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TMI BlogThe Finance Act, 1989X X X X Extracts X X X X X X X X Extracts X X X X ..... calculated in each case in the manner provided therein. (2) In the cases to which Sub-Paragraph I or Sub-Paragraph II of Paragraph A of Part I of the First Schedule applies, where the assessee has, in the previous year, any net agricultural income exceeding six hundred rupees, in addition to total income, and the total income exceeds,-- (i) in a case to which the said Sub-Paragraph I applies, eighteen thousand rupees, and (ii) in a case to which the said Sub-Paragraph II applies, twelve thousand rupees, then,-- (a) the net agricultural income shall be taken into account, in the manner provided in clause (b) [that is to say, as if the net agricultural income were comprised in the total income after,-- (i) in a case to which the said Sub-Paragraph I applies, the first eighteen thousand rupees, and (ii) in a case to which the said Sub-Paragraph II applies, the first twelve thousand rupees, of the total income but without being liable to tax], only for the purpose of charging income-tax in respect of the total income ; and (b) the income-tax chargeable shall be calculated as follows :-- (i) the total income and the net agricultural income shall be aggregated and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,-- (a) in the cases to which the provisions of sub-item (a) of item 1 of that Part apply, by a surcharge for purposes of the Union ; and (b) in the cases to which the provisions of sub-item (a) of item 2 of that Part apply, by a surcharge, calculated in each case in the manner provided therein. (5) In cases in which tax has to be deducted under section 194C of the Income-tax Act, the deduction shall be made at the rates specified in that section and shall be increased by a surcharge for purposes of the Union calculated at the rate of eight per cent. of such deduction. (6) In cases in which tax has to be collected under section 206C of the Income-tax Act, the collection shall be made at the rate specified in that section and shall be increased by a surcharge for purposes of the Union calculated at the rate of eight per cent. of such collection. (7) Subject to the provisions of sub-section (8), in cases in which income-tax has to be calculated under the first proviso to sub-section (5) of section 132 of the Income-tax Act or charged under sub-section (4) of section 172 or sub-section (2) of section 174 or section 175 or sub-section (2) of section 176 of the said Act or d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in clause (b) [that is to say, as if the net agricultural income were comprised in the total income after, (i) in a case to which the said Sub-Paragraph I applies, the first eighteen thousand rupees, and (ii) in a case to which the said Sub-Paragraph II applies, the first twelve thousand rupees, of the total income but without being liable to tax], only for the purpose of calculating, charging or computing such income-tax or, as the case may be, " advance tax " in respect of the total income ; and (b) such income-tax or, as the case may be, " advance-tax " shall be so calculated, charged or computed as follows :-- (i) the total income and the net agricultural income shall be aggregated and the amount of income-tax or " advance tax " shall be determined in respect of the aggregate income at the rates specified in Sub-Paragraph I or, as the case may be, Sub-Paragraph II of the said Paragraph A, as if such aggregate income were the total income ; (ii) the net agricultural income shall be increased,-- (A) in a case to which the said Sub-Paragraph I applies, by a sum of eighteen thousand rupees ; and (B) in a case to which the said Sub-Paragraph II applies, by a sum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e heads " Income from house property ", " Capital gains " and " Income from other sources " or of income by way of interest on securities ; (e) " net agricultural income ", in relation to a person, means the total amount of agricultural income, from whatever source derived, of that person computed in accordance with the rules contained in Part IV of the First Schedule ; (f) " tax-free security " means any security of the Central Government issued or declared to be income-tax free, or any security of a State Government issued income-tax free, the income-tax whereon is payable by the State Government ; (g) " trading company " means a company whose business consists mainly in dealing in goods or merchandise manufactured, produced or processed by a person other than that company and whose income attributable to such business included in its gross total income (as defined in section 80B of the Income-tax Act) is not less than fifty-one per cent. of the amount of such gross total income ; (h) all other words and expressions used in this section or in the First Schedule but not defined in this sub-section and defined in the Income-tax Act shall have the meanings respectively assig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any amount standing to the credit of the Fund and not charged to income-tax during any previous year is shared, either wholly or in part, with a public financial institution, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is so shared and shall accordingly be chargeable to income-tax. Explanation.--For the purposes of this clause, the expression " public financial institution " shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956) ;' ; (d) after clause (26A), the following clause shall be inserted with effect from the 1st day of April, 1990, namely :-- '(26AA) any income of a person by way of winnings from any lottery, the draw of which is held in pursuance of any agreement entered into on or before the 28th day of February, 1989, between the State Government of Sikkim and the organising agents of such lottery, where such person is resident in the State of Sikkim in any previous year. Explanation.--For the purposes of this clause, a person shall be deemed to be resident in the State of Sikkim if he fulfils the requirements of clause (1) or clause (2) or clause (3) or clause (4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) for the words " Sixth Schedule ", the words and figures " Schedule VI " shall be substituted ; (2) the word " and " occurring at the end shall be omitted ; (iii) clause (b) shall be omitted ; (d) sub-section (4), after clause (d), the following clause shall be inserted with effect from the 1st day of April, 1991, namely :-- " (e) any new machinery or plant to be installed in an industrial undertaking, other than a small scale industrial undertaking, as defined in section 80HHA, for the purposes of business of construction, manufacture or production of any article or thing specified in the list in the Eleventh Schedule. " ; (e) in sub-section (5A),-- (i) for the words " scheme and ", the words " scheme or " shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 1987 ; (ii) the following Explanation shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1987, namely :-- " Explanation.--For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall affect the operation of the provisions of sub-section (5AA) or sub-section (6) in relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been made otherwise than in cash, the sum has been realised within fifteen days from the due date. " ; (b) after Explanation 1, the following Explanation shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1984, namely :-- 'Explanation 2.--For the purposes of clause (a), as in force at all material times, " any sum payable " means a sum for which the assessee incurred liability in the previous year even though such sum might not have been payable within that year under the relevant law.' ; (c) Explanation 2 and Explanation 3 shall be renumbered as Explanation 3 and Explanation 4 respectively. 10. Insertion of new section 44BBB.--After section 44BBA of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 1990, namely :-- '44BBB. Special provision for computing profits and gains of foreign companies engaged in the business of civil construction, etc., in certain turnkey power projects.--Notwithstanding anything to the contrary sections 28 to 44AA, in the case of an assessee, being a foreign company, engaged in the business of civil construction or the business of erection of plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertake projects for which it is otherwise professionally or technically equipped ; and (3) the company seeks to employ any technology which will result in significant improvement over the existing technology in India in any field and the investment in such technology involves high risk.'. 12. Amendment of section 54E.--In section 54E of the Income-tax Act, in sub-section (1), in Explanation 1, after clause (d), the following clause shall be inserted with effect from the 1st day of April, 1990, namely :-- " (e) in a case where the original asset is transferred after the 31st day of March, 1989, any of the assets specified in clauses (c) and (d) and such debentures or bonds issued by the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987), as the Central Government may, by notification in the Official Gazette, specify in this behalf. ". 13. Amendment of section 57.--In section 57 of the Income-tax Act, after clause (ii), the following clause shall be inserted, with effect from the 1st day of April, 1990, namely :-- '(iia) in the case of income in the nature of family pension, a deduction of a sum equal to thirty-three and on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of April, 1990,-- (a) in sub-section (1),-- (i) in clause (ii), the word " or " shall be inserted at the end ; (ii) after clause (ii), the following clause shall be inserted, namely :-- " (iii) is subject to mental retardation to the extent specified in the rules made in this behalf by the Board, and which has the effect of reducing substantially his capacity to engage in a gainful employment or occupation, " ; (iii) in the proviso,-- (1) in clause (a), the word " and " occurring at the end shall be omitted ; (2) in clause (b), the word " and " shall be inserted at the end ; (3) after clause (b), the following clause shall be inserted, namely :-- " (c) in a case referred to in clause (iii), a certificate as to the mental retardation from a psychiatrist working in a Government hospital. " ; (b) for sub-section (2), the following sub-section shall be substituted, namely :-- " (2) The Board shall, in making any rules for specifying any disability mental retardation for the purposes of clause (ii) or clause (iii), as the case may be, of sub-section (1), have regard to the nature of such disability or mental retardation and the effect which such disability or menta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent) Act, 1987 (4 of 1988)], for sub-section (1), the following sub-section shall be substituted namely :-- " (1) No order of assessment shall be made under section 143 or 144 at any time after the expiry of-- (a) two years from the end of the assessment year in which the income was first assessable ; or (b) one year from the end of the financial year in which a return or a revised return relating to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, is filed under sub-section (4) or sub-section (5) of section 139, whichever is later. ". 21. Amendment of section 192.--In section 192 of the Income-tax Act, with effect from the 1st day of June, 1989,-- (a) in sub-section (2A), for the words " public sector undertaking " the words " company, co-operative society, local authority, university, institution, association or body " shall be substituted ; (b) after sub-section (2A), the following Explanation shall be inserted, namely :-- 'Explanation.--For the purposes of this sub-section, " University " means a University established or incorporated by or under a Central, State or Provincial Act, and includes an institution declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from the 1st day of June, 1989. 25. Consequential amendments.--The following amendments (being amendments of a consequential nature) shall be made in the Income-tax Act, with effect from the 1st day of April, 1990, namely :-- (a) in section 80A, in sub-section (3), after the figures and letter " 80J ", the words, figures and letters " or section 80JJ " shall be inserted ; (b) in section 80P, in sub-section (3),-- (i) after the words, figures and letter " or section 80J ", the words, figures and letters " section 80JJ " shall be inserted ; (ii) for the words, figures and letter " and section 80J ", the words, figures and letters " section 80J and section 80JJ " shall be substituted. WEALTH-TAX 27. Amendment of section 5.--In section 5 of the Wealth-tax Act, 1957 (27 of 1957) (hereinafter referred to as the Wealth-tax Act),-- (a) in sub-section (1),-- (i) after clause (xxvb), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1988, namely :-- " (xxvc) the right or interest of the assessee in any annuity plan of the Life Insurance Corporation referred to in clause (ii) of sub-section (1) of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and letters " filed on or before or after the 1st day of June, 1988 " shall be inserted and shall be deemed to have been inserted with effect from the 1st day of June, 1988 ; (b) after the words " shall extend ", the words " and shall be deemed always to have extended " shall be inserted and shall be deemed to have been inserted with effect from the 1st day of June, 1988. GIFT-TAX 31. Amendment of section 16A.--In section 16A of the Gift-tax Act, 1958 (18 of 1958) (hereinafter referred to as the Gift-tax Act) [as amended by section 172 of the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988)], in sub-section (1),-- (a) for the words " one year ", the words " two years " shall be substituted ; (b) for the proviso, the following proviso shall be substituted, namely :-- " Provided that,-- (a) where the gifts were first assessable in the assessment year commencing on the 1st day of April, 1987, or any earlier assessment year, such assessment may be made on or before the 31st day of March, 1991 ; (b) where the gifts were first assessable in the assessment year commencing on the 1st day of April, 1988, such assessment may be made on or before the 31st day of March, 1992 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cent. of the exceeds Rs. 1,00,000 amount by which the total income exceeds Rs. 1,00,000. Surcharge on income-tax The amount of income-tax computed in accordance with the preceding provisions of this Sub-Paragraph shall, in the case of every person having a total income exceeding fifty thousand rupees, be increased by a surcharge for purposes of the Union calculated at the rate of five per cent. of such income-tax : Provided that no such surcharge shall be payable by a non-resident. Sub-Paragraph II In the case of every Hindu undivided family which at any time during the previous year has at least one member whose total income of the previous year relevant to the assessment year commencing on the 1st day of April, 1989, exceeds Rs. 18,000,--- Rates of income-tax (1) where the total income Nil; does not exceed Rs. 12,000 (2) where the total income 25 per cent. of the amount by exceeds Rs. 12,000 but does not which the total income exceeds exceed Rs. 20,000 Rs. 12,000; (3) where the total income Rs. 2,000 plus 30 per cent. of the exceeds Rs. 20,000 but does not amount by which the total exceed Rs. 40,000 income exceeds Rs. 20,000; (4) where the total income Rs. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Rs. 10,000 plus 24 per cent. of the exceeds Rs. 1,00,000 amount by which the total income exceeds Rs. 1,00,000. Surcharge on income-tax The amount of income-tax computed in accordance with the preceding provisions of this Sub-Paragraph shall, in the case of every person having a total income exceeding fifty thousand rupees, be increased by a surcharge for purposes of the Union calculated at the rate of five per cent. of such income-tax. Sub-Paragraph II In the case of every registered firm whose total income includes income derived from a profession carried on by it and the income so included is not less than fifty-one per cent. of such total income,---- Rates of income-tax (1) where the total income Nil; does not exceed Rs. 10,000 (2) where the total income 4 per cent. of the amount by exceeds Rs. 10,000 but does not which the total income exceeds exceed Rs. 25,000 Rs. 10,000; (3) where the total income Rs. 600 plus 7 per cent. of the exceeds Rs. 25,000 but does not amount by which the total exceed Rs. 50,000 income exceeds Rs. 25,000; (4) where the total income Rs. 2,350 plus 13 per cent. of the exceeds Rs. 50,000 but does not amount by which the total e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge on income-tax The amount of income-tax computed in accordance with the provisions of item I of this Paragraph shall, in the case of every person having a total income exceeding fifty thousand rupees, be increased by a surcharge calculated at the rate of five per cent. of such income-tax. PART II RATES FOR DEDUCTION OF TAX AT SOURCE IN CERTAIN CASES In every case in which under the provisions of sections 193, 194, 194A, 194B, 194BB, 194D and 195 of the Income-tax Act, tax is to be deducted at the rates in force, deduction shall be made from the income subject to deduction at the following rates : --- Rate of income-tax 1. In the case of a person other than a company---- (a) where the person is resident in India--- (i) on income by way of 10 per cent.; interest other than " Interest on securities " (ii) on income by way of 40 per cent.; winnings from lotteries and crossword puzzles (iii) on income by way of 40 per cent.; winnings from horse races (iv) on income by way of 10 per cent.; insurance commission (v) on income by way of 10 per cent.; interest payable on--- (A) any security, other than a tax-free security, of the Central or a State Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les (iii) on income by way of 40 per cent.; winnings from horse races (iv) on income by way of 25 per cent.; interest payable by Government or an Indian concern on moneys borrowed or debt incurred by Government or the Indian concern in foreign currency (v) on income by way of 30 per cent.; royalty payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern after the 31st day of March, 1976, where such royalty is in consideration for the transfer of all or any rights (including the granting of a licence) in respect of copyright in any book on a subject referred to in the proviso to sub-section (1A) of section 115A of the Income-tax Act, to the Indian concern (vi) on income by way of royalty [not being royalty of the nature referred to in sub-item (b)(v)] payable by Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern and which has been approved by the Central Government,---- (A) where the agreement 50 per cent.; is made after the 31st day of March, 1961, but before the 1st day of April, 1976 (B) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aph A Sub-Paragraph I In the case of every individual or Hindu undivided family or unregistered firm or other association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act, not being a case to which Sub-Paragraph II of this Paragraph or any other Paragraph of this Part applies, ---- Rates of income-tax (1) Where the total income Nil; does not exceed Rs. 18,000 (2) Where the total income 20 per cent. of the amount by exceeds Rs. 18,000 but does not which the total income exceeds exceed Rs. 25,000 Rs. 18,000; (3) Where the total income Rs. 1,400 plus 30 per cent. of the exceeds Rs. 25,000 but does not amount by which the total income exceed Rs. 50,000 exceeds Rs. 25,000; (4) Where the total income Rs. 8,900 plus 40 per cent. of the exceeds Rs. 50,000 but does not amount by which the total income exceed Rs. 1,00,000 exceeds Rs. 50,000; (5) Where the total income Rs. 28,900 plus 50 per cent. of the exceeds Rs. 1,00,000 amount by which the total income exceeds Rs. 1,00,000. Surcharge on income-tax The amount of income-tax computed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax The amount of income-tax computed in accordance with the preceding provisions of this Paragraph shall, in the case of every person having a total income exceeding fifty thousand rupees, be increased by a surcharge for purposes of the Union calculated at the rate of eight per cent. of such income-tax. Paragraph C Sub-Paragraph I In the case of every registered firm, not being a case to which Sub-Paragraph II of this Paragraph applies,---- Rates of income-tax (1) Where the total income Nil; does not exceed Rs. 10,000 (2) Where the total income 5 per cent. of the amount by exceeds Rs. 10,000 but does not which the total income exceeds exceed Rs. 25,000 Rs. 10,000; (3) Where the total income Rs. 750 plus 7 per cent. of the exceeds Rs. 25,000 but does not amount by which the total income exceed Rs. 50,000 exceeds Rs. 25,000; (4) Where the total income Rs. 2,500 plus 15 per cent. of the exceeds Rs. 50,000 but does not amount by which the total income exceed Rs. 1,00,000 exceeds Rs. 50,000; (5) Where the total income Rs. 10,000 plus 24 per cent. of the exceeds Rs. 1,00,000 amount by which the total income exceeds Rs. 1,00,000. Surcharge on income-tax The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tantially interested (2) Where the company is not a company in which the public are substantially interested--- (i) in the case of a trading 60 per cent. of the total income; company or an investment company (ii) in any other case 55 per cent. of the total income. II. In the case of a company other than a domestic company,---- (i) on so much of the total income as consists of--- (a) royalties received from Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern after the 31st day of March, 1961, but before the 1st day of April, 1976, or (b) fees for rendering technical services received from Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern after the 29th day of February, 1964, but before the 1st day of April, 1976, and where such agreement has, 50 per cent.; in either case, been approved by the Central Government. (ii) on the balance, if any, of the 65 per cent. total income Surcharge on income-tax The amount of income-tax computed in accordance with the provisions of item I of this Paragraph shall, in the case of ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Rule 5.---Where the assessee is a partner of a registered firm or an unregistered firm assessed as a registered firm under clause (b) of section 183 of the Income-tax Act, which in the previous year has any agricultural income, or is a partner of an unregistered firm which has not been assessed as a registered firm under clause (b) of the said section 183 and which in the previous year has either no income chargeable to tax under the Income-tax Act or has total income not exceeding the maximum amount not chargeable to tax in the case of an unregistered firm but has any agricultural income, then, the agricultural income or loss of the firm shall be computed in accordance with these rules and his share in the agricultural income or loss of the firm shall be computed in the manner laid down in sub-section (1), sub-section (2) and sub-section (3) of section 67 of the Income-tax Act and the share so computed shall be regarded as the agricultural income or loss of the assessee. Rule 6.---Where the assessee is a member of an association of persons or a body of individuals (other than a Hindu undivided family, a company or a firm) which in the previous year has either no income char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay of April, 1982, or the 1st day of April, 1983, or the 1st day of April, 1984, or the 1st day of April, 1985, or the 1st day of April, 1986, or the 1st day of April, 1987, or the 1st day of April, 1988, (ii) the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 1982, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 1983, or the 1st day of April, 1984, or the 1st day of April, 1985, or the 1st day of April, 1986, or the 1st day of April, 1987, or the 1st day of April, 1988, (iii) the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 1983, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 1984, or the 1st day of April, 1985, or the 1st day of April, 1986, or the 1st day of April, 1987, or the 1st day of April, 1988, (iv) the loss so computed for the previous year relevant to the assessment year commencing on the 1st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 2 of this Act,--- (i) the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 1982, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 1983, or the 1st day of April, 1984, or the 1st day of April, 1985, or the 1st day of April, 1986, or the 1st day of April, 1987, or the 1st day of April, 1988, or the 1st day of April, 1989, (ii) the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 1983, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 1984, or the 1st day of April, 1985, or the 1st day of April, 1986, or the 1st day of April, 1987, or the 1st day of April, 1988, or the 1st day of April, 1989, (iii) the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 1984, to the extent, if any, such loss has not been set off against the agricultural income for the previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputed in the manner aforesaid) which is not apportionable to him. (4) Where any person deriving any agricultural income from any source has been succeeded in such capacity by another person, otherwise than by inheritance, nothing in sub-rule (1) or sub-rule (2) shall entitle any person, other than the person incurring the loss, to have it set off under sub-rule (1) or, as the case may be, sub-rule (2). (5) Notwithstanding anything contained in this rule, no loss which has not been determined by the Assessing Officer under the provisions of these rules or the rules contained in Part IV of the First Schedule to the Finance Act, 1981 (16 of 1981), or of the First Schedule to the Finance Act, 1982 (14 of 1982), or of the First Schedule to the Finance Act, 1983 (11 of 1983), or of the First Schedule to the Finance Act, 1984 (21 of 1984), or of the First Schedule to the Finance Act, 1985 (32 of 1985), or of the First Schedule to the Finance Act, 1986 (23 of 1986), or of the First Schedule to the Finance Act, 1987 (11 of 1987), or of the First Schedule to the Finance Act, 1988 (26 of 1988), shall be set off under sub-rule (1) or, as the case may be, sub-rule (2). Rule 10.---Where ..... X X X X Extracts X X X X X X X X Extracts X X X X
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