agricultural income, as explained in the preceding paragraphs, is retrospective and is deemed to have taken effect from 1-4-1962, i.e., the date on which the Income-tax Act came into force. Accordingly, where income derived by agricultural operations on land which is not assessed to land revenue or any local rate has been subjected to Central income-tax, the relevant assessment should now be rectified and the tax charged on such income refunded or remitted, as the case may be. Where assessment proceedings have been initiated for bringing such income to tax, these should be dropped. [Section 2 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Exemption from income-tax of the value of travel concession or assistance received by Indian citizens, and passage moneys or the value of free or concessional passage received by individuals of foreign nationality, employed in India 96. Section 10( 5 ) presently exempts from tax the value of any travel concession or assistance received by an Indian citizen from his employer for himself, his wife and children in connection with his proceeding on leave to his home-district in India. The exemption is presently not available when the journey is performed after retirement or termination of service of the individual. The Taxation Laws (Amendment) Act, 1970 97. Section 10(6)( i ) presently exempts from tax passage moneys or the value of any free or concessional passage received by an individual of foreign nationality from his employer for himself, his wife and children in connection with his proceeding on home leave outside India. This provision does not also, presently, cover passage moneys or free or concessional passage received by the individual in connection with his proceeding to his home country after retirement or termination of his service in India. The Taxation Laws (Amendment) Act, 1970 98. The provisions in clauses ( 5 ) and ( 6 )( i ) of section 10, as stated in the preceding paragraphs, have been amended, retrospectively from 1-4-1962, so as to extend the scope of the exemption under those clauses to— a. the value of any travel concession or assistance received by or due to an Indian citizen from his employer or former employer for himself, his spouse and children, in connection with his proceeding to his home-district in India after retirement from service or termination of his service; b. passage moneys or the value of free or concessional passage received by an individual of foreign nationality from his employer or former employer for himself, his spouse and children, in connection with his proceeding to his home country after retirement from service or termination of his service in India. With effect from the assessment year 1971-72, the exemption in the case of an Indian citizen in respect of the value of any travel concession or assistance received from the employer or former employer in connection with his proceeding on leave or in connection with his proceeding after retirement from service or after the termination of his service, will be available not only where he proceeds to his home-district in India but also where he proceeds to any other place in India. In the latter circumstance, the exemption from tax will be available only to the extent of the amount which he would have received or which would have been due to him in connection with his proceeding to his home-district in India. [Section 3( b ) and ( c )( i ) of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Tax relief to blind or physically handicapped individual 99. Under the existing provisions of section 80U, a resident individual who is totally blind is entitled to a deduction of Rs. 2,000 in the computation of his taxable income. This section has been substituted by a new section under which the deduction in such cases has been increased to Rs. 5,000, and it has been extended also to any resident individual who suffers from a permanent physical disability (other than blindness) which has the effect of reducing substantially his capacity for engaging in a gainful employment or occupation. In order to avail of the deduction, the taxpayer is required to furnish, in respect of the first assessment year for which the deduction is claimed, in a case of total blindness, a certificate from a registered oculist, and in a case of other physical disability, a certificate from a registered medical practitioner. Section 80U as substituted will take effect on 1-4-1971 and its provisions will, accordingly, be applicable for the assessment year 1971-72 and subsequent years. [Section 22 of the Amending Act] Amendments for removing certain anomalies, drafting lacunae, etc. The Taxation Laws (Amendment) Act, 1970 Exemption from tax of the income of members of Scheduled Tribes 100. Under the existing provision in clause ( 26 ) of section 10, a member of a Scheduled Tribe as defined in article 366(25) of the Constitution, who is not in the service of Government, and who resides in any area specified in Part A or Part B of the Table appended to Paragraph 20 of the Sixth Schedule to the Constitution (broadly, certain areas in Assam and on the North-East Frontier of India) or in the State of Nagaland or in the Union territories of Manipur and Tripura is exempt from income-tax in respect of income arising to him from any source in the said areas of Nagaland or the Union territories of Manipur and Tripura. This exemption is also available to him in respect of income by way of dividends or interest on securities. In the case of S.K. Dutta, ITO v. Lawrence Singh Ingty [1968] 68 ITR 272, the Supreme Court held that the existing provision in clause ( 26 ) of section 10, to the extent it denied exemption from tax to a member of a Scheduled Tribe who is in the service of Government was unconstitutional. Section 10( 26 ) has accordingly been amended to bring it in line with the Supreme Court's ruling, by the commission of the words "who is not in the service of Government" from that clause. This amendment is deemed to have taken effect on 1-4-1962. [Section 3( d ) of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Definition of "gross total income" 101. Under the existing provisions of clause ( 5 ) of section 80B, "gross total income" means the total income computed in accordance with the provisions of the Income-tax Act, before making any deduction under Chapter VIA or in respect of annuity deposit under section 280-O, and without applying the provisions of section 64 (relating to the assessment of an individual in respect of income arising to the spouse or minor child of the individual from assets transferred to them by the individual or by reason of the spouse being a partner, or the child being admitted to the benefits of partnership, in a firm of which the individual is also a partner). This definition of "gross total income" was inserted in the Income-tax Act by the Finance (No. 2) Act, 1967, with effect from 1-4-1968, in the context of simplification of tax computations by allowing straight deduction of the whole or part of incomes and payments formerly qualifying for full or partial rebate of tax calculated at the average rate of tax applicable to the total income. The exclusion, from the "gross total income" of an individual of income which is to be assessed in his hands under the provisions of section 64, was unintentional, and even anomalous. Clause (5) of section 80B has accordingly been amended, retrospectively from 1-4-1968, so as to include in the "gross total income", in the case of an individual, also the income arising to the spouse or minor child of the individual in respect of which the individual is chargeable to tax under section 64. The effect of the amendment is that the deductions under the provisions of Chapter VIA, e.g., in respect of long-term savings in approved media (life insurance, provident fund, etc.), charitable donations and long-term capital gains, will be available to an individual also in relation to, or up to appropriate percentage of, the income of the spouse or minor child which is assessable as the income of the individual. The Taxation Laws (Amendment) Act, 1970 102. The amendment of section 80B(5) applies for and from the assessment year 1968-69. Accordingly, assessments where the deduction in respect of long-term savings in approved media or charitable donations has been allowed to an individual only in respect of such savings or donations up to the specified percentage calculated with reference to the gross total income excluding income assessable under section 64, or the deduction under section 80T in respect of long-term capital gains arising to the spouse or minor child denied to the individual and the whole of such capital gains subjected to tax as his income, such assessments should be revised in the light of amendment and the appropriate amount of tax relief allowed to the assessee. The deduction under section 80L in respect of dividends on shares in Indian companies (since enlarged to cover income from the investments in specified financial assets) will also be allowable with reference to the income of the spouse or minor child which is assessable as the income of the individual under section 64, and completed assessments for past years should be revised where appropriate in the light of the amended definition. [Section 18 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Deduction in respect of charitable and other donations 103. Under section 80G, an assessee is entitled, subject to certain conditions, to a deduction in the computation of his total income of a specified percentage of the donations made by him to certain funds, charitable institutions, or for the repair or renovation of any temple, mosque, gurdwara, church or other place of worship, which is notified by the Central Government for the purposes of that section. The amount of donations to charitable institutions qualifying for the deduction under this section is limited to 10 per cent of the "gross total income" of the donor (as reduced by any portion thereof on which income-tax is not payable and by any amount in respect of which the assessee is entitled to a deduction under Chapter VIA) and is also subject to an overall monetary limit of Rs. 2,00,000. Where the taxpayer has, during the relevant year, made any donations for the renovation or repair of any notified temple, mosque, gurdwara, church or other place of worship, the monetary limit of Rs. 2,00,000 is increased up to Rs. 5,00,000, so as to cover such donations only. The relevant provision specifying this relaxation in the monetary limit [proviso to section 80G(4)] as presently worded, may lend itself to the interpretation that where any donation is made to a notified temple, mosque, gurdwara, church or other place of worship even in a small amount, the higher overall limit of Rs. 5,00,000 would be available in respect of all charitable donations qualifying for the deduction under that section. As this is contrary to the intention underlying the relevant provision, the proviso to sub-section (4) of section 80G has been substituted by a new proviso so as to bring out explicitly the intention underlying the existing provision. Under the proviso as substituted, it has been made clear that where the aggregate of the sums qualifying for the deduction includes any donations for the repair or renovation of any notified temple, mosque, gurdwara, church or other place of worship the monetary limit over the amount qualifying for the deduction under section 80G(1) will be increased, from the general limit of Rs. 2,00,000 to the special limit of Rs. 5,00,000, only to the extent that such aggregate exceeds the general limit of Rs. 2,00,000 by reason of the inclusion of donations to the notified temples, etc. In other words, charitable donations, other than for repair or renovation of the notified temples, etc., in excess of Rs. 2,00,000 will not qualify for the deduction under section 80G, but donations for repair or renovation of temples, etc., taken together with other charitable donations, if any, will so qualify up to Rs. 5,00,000. The amount qualifying for the deduction will, as at present, be subject to the alternative limit of 10 per cent of the "gross total income" of the donor (as reduced by any portion thereof on which income-tax is not payable and by any amount in respect of which the assessee is entitled to a deduction under any other provision of Chapter VIA). The Taxation Laws (Amendment) Act, 1970 104. The amendment to section 80G will apply, retrospectively, from the assessment year 1968-69. Accordingly, where any claim has been made and allowed for the deduction under section 80G in respect of charitable donations amounting to more than Rs. 2,00,000 on the ground that such amounts included donations for the repair or renovation of any notified temple, etc., the assessment should be revised so as to withdraw the unintended benefit. [It may be noted that the amendment does not change the position in regard to donations to the National Defence Fund, the Jawaharlal Nehru Memorial Fund or the Prime Minister's Drought Relief Fund, which continue to be eligible for the deduction under section 80G without any ceiling limit.] [Section 19 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Deduction in respect of dividends attributable to "tax holiday" profits 105. Section 80K provides for the deduction of the whole of the dividends attributable to the "tax holiday" profits of the company paying the dividend in computing the total income of the shareholder. Presently, the deduction under this section is available only to an assessee who is the owner of any share or shares in respect of which the dividend is paid. Accordingly, the deduction is not available, at present, in relation to dividends on shares owned by the spouse or minor child of an individual in respect of which the individual is chargeable to tax under section 64. As this is an unintended denial of the benefit of tax relief in relation to "tax holiday" dividends, and in the context of the amendment to the definition of "gross total income" so as to include therein income which is assessable as the income of an individual under the provisions of section 64 ( vide paragraph 101), section 80K has been substituted by a new section, retrospectively from 1-4-1968, so as to bring out explicitly the underlying intention. Under section 80K as substituted, where income by way of dividends attributable to "tax holiday" profits on any share or shares in a company owned by any person is chargeable to tax, under the provisions of the Income-tax Act, as the income of any other person, the whole of such dividend will be allowed as a deduction in computing the total income of the second mentioned person. The Taxation Laws (Amendment) Act, 1970 106. This amendment applies for and from the assessment year 1968-69. Accordingly, where the claim for the deduction under section 80K has been disallowed in respect of dividends attributable to "tax holiday" profits on the ground that the assessee was not the owner of the relevant shares, the necessary relief should be allowed by rectifying the assessment in the light of the section as substituted. [Section 20 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Calculation of tax in a case where the total income includes income by way of interest on National Savings Certificates (First Issue) 107. Section 112A lays down a concessional basis for charging of tax in a case where the total income of a non-corporate taxpayer includes income by way of interest on National Savings Certificates (First Issue) or the Bank series of such Certificates. Prior to 1-4-1968, the section provided for the determination of the tax payable in such a case as the aggregate of: ( i ) the tax calculated on the ordinary income, i.e., income other than ( a ) compensation received on the determination or modification of the terms of a managing agency, etc., ( b ) capital gains, and ( c ) interest on National Savings Certificates (First Issue) or the Bank series of such Certificates, at the average rate of tax applicable to such ordinary income; ( ii ) the tax calculated on the income by way of compensation received on the determination or modification of the terms of a managing agency, etc., in the manner provided in section 112; ( iii ) the tax calculated on the capital gains under the special provisions of section 114; and ( iv ) the tax on the interest on National Savings Certificates (First Issue) or the Bank series of such Certificates, at the average rate of tax applicable to the ordinary income referred to at ( i ) above. The Taxation Laws (Amendment) Act, 1970 108. With effect from 1-4-1968, the special provisions in section 112, for calculation of tax on income by way of compensation on the determination or modification of the terms of a managing agency, etc., and section 114, for the calculation of tax on long-term capital gains, were replaced by the new provisions in sections 80S and 80T, respectively, under which a non-corporate taxpayer is entitled to the deduction of a specified proportion of his income by way of such compensation and long-term capital gains, respectively, in the computation of his taxable income. Consequential to these changes, section 112A has been amended, retros-pectively from 1-4-1968, so as to provide that the tax payable by a non-corporate taxpayer whose total income includes income by way of interest on National Savings Certificates (First Issue) or the Bank series of such Certificates will be taken to be the aggregate of: ( a ) the tax chargeable on his total income exclusive of such interest; and ( b ) the tax calculated on such interest at the average rate of tax applicable to his ordinary income, i.e., the total income exclusive of the aforesaid interest and also the compensation and capital gains, if any, included therein. The Taxation Laws (Amendment) Act, 1970 109. Explanation 1 to section 112A, which provides that in computing the average rate of income-tax on the ordinary income of a non-corporate taxpayer, for the purpose of calculating the tax chargeable on his income by way of interest on National Savings Certificates (First Issue) or the Bank series of such Certificates, such ordinary income shall be deemed to consist wholly of "earned income" as defined in the Finance Act of the relevant year, has been omitted with effect from 1-4-1969, as it has become redundant after the discontinuance of the distinction between "earned income" and "unearned income" for the purpose of levy of tax with effect from the same date. [Section 24 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Procedure for grant of registration to partnership firms 110. Under the existing provisions of section 184(7), where registration is granted to any firm for any assessment year, it shall have effect for every subsequent assessment year subject to certain requirements. One of these requirements is that the firm should furnish along with its return of income for the relevant assessment year, a declaration to the effect that there is no change in the constitution of the firm or the shares of the partners as evidenced by the instrument of partnership on the basis of which the registration was granted. This requirement has, in practice, led to hardship where due to any reason the firm was not able to furnish the declaration along with the return of income. One of such reasons will be where some partner or partners were not available for signing the declaration before the date of furnishing the return of income (which may be signed by any one of the partners and not by all of them). With a view to avoiding inconvenience and hardship to taxpayers in regard to this matter, clause ( ii ) of the proviso to section 184(7) has been substituted by a new clause under which the declaration for continuation of registration may be furnished, not necessarily along with the return of income, but before the expiry of the time allowed for furnishing the return, whether fixed originally or on extension. Further, where the Income-tax Officer is satisfied that the firm was prevented by sufficient cause from furnishing the declaration within the said period, he may allow the declaration to be furnished at any time before the assessment is made. The Taxation Laws (Amendment) Act, 1970 111. By an amendment to section 185, it has also been provided that where the Income-tax Officer finds that the declaration furnished by the firm in pursuance of section 184(7) is not in order, he shall intimate the defect in the declaration to the firm and give it an opportunity to rectify the defect within a period of one month from the date of such intimation. If the defect is not rectified within that period, then only the Income-tax Officer will pass an order in writing declaring that the registration granted to the firm for the earlier year or years shall not have effect for the relevant assessment year. This provision has been made in a new sub-section (3) of section 185. The substance of the existing sub-section (3) of section 185 has been incorporated in a new sub-section (2) [substituted for the existing sub-section (2)] of that section providing, inter alia, that where the application for registration of a firm is rejected by the Income-tax Officer on the ground that the defect in the application is not rectified within the time allowed, as provided in the existing sub-section (3), the Income-tax Officer shall do so by an order in writing. At present, there is no provision requiring the Income-tax Officer to allow an opportunity to the firm to rectify any defect in the declaration furnished by it in pursuance of section 184(7). Nor is there any requirement, at present, that a written order should be made by him rejecting the application for registration on account of its being defective, even after the grant of opportunity to the firm to rectify the defect, or declaring that the registration granted to the firm for an earlier assessment year or years shall not have effect for the relevant assessment year. The amendment removes the inconvenience and hardship caused to partnership firms by reason of the absence of any such provision. The Taxation Laws (Amendment) Act, 1970 Appeal against Income-tax Officer's orders refusing registration to a firm because of certain defect in the application or in the declaration for continuation of registration for a subsequent year 112. Under the existing law, no appeal lies against the order of the Income-tax Officer rejecting the application for registration of a partnership firm because of certain defects in the application which are not rectified by the firm even after an opportunity has been allowed to it as required by section 185(2). Similarly, there is no appeal against the Income-tax Officer's refusal to allow the registration granted to a firm for any year to have effect for the subsequent year because of certain defects in the declaration furnished by it under section 184(7). With a view to avoiding inconvenience and hardship to assessees in such cases, section 246 which specifies the orders of the Income-tax Officer against which an appeal lies to the Appellate Assistant Commissioner, has been amended by substituting a new clause ( j ) for the existing clause ( j ) of that section. Under clause ( j ) as substituted, an appeal will lie to the Appellate Assistant Commissioner against the following orders of the Income-tax Officer, namely : 1. An order under section 185(1)( b ) refusing registration to a firm where the Income-tax Officer is not satisfied as to its genuineness. 2. An order under section 185(2) rejecting the application for registration of a firm because of certain defects in that application which were not rectified within the time allowed by the Income-tax Officer. 3. An order under section 185(3) (which is a new provision as explained in the preceding paragraphs) declaring that the registration granted to a firm for an earlier assessment year or years shall not have effect for the relevant assessment year because of certain defects in the declaration furnished by the firm in pursuance of section 184(7) which were not rectified within the period allowed by the Income-tax Officer. 4. An order under section 185( 5 ) refusing to register a firm where a best judgment assessment is made under section 144. The orders specified against items ( 2 ) and ( 3 ) above have been made appealable for the first time while those mentioned at ( 1 ) and ( 4 ) above are already covered by the existing provisions of section 246( j ). The Taxation Laws (Amendment) Act, 1970 113. The amendments to sections 184, 185 and 246 as explained in the preceding paragraphs will take effect from 1-4-1971. As the amendments to sections 184 and 185 are procedural in nature, the new provisions will apply not only in relation to the assessments for the assessment year 1971-72 and subsequent years, but also to assessment for 1970-71 or any earlier year where the question of registration or continuation of registration is considered on or after 1-4-1971 and the relevant orders are passed on or after that date. The amended provisions of section 246( j ) regarding appeal will, however, apply only to orders passed under section 185(2) or section 185(3) on or after 1-4-1971 and not to orders passed before that date. [Sections 33, 34( b ) and 44 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Tax relief on dividends attributable to the agricultural income of the company paying the dividends 114. Section 235 provides for the grant of tax relief to shareholders of companies on that part of the dividend on their shares which is attributable to the paying company's agricultural income which has been subjected to agricultural income-tax under a State law. In the case of shareholders who are themselves companies, the tax relief is presently limited to 27.5 per cent of the agricultural element of the dividend. However, under the other provisions of the income-tax law, the effective incidence of tax on inter-corporate dividends ranges from 14 per cent to 26 per cent only. With a view to removing this anomaly, which enables a company to obtain tax relief on its inter-corporate dividends at a rate higher than the effective rate of tax otherwise chargeable on such dividends, section 235 has been amended so as to secure that the tax relief in such cases is limited to the Central income-tax actually payable by the receiving company on the agricultural element of the dividend. This amendment will take effect on 1-4-1971 and will, accordingly, be applicable for the assessment year 1971-72 and subsequent years. The Taxation Laws (Amendment) Act, 1970 115. The tax relief under section 235 is presently available only to the "shareholder", i.e., the person who is registered as the shareholder in the books of the company. It is not available under the existing provisions of this section, in a case where the shares in respect of which the dividend is received stand registered in the name of a person other than the beneficial owner, e.g., where shares belonging to a taxpayer are registered in the name of a bank for facility of collection of dividends. The tax relief is also not available in a case where an individual is chargeable to tax under section 64 on the dividends in respect of shares standing registered in the name of the spouse of the individual. With a view to removing the unintended denial of the tax relief under section 235 in these and similar cases, the section has been amended retrospectively from 1-4-1962, by the addition of an Explanation which makes it clear that the relief under that section will be available also in a case where any person other than the shareholder is chargeable to tax on the dividends attributable to the agricultural income of the paying company. In such a case, the tax relief will be available to the other person who is chargeable to tax in respect of the dividends, instead of the registered shareholder. As this amendment is retrospective, it will apply in relation to the assessment year 1962-63 and subsequent years. Accordingly, where tax relief under section 235 has been denied merely on the ground that the person in whose hands the dividend income is chargeable to tax is not the registered shareholder, the relevant assessments will be rectified or revised and the appropriate relief allowed to him. [Section 41 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Rate of interest chargeable on arrears of tax in the case of sale of immovable property in recovery proceedings 116. Rule 60(1) of the Second Schedule provides that a tax defaulter or any other person whose interests are affected by the sale of immovable property made in execution of a certificate for recovery of arrears of tax, can make an application to the Tax Recovery Officer for setting aside the sale. For this purpose, the defaulter or other person is required to deposit the amount of the tax in arrear for the recovery of which the sale was ordered, together with interest calculated at the rate of 6 per cent per annum from the date of proclamation of the sale to the date when the deposit is made. The rate of interest chargeable under the other provisions of the Income-tax Act for defaults in payment of taxes, delays in furnishing returns of income, etc., and also that payable by the Central Government to assessees for delays in grant of refunds, has been specified to be 9 per cent per annum since 1-10-1967. Rule 60 of the Second Schedule has, therefore, been amended so as to bring the rate of interest for the purpose of that rule in line with the rate of interest applicable for other purposes, namely 9 per cent per annum. This amendment will take effect on 1-4-1971 and, accordingly, the higher rate will be operative in cases where the proclamation of sale is made on or after 1-4-1971. [Section 56 of the Amending Act] Amendments to Wealth-tax Act The Taxation Laws (Amendment) Act, 1970 Exemption from wealth-tax of the value of annuities due on annuity deposits made under the provisions of the Income-tax Act 117. Chapter XXIIA, inserted by the Finance Act, 1964, provided for the making of annuity deposits by resident non-corporate taxpayers (other than individuals who are not citizens of India, local authorities and registered firms) for the assessment years 1964-65 to 1968-69 (inclusive), at rates specified in the Finance Acts from year to year. Under section 280D, annuity deposits made or recovered in any year are repayable by the Central Government in 10 annual equated instalments of principal and interest at such rate as may be notified by the Central Government. The proviso to that section permits the payment of the commuted value of the outstanding annuities in any case in which the concerned authority (Income-tax Officer) is satisfied that genuine hardship will be caused unless such payment is made. The Taxation Laws (Amendment) Act, 1970 118. The definition of the term "assets" in clause ( e ) of section 2 excludes from its scope, inter alia, a right to any annuity in any case where the terms and conditions relating thereto preclude the commutation of any portion thereof into a lump sum grant. Having regard to the provisions of section 280D, particularly the proviso to that section, it could not be said that the terms and conditions relating to payment of annuities in return for annuity deposits made under the Income-tax Act precluded the commutation of such annuities altogether. As it is not the intention to subject the value of outstanding annuities to wealth-tax, a specific provision has been made in a new clause ( via ) inserted in section 5(1), under which the value of outstanding annuities receivable by an assessee from the Central Government in respect of annuity deposits made under the provisions of Chapter XXIIA of the Income-tax Act will be exempt from wealth-tax altogether. As annuity deposits were first introduced during the financial year 1964-65, the amendment of the Wealth-tax Act to exempt the value of outstanding annuities has been made effective, retrospectively, for the assessment year 1965-66 and subsequent years. [Section 59 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Penalty for failure to pay tax on self-assessment 119. Section 15B requires the payment of wealth-tax on self-assessment, within 30 days of furnishing the return of wealth, in a case where the tax payable on the basis of the return exceeds Rs. 500. Sub-section (3) of section 15B provides for the levy of a penalty up to 50 per cent of the tax payable on self-assessment if such tax is not paid. The power to impose the penalty, under the existing provision, can, however, be exercised only once. Sub-section (3) of section 15B has been amended so as to make the provision for levy of penalty more flexible by enabling the Wealth-tax Officer, in a case of continuing default in payment of tax on self-assessment, to levy the penalty from time to time in stages, according to the gravity of the default. The aggregate amount of the penalty will, however, be limited, as at present, to 50 per cent of the tax which was due to be paid but has not been paid. The amendment of section 15B will come into force on 1-4-1971. In cases where default in payment of wealth-tax on self-assessment for any past year, having occurred before 1-4-1971, continues on or after that date, it will be open to the Wealth-tax Officer to levy a penalty or penalties under section 15B(3) as amended, subject to the ceiling of 50 per cent of the tax, provided the power to levy penalty has not already been exercised before 1-4-1971. [Section 60 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Procedure for levy of penalties for concealment of wealth 120. Section 18 provides for the imposition of penalties for failure to furnish the return of wealth or complying with notices for production of documents, etc., and for concealment of wealth. Sub-section (3) of that section, presently, provides that where the minimum penalty imposable for concealment of wealth as stated above, exceeds Rs. 1,000 the Wealth-tax Officer shall refer the case to the Inspecting Assistant Commissioner who shall thereafter proceed to impose the penalty. This limit of Rs. 1,000 in terms of minimum penalty imposable was prescribed at a time when the minimum penalty for concealment of wealth was specified to be 20 per cent of the wealth-tax sought to be avoided. Under the Finance Act, 1968, the scale of penalty for concealment of wealth was increased to a minimum of an amount equal to the concealed wealth and a maximum of twice that amount. The limit of Rs. 1,000 in terms of minimum penalty as stated above has, therefore, become unrealistic and has the virtual effect of requiring practically all penalty orders for concealment of wealth to be passed by the Inspecting Assistant Commissioner. With a view to placing this provision for imposition of penalty for concealment of wealth on a more rational basis and bringing about a proper division of work between the Inspecting Assistant Commissioner and the Wealth-tax Officer, sub-section (3) has been amended to provide that in cases involving concealment of wealth, the proceedings for levy of penalty will have to be referred by the Wealth-tax Officer to the Inspecting Assistant Commissioner only where the concealed wealth, as determined by the Wealth-tax Officer on assessment, exceeds Rs. 25,000. This amendment will take effect on 1-4-1971. The position stated in para 29, in relation to the similar amendment of section 274, will be applicable in relation to wealth-tax as well. [Section 61( b ) of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Procedure for waiver or reduction of penalty in cases of voluntary disclosure of wealth 121. Sub-section (2A) of section 18 provides for the reduction or waiver of the minimum penalty imposable on a person for delay in furnishing the return of net wealth or for concealment of wealth, in cases of voluntary disclosure of concealed wealth. Such reduction or waiver is to be ordered by the Commissioner if he is satisfied that the disclosure is full and complete and has been made voluntarily and in good faith; that the assessee has co-operated in any enquiry relating to the assessment in pursuance of the disclosure; and that the assessee has either paid or made satisfactory arrangements for the payment of the tax and interest determined to be payable in consequence of such assessment. In the corresponding provision in section 271(4A) relating to voluntary disclosure of concealed income, there is a requirement that the Commissioner should obtain the previous approval of the Board to the reduction or waiver of the penalty in cases where the minimum penalty imposable or the amount of concealed income exceeds specified amounts, vide para 30 of this circular. With a view to bringing the provision relating to voluntary disclosure of concealed wealth in line with the corresponding provision in the Income-tax Act, section 18(2A) has been amended by the addition of a proviso under which the Commissioner will be required to obtain the previous approval of the Board to the waiver or reduction of the penalty imposable for concealment of wealth where the amount of concealed wealth in respect of which the penalty is imposable exceeds Rs. 5 lakhs for any one of the assessment years covered by the disclosure. This amendment will take effect on 1-4-1971. The position stated in paragraph 31, in relation to the similar amendment of section 271(4A), will be applicable in relation to wealth-tax as well. [Section 61( a ) of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Time limit for completion of penalty proceedings 122. Sub-section (5) of section 18, presently, specifies a time limit of two years for the completion of penalty proceedings for concealment of wealth or for defaults in furnishing the return, accounts, etc. This two-year time limit is presently reckoned from the date of completion of the proceedings in the course of which the penalty proceedings were commenced. The operation of this time limit results in practical difficulties in cases where the Appellate Assistant Commissioner remands the appeal against the assessment for enquiry by the Wealth-tax Officer or deletes or reduces the addition made on account of concealed wealth and the Department takes the matter in appeal to the Appellate Tribunal. Sometimes, the final decision in such cases on the quantum of concealed wealth becomes available only after the expiry of the two-year limit. With a view to obviating difficulties in such cases, reducing infructuous work and avoiding hardship to taxpayers, sub-section (5) of section 18 has been substituted by a new sub-section. Under new sub-section (5), the time limit for making an order imposing a penalty under section 18 will, ordinarily, be two years from the end of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed. However, in a case where the relevant assessment or other order is the subject matter of appeal to the Appellate Assistant Commissioner or an appeal by the Wealth-tax Officer to the Appellate Tribunal, the time limit for completing the penalty proceedings will be either two years as stated above or six months from the end of the month in which the order of the Appellate Assistant Commissioner or, as the case may be, the Appellate Tribunal is received by the Commissioner of Wealth-tax, whichever is later. The existing provision in the Explanation to section 18(5) [which provides that the time taken in rehearing the assessee due to change of incumbent of the office of Wealth-tax Officer, Inspecting Assistant Commissioner or Appellate Assistant Commissioner having jurisdiction and any period during which the penalty proceedings have been stayed by an order of the court will be excluded in computing the period of limitation] is being retained. The amendment of section 18(5) will take effect on 1-4-1971. As stated in para 35, in relation to the similar amendment to section 275 of the Income-tax Act, the revised time limit for completion of penalty proceedings will apply to penalty proceedings commenced on or after 1-4-1971, as also to penalty proceedings commenced before that date provided the period of limitation specified under the existing provisions of section 18(5) has not already expired. [Section 61( c ) of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Enhancement of fees payable by assessees along with their appeals and reference applications in wealth-tax cases to the Income-tax Appellate Tribunal 123. In conformity with the amendments made to the relevant provisions of the Income-tax Act, the fee payable by assessee along with their appeals and reference applications in wealth-tax cases to the Income-tax Appellate Tribunal has been increased from Rs. 100 to Rs. 125. For this purpose, sections 24, 26 and 27 of the Wealth-tax Act have been amended with effect from 1-4-1971. [Sections 62, 63 and 64 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Rounding off of net wealth and also the wealth-tax payable or refundable 124. With a view to simplifying calculations, two new sections, 44C and 44D, have been introduced in the Wealth-tax Act with effect from 1-4-1971. New section 44C provides that the net wealth computed under the other provisions of the Wealth-tax Act will be rounded off to the nearest multiple of Rs. 100 by ignoring any amount less than Rs. 50 comprised in such net wealth and increasing amounts ranging from Rs. 50 to 99, to Rs. 100. New section 44D provides that the amount of wealth-tax interest, penalty or any other sum payable and the amount of refund due, under the other provisions of the Wealth-tax Act, will be rounded off to the nearest multiple of a rupee. These provisions will be applicable also to assessments for the assessment year 1970-71 or any earlier year which are completed on or after 1-4-1971. [Section 65 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Simplification of interest calculations 125. As under the Income-tax Act, provision has been introduced, in a new clause ( dd ) of sub-section (2) of section 46, so as to empower the Central Board of Direct Taxes to make rules laying down the procedure to be followed in calculating the interest chargeable from and payable to assessees under the Wealth-tax Act. The new clause specifically provides that such rules may include provisions for rounding off, to whole months, of the period for which the interest is to be calculated and also specify the circumstances in which and the extent to which petty amounts of interest payable by assessees may be ignored. [Section 66 of the Amending Act] Amendments to gift-tax act The Taxation Laws (Amendment) Act, 1970 Enhancement of fees payable by assessees with their appeals and reference applications to the Income-tax Appellate Tribunal in gift-tax matters 126. In conformity with the amendments made to the relevant provisions of the Income-tax Act and Wealth-tax Act, sections 23, 25 and 26 relating to appeals and reference applications to the Income-tax Appellate Tribunal in gift-tax matters, have been amended with a view to increasing the fees payable by assessees from Rs. 100 to Rs. 125. These amendments will take effect on 1-4-1971. [Sections 67, 68 and 69 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Provisions for rounding off of taxable gifts and gift-tax, etc. 127. With a view to simplifying calculations, two new sections 44A and 44B have been inserted with effect from 1-4-1971. New section 44A provides that the amount assessed under the other provisions of the Gift-tax Act as being the value of all taxable gifts will be rounded off to the nearest multiple of ten rupees, by ignoring amounts less than five rupees comprised in such value and increasing amounts ranging from five rupees to nine rupees, to ten rupees. The new section 44B provides that the amount of gift-tax, interest, penalty or any other sum payable, and the amount of refund due, under the provisions of the Gift-tax Act, will be rounded off to the nearest rupee. These provisions will be applicable also to assessments for the assessment year 1970-71 or any earlier year, which are completed on or after 1-4-1971. [Section 70 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Simplification of interest calculations 128. With a view to simplifying interest calculations, provision has been made, in a new clause ( ee ) of sub-section (2) of section 46, so as to empower the Central Board of Direct Taxes to make rules laying down the procedure to be followed in calculating the interest chargeable from and payable to assessees under the Gift-tax Act. The new clause specifically provides that such rules may include provisions for the rounding off, to whole months, of the period for which the interest is to be calculated and also specify the circumstances in which and the extent to which petty amounts of interest payable by assessees may be ignored. [Section 71 of the Amending Act] Amendments to companies (profits) surtax act The Taxation Laws (Amendment) Act, 1970 Enhancement of fees payable by assessees with their appeals to the Income-tax Appellate Tribunal in surtax matters 129. In line with the amendments made in the Income-tax Act, Wealth-tax Act and Gift-tax Act, the fees payable by assessees along with their appeals to the Appellate Tribunal in regard to surtax matters has also been increased from Rs. 100 to Rs. 125. For this purpose, section 12 of the Companies (Profits) Surtax Act has been amended with effect from 1-4-1971. [Fees at the enhanced rate of Rs. 125 will be payable by assessees also along with their reference applications to the Appellate Tribunal in surtax matters by virtue of section 18 of the Act applying, inter alia, section 256 for the purposes of surtax.] [Section 72 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Amendment of orders relating to surtax in certain circumstances 130. Under the existing provisions of section 14 of the Companies (Profits) Surtax Act, the Income-tax Officer is authorised to recompute the chargeable profits for purposes of surtax on the basis of any order of rectification or recomputation made under section 154 or section 155 of the Income-tax Act. As recomputation of the chargeable profits for purposes of surtax may also be required to be made in consequence of various other orders under the Income-tax Act, section 14 has been amended so as to enable the Income-tax Officer to recompute the chargeable profits for surtax also in cases where the corresponding income-tax assessment has been modified as a result of any order passed in a proceeding by way of appeal, reference or revision under the Income-tax Act. [Section 73 of the Amending Act] The Taxation Laws (Amendment) Act, 1970 Simplification of interest calculations 131. In line with the amendments made to the Income-tax Act, Wealth-tax Act and Gift-tax Act, provision has been made in a new clause ( dd ) of sub-section (2) of section 25 of the Companies (Profits) Surtax Act, with a view to empowering the Central Board of Direct Taxes to make rules laying down the procedure to be followed in calculating the interest chargeable from and payable to assessees under the said Act. The new clause specifically provides that such rules may include provisions for rounding off, to whole months, of the period for which the interest is to be calculated and also specify the circumstances in which and the extent to which petty amounts of interest payable by assessees may be ignored. [Section 74 of the Amending Act]