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TMI BlogProvisions at a glance , Provisions explainedX X X X Extracts X X X X X X X X Extracts X X X X ..... 22 Income-tax papers to be available for the purposes of the Act 15 23 to 26 Prosecutions and punishment for offences 16 27, 29 Power to make rules and remove difficulties 17 28 Power to exempt 18 30 Consequential amendments in other enactments 19 Circular No. 159, dated 31-12-1974 Explanatory Notes Interest-tax Act, 1974 Introduction 1. The Interest-tax Bill, 1974, as passed by Parliament, received the assent of the President on 23-9-1974 and has been enacted as the Interest-tax Act, 1974 (45 of 1974). Section 27 of the Interest-tax Act, 1974 empowers the Board to make, subject to the control of the Central Government, rules for carrying out the purposes of the Act. The Board has, in exercise of this power, made the Interest-tax Rules, 1974 which have been published in the Official Gazette on 30-12-1974. This circular explains the main provisions contained in the Act and the Rules. Interest-tax Act, 1974 2. The Interest-tax Act imposes a special tax on the gross amount of interest received by scheduled banks on loans and advances made in India. The banks are expected to adjust their fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in respect of bad debts will be allowed only if the following conditions are satisfied, namely : ( a ) the interest has been taken into account in computing the chargeable interest of the assessee of any earlier previous year; and ( b ) the amount is written off as irrecoverable in the accounts of the assessee for the relevant previous year. It will be manifest that no deduction on account of bad debts will be allowable in respect of interest accruing or arising to the bank in any previous year preceding the previous year relevant to the assessment year 1975-76, as such interest has not been taken into account in computing the chargeable interest under the Interest-tax Act. It should be noted that no deduction other than the deduction on account of bad debts is allowable in computing the chargeable interest. The term "interest" will include ( a ) commitment charges on the unutilised portion of any credit sanctioned for being availed of in India, and ( b ) discounts on promissory notes and bills of exchange drawn or made in India. Discounts on treasury bills are, however, exempted from the levy. It may be noted that interest on loans and advances made outside Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments or evidence should be produced. It will be open to the Income-tax Officer to serve further notices from time to time requiring the production of accounts, documents, etc. After considering the evidence produced by the assessee and the relevant material that the Income-tax Officer may have gathered, the Income-tax Officer will pass an order in writing, determining the chargeable interest and the amount of interest-tax payable by the assessee. [Section 8 of the Act] Interest-tax Act, 1974 Self-assessment 7. Section 9 provides for the payment of interest-tax by the assessee on the basis of his own assessment. Where the assessee has furnished a return of chargeable interest and the interest-tax payable on the basis of the return exceeds any interest-tax already paid for the relevant assessment year, he will be required to pay the excess within 30 days of furnishing the return. It should be noted that, unlike the corresponding provision in section 140A of the Income-tax Act, interest-tax will be payable on the basis of self-assessment even in cases where the tax so payable does not exceed Rs. 500. In case of default in payment of interest-tax or any part thereof o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the relevant date. In this connection, it may be mentioned that the scheduled commercial banks close their accounts half-yearly on 30th June and 31st December every year. In the case of such banks, only one instalment will fall due on 15-3-1975, during the current financial year and this will cover interest accruing or arising to such banks during the period of five months from August 1974 to December 1974. In the case of scheduled co-operative banks, the accounts are closed on 30th June every year. Since interest accruing before 1-8-1974 is excluded from the tax base, no tax will be payable by co-operative banks for the assessment year 1975-76. The advance payment for the assessment year 1976-77 will be made by such banks in two instalments falling due on 15-9-1975 and 15-3-1976. In case of default in payment of any instalment of interest-tax payable in advance, the assessee shall be deemed to be an assessee in default in respect of such instalment and the arrears would be recoverable in accordance with the procedure laid down under the Income-tax Act for the recovery of income-tax. [Section 11 of the Act] Interest-tax Act, 1974 Penalties for failure to furnish ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the financial year immediately preceding the assessment year falls short of 85 per cent of the interest-tax chargeable under the provisions of the Interest-tax Act and the maximum penalty will be equal to one and a half time of such shortfall. In case of default in furnishing the estimate of interest-tax, the minimum penalty will be equal to 10 per cent of 85 per cent of the interest-tax chargeable under the provisions of the Interest-tax Act and the maximum penalty will be equal to one and a half time of 85 per cent of the interest-tax so chargeable. Before imposing the penalty under section 13, the Income-tax Officer will have to hear the assessee or give him a reasonable opportunity of being heard. [Sections 13 and 14 (Part) of the Act] Interest-tax Act, 1974 Appeals, revisions, rectifications and reference applications 12. The provisions relating to appeals, rectifications, revisions and reference applications in respect of interest-tax are broadly similar to the corresponding provisions in the Companies (Profits) Surtax Act, 1964. The Interest-tax Rules, 1974 have prescribed the following separate forms for presentation of appeals, etc. : ( a ) Form No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with a further fine which may extend to Rs. 10 for every day during which the default continues. Any person who makes a false statement in the return of chargeable interest, will be punishable with simple imprisonment which may extend to six months or with fine which may extend to Rs. 1,000 or with both. The abetment of this offence will also attract similar punishment. The prosecution for any offence under the Act or for any offence under the Indian Penal Code relating to any matter connected with or arising out of the Act will lie only at the instance of the Commissioner who will also have the power to compound any offence punishable under the Act. The provisions for prosecution and punishment for offences are on the lines of the corresponding provisions in the Companies (Profits) Surtax Act, 1964. [Sections 23, 24, 25 and 26 of the Act] Interest-tax Act, 1974 Power to make rules and remove difficulties 17. The Central Government have been empowered to make an order for removal of any difficulty that may arise in the operation of the Act provided the order is not inconsistent with the provisions thereof. This power will be exercisable during the period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 35. Hindusthan Mercantile Bank Ltd. 36. Jammu Kashmir Bank Ltd. 37. Karanataka Bank Ltd. 38. Karur Vysya Bank Ltd. 39. Krishnaram Baldeo Bank Ltd. 40. Kumbakoam City Union Bank Ltd. 41. Lakshmi Commercial Bank Ltd. 42. Lakshmi Vilas Bank Ltd. 43. Lord Krishna Bank Ltd. 44. Miraj State Bank Ltd. 45. Narang Bank of India Ltd. 46. Nedungadi Bank Ltd. 47. New Bank of India Ltd. 48. Oriental Bank of Commerce Ltd. 49. Punjab Sind Bank Ltd. 50.Punjab Co-operative Bank Ltd. 51. Purbanchal Bank Ltd. 52. Ratnakar Bank Ltd. 53. Sangli Bank Ltd. 54. South India Bank Ltd. 55. South Indian Bank Ltd. 56. Tamil Nadu Merchantile Bank Ltd. 57. Tanjore Permanent Bank Ltd. 58. Traders' Bank Ltd. 59. United Industrial Bank Ltd. 60. United Western Bank Ltd. 61. Vijya Bank Ltd. 62. Vysya Bank Ltd. Foreign Banks (13) 63. Algomene Bank Dederland N.V. 64. American Corporation 65. Bank of America National Trust Saving Association 66. Bank of Tokyo Ltd. 67. Banque National de Paris 68. British Bank of the Middle East 69. Charted Bank 70. First National City Bank 71. Habib Bank Ltd. 72. Merchantile Bank Ltd. 73. Mitsui ..... X X X X Extracts X X X X X X X X Extracts X X X X
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