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TMI BlogAmendments at a glance, Amendments to Income-tax Act , Amendments to Wealth-tax Act , Amendments to Gift-tax Act , Amendments to Companies (Profits) Surtax ActX X X X Extracts X X X X X X X X Extracts X X X X ..... 1)(i) of the G.T. Act as it stood prior to 1-4-1963 37 Income-tax act 10(6)(viia), Prov. Tax exemption of remuneration of foreign technicians 5 10(15)(iv)(d), (e) Tax exemption of interest payable by financial institutions, etc., on loans raised in foreign countries 6 10(17A) Tax exemption of certain awards for literary, scientific and artistic work or attainment or for proficiency in sports and games 7 10(17B) Tax exemption of certain rewards 8 32(1)(vi), Initial depreciation allowance in respect of machinery 34(2)(ii) or plant installed in selected industries 9-17 35(1)(i), (2A), Tax concessions for promoting research and development 18-20 Expln. 35B(1)(a), Prov. Tax concessions for promoting exports 21-22 80HH Tax concessions for industrial undertakings and hotels set up in specified backward areas 23-31 271(1)(i) Penalty for delay or default in furnishing return of income 32-33 295(4) Power of the Board to give retrospective effect to subordinate legislation beneficial to taxpayers 34 Wea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , accordingly, applicable in relation to the assessment year 1973-74 and subsequent years. [Section 2( a ) of the Amending Act] Direct Taxes (Amendment) Act, 1974 Exemption from income-tax of interest payable by financial institutions and banking companies on loans raised in foreign countries in certain cases 6. Under section 10( 15 )( iv ), interest payable on foreign loans, especially those raised by industrial undertakings, enjoy exemption from income-tax over a large area. The Amending Act has enlarged the area of this tax concession with a view to exempting from income-tax interest payable to foreign parties in the following circumstances : 1. Where interest is payable by the Industrial Finance Corporation of India, the Industrial Development Bank of India and Industrial Credit and Investment Corporation of India, on loans, raised by them in foreign countries, such interest will be exempt to the extent of the rate approved by the Central Government. 2. Where interest is payable on loans raised in any foreign country by any other financial institution or by a banking company to which the Banking Regulation Act, 1949 applies (including any bank or bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessment year 1973-74 and subsequent years. [Section 10( c ) (Part) of the Amending Act] Direct Taxes (Amendment) Act, 1974 Exemption from income-tax of certain rewards 8. The Amending Act has inserted a new clause ( 17B ) in section 10 providing for exemption from income-tax of rewards given by the Central Government or a State Government for such purposes as may be approved by the Central Government in the public interest. This amendment has come into force with effect from 1-4-1973 and is, accordingly, applicable in relation to the assessment year 1973-74 and subsequent years. [Section 10( c ) (Part) of the Amending Act] Tax concessions for encouraging industries in selected sectors/backward areas as also for promotion of research and development and export Direct Taxes (Amendment) Act, 1974 Initial depreciation allowance in respect of machinery or plant installed in selected industries 9. In May 1971, the Central Government had issued a notification providing for the withdrawal of development rebate in respect of ships acquired or machinery or plant installed after 31-5-1974. In view of the need for continued encouragem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yed, printed or otherwise processed) made wholly or mainly of jute, including jute twine and rope. 23. Cement and refractories. 4. New machinery or plant (other than office appliances or road transport vehicles) installed in a small-scale industrial undertaking for the purposes of business of manufacture or production of any other article or thing. In other words, new machinery or plant installed in small-scale industrial undertakings will qualify for initial depreciation allowance irrespective of whether or not the new machinery or plant is used for the manufacture or production of articles or things specified in the new Ninth Schedule. An industrial undertaking will be regarded as a small-scale industrial undertaking, if the aggregate value of machinery and plant installed therein, as on the last day of the relevant previous year, does not exceed Rs. 7.5 lakhs. For this purpose, the value of the machinery or plant owned by the taxpayer shall be the actual cost thereof to the taxpayer and the value of machinery or plant hired by the taxpayer shall be the actual cost to the owner thereof. Direct Taxes (Amendment) Act, 1974 10. Initial depreciation allowance in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y residential accommodation will not qualify for initial depreciation allowance. Direct Taxes (Amendment) Act, 1974 13. Initial depreciation allowance will ordinarily be allowed in the year in which the ship or aircraft is acquired or the machinery or plant is installed. Where, however, the ship, aircraft, machinery or plant is first put to use in the year immediately following the year in which it is acquired or installed, the initial depreciation allowance will be admissible for such immediately following year. Direct Taxes (Amendment) Act, 1974 14. Under the Income-tax Act, unabsorbed depreciation allowance can be carried forward indefinitely while unabsorbed development rebate can be carried forward only for a period of eight years. Further, where a taxpayer is entitled to set off of both depreciation and development rebate, the current depreciation as also unabsorbed depreciation of earlier years is deducted first and the unabsorbed development rebate carried forward from earlier years can be set off only against the balance of the income remaining after such deduction. In view of this position, enterprises having large unabsorbed development rebate may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract for the purchase of such machinery or plant with the manufacturer or owner of, or a dealer in, such machinery or plant before that date, or ( iii ) had, where such machinery or plant has been manufactured in an undertaking owned by him, taken steps for the manufacture of such machinery or plant before that date; ( c ) in the case of machinery or plant, being a coal-fired boiler, furnace, kiln, oven or the like, or any machinery or plant for converting any boiler, furnace, kiln, oven or the like from oil firing to coal firing installed by the taxpayer after 31-5-1974 but before 1-6-1977. Since it is not the intention to allow initial depreciation allowance in respect of ships, aircraft, machinery or plant, which qualify for development rebate, the Amending Act has specifically provided that initial depreciation will not be allowed in respect of ships, aircraft, machinery and plant in respect of which development rebate is admissible, even though such ships or aircraft may be acquired or such machinery or plant installed after 31-5-1974. Direct Taxes (Amendment) Act, 1974 16. The Amending Act has also made a consequential change in section 34 in order to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition to any salary or wages; any advance of salary and annual accretion to the balance at the credit of the employee participating in a recognized provident fund, to the extent to which it is chargeable to tax under rule 6 of Part A of the Fourth Schedule. To put it a little differently, it will have the same meaning as in section 17, subject to the modification that perquisites as defined in Explanation 2 ( b ) below sub-section (5) of section 40A, as also sums comprised in transferred balances referred to in sub-rule (2) of rule 11 of Part A of the Fourth Schedule will not be included in "salary". It may be mentioned that expenditure incurred on the provision of "perquisites" as defined in Explanation 2 ( b ) below sub-section (5) of section 40A during the pre-investment period will not be allowed as a deduction in computing the employer's income. In other words, the expenditure incurred by the employer during the pre-investment period on providing ( i ) residential accommodation to research personnel, free of cost or on concessional basis; ( ii ) any benefit or amenity granted free of cost or at concessional rate; ( iii ) any payment by the employer of any sum in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mendments have come into force with effect from 1-4-1974 and will, accordingly, apply in relation to the assessment year 1974-75 and subsequent assessment years. [Sections 5 and 7 of the Amending Act] Direct Taxes (Amendment) Act, 1974 Tax concessions for promoting exports 21. Under section 35B, domestic companies and non-corporate taxpayers resident in India are entitled to a weighted deduction equal to one and one-third times the amount of expenditure incurred by them on development of export markets. The weighted deduction is allowed only in respect of expenditure under specific heads, e.g., advertisement and publicity outside India; collection of information regarding markets outside India; distribution, supply or provision of goods, services or facilities outside India; maintenance of foreign branches and agencies; preparation and submission of tenders, etc. In order to encourage development of export markets, the Amending Act has made a provision in section 35B(1)( a ) so as to increase the amount of deduction to one and one-half times the amount of actual expenditure incurred after 28-2-1973 by companies in which the public are substantially interested. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing conditions, namely : 1. The industrial undertaking should not have been formed by the splitting up or reconstruction of a business already in existence in any backward area specified in the Eighth Schedule. It may be noted that the new concession will be available in the case of industrial undertakings which are formed by splitting up or reconstruction of a business already in existence in a non-backward area and, accordingly, industrial undertakings shifting from non-backward areas to backward areas will qualify for the tax concession. Where an industrial undertaking is formed as a result of re-establishment, reconstruction or revival by the taxpayer of the business of any such industrial undertaking as is referred to in section 33B in the circumstances and within the period specified in that section, the same will qualify for the new tax concession, even though the earlier business was situated in any specified backward area. 2. The industrial undertaking should not have been formed by the transfer to a new business of machinery or plant previously used for any purpose in any backward area specified in the Eighth Schedule. In a case where any machinery or plant or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empowered to determine the reasonable profits that could be attributed to the qualifying undertaking or the business of a hotel in the backward area in cases where, owing to close connection between the taxpayer and any other person or for any other reason, the course of the business is so arranged that the industrial undertaking set up in the backward areas derives more than the ordinary profits which might be expected to arise in that business. Likewise, where a taxpayer has several units, some in the backward areas and some outside, the profits of the units in the backward areas will be computed after taking the cost of the goods transferred to or from the units on the basis of the fair market value of such goods. Direct Taxes (Amendment) Act, 1974 28. Industries in backward areas already enjoy certain concessions inasmuch as Central subsidy is allowed to small and medium industries and financial institutions provide concessional finance to industries set up in these areas. The backward areas for the purposes of the new tax concession are the same as qualify for the grant of concessional finance by financial institutions, subject to the modification that the areas no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Department) as amended by Notification No. RPB-1173-I-RPC, dated 16-8-1973, issued by that Government; the districts of Nanded, Osmanabad, Parbhani, Ratnagiri and Yeotmal Manipur The whole of the State. Meghalaya The districts of Garo Hills, Jaintia Hills and Khasi Hills Nagaland The whole of the State. Orissa The ditricts of Balasore, Bolangir, Dhenkanal, Kalahandi, Keonjhar, Koraput, Mayurbhanj and Phulbani Punjab The district of Bhatinda; so much of the district of Faridkot as formed part of the district of Bhatinda on 31-7-1972; the districts of Gurdaspur, Hoshiarpur and Sangrur Rajasthan The districts of Alwar, Banswara, Barmer, Bhilwara, Churu, Dungarpur, Jaisalmer, Jalore, Jhalawar, Jhunjhunu, Jodhpur, Nagaur, Sikar, Sirohi, Tonk and Udaipur Tamil Nadu The districts of Dharmapuri, Kanyakumari, Madurai, North Arcot, Ramanathapuram, South Arcot, Thanjavur and Tiruchirapalli. Tripura The whole of the State Uttar Pradesh The districts of Almora, Azamgarh, Baharaich, Ballia, Banda, Barabanki, Basti, Budaun, Bulandshahr, Chamoli, Deoria, Etah, Etawah, Faizabad, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 80HH will be allowed first and the provision of section 80J shall apply to the balance of the income after allowing such deduction. 3. Consequential changes have also been made in sections 80J, 80P and 80QQ in order to provide that the deduction under each of the aforesaid sections will be allowed with reference to the income of the industrial undertaking after allowing, inter alia, the deduction under section 80HH. Direct Taxes (Amendment) Act, 1974 31. The aforesaid amendments have come into force with effect from 1-4-1974 and are, accordingly, applicable in relation to the assessment year 1974-75 and subsequent years. [Sections 8, 9, 10, 11 and 12 of the Amending Act] Other Amendments Direct Taxes (Amendment) Act, 1974 Amendment of provision relating to penalty for delay or default in furnishing return of income 32. The Amending Act has modified the provision in section 271(1)( i ) with a view to countering the ruling of the Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192. In the above-mentioned case, the Supreme Court held that the quantum of penalty for delay or default in furnishing the return of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erests of taxpayers are not prejudicially affected due to such retrospective framing of the rules. [Section 14 of the Amending Act] Amendments to Wealth-tax Act Direct Taxes (Amendment) Act, 1974 Power of the Board to give retrospective effect to subordinate legislation beneficial to taxpayers 35. The Amending Act has amended section 46 (relating to the Board's power to make rules for carrying out the purposes of the Wealth-tax Act) with a view to expressly conferring powers on the Board to give retrospective effect to rules which do not prejudicially affect the interest of taxpayers. This amendment is on the lines of the amendment to section 295 of the Income-tax Act under section 14 of the Amending Act. [Section 17 of the Amending Act] Direct Taxes (Amendment) Act, 1974 Independent provision modifying the effect of section 18(1)(i) as it stood during certain period 36. Under section 18(1)( i ), penalty for delay or default in furnishing returns of net wealth is currently calculated with reference to the quantum of net wealth and not wealth-tax payable by the taxpayer. The Supreme Court's ruling in the case of CIT v. Vegetable Product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Taxes (Amendment) Act, 1974 Powers of the Board to give retrospective effect to subordinate legislation beneficial to taxpayers 38. The Amending Act has amended section 46 (relating to the Board's power to make rules for carrying out the purposes of the Gift-tax Act) with a view to expressly conferring powers on the Board to give retrospective effect to rules which do not prejudicially affect the interest of taxpayers. This amendment is on the lines of the amendment to section 295 of the Income-tax Act under section 14 of the Amending Act. [Section 19 of the Amending Act] Amendments to Companies (Profits) Surtax ACt Direct Taxes (Amendment) Act, 1974 Amendment of section 9 39. The ruling of the Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 will, mutatis mutandis, apply in relation to surtax. The Amending Act has accordingly made an amendment to section 9 in order to secure that the quantum of penalty exigible for delay or default in furnishing returns of chargeable profits will be calculated with reference to the surtax chargeable under the provisions of the Surtax Act without allowing any deduction whatever f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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