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Whoever voluntarily has carnal intercourse against the order of nature with any man, woman or animal, shall be punished with imprisonment for life, or with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine.
Explanations
Whoever cheats and thereby dishonestly induces the person deceived to deliver any property to any person, or to make, alter or destroy the whole or any part of a valuable security, or anything which is signed or sealed, and which is capable of being converted into a valuable security, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine.
Whoever commits the offence of criminal intimidation shall be punished with imprisonment of either description for a term which may extend to two years, or with fine, or with both;
If threat be to cause death or grievous hurt, etc. – and if the threat be to cause death or grievous hurt, or to cause the destruction of any property by fire, or to cause an offence punishable with death or imprisonment for life, of with imprisonment for a term which may extend to seven years, or to impute unchastity to a woman, shall be punished with imprisonment of either description for a term which may extend to seven years, or with fine, or with both.
Whoever assaults or uses criminal force to any woman, intending to outrage or knowing it to be likely that he will there by outrage her modesty, shall be punished with imprisonment of either description for a term which shall not be less than one year but which may extend to five years, and shall also be liable to fine.
Whoever commits murder shall be punished with death, or imprisonment for life, and shall also be liable to fine.
(2) It extends to the whole of India.
(3) Save as otherwise provided in this Act, it shall come into force on the 1st day of April, 1962Bottom of FormTop of Form
[(1) “advance tax” means the advance tax payable in accordance with the provisions of Chapter XVII-C;]
[ (1A)] “agricultural income”7 means8—
9[(a) any rent10 or revenue10 derived10 from land10 which is situated in India and is used for agricultural purposes;]
(b) any income derived from such land10 by—
(i) agriculture10; or
(ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market10; or
(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii) of this sub-clause ;
(c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on :
9[Provided that—
(i) 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, and
(ii) the land 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 or where the land is not so assessed to land revenue or subject to a local rate, it is not situated—
(A) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board and which has a population of not less than ten thousand 11[***]; or
11a[(B) in any area within the distance, measured aerially,—
(I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten thousand but not exceeding one lakh; or
(II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than one lakh but not exceeding ten lakh; or
(III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (A) and which has a population of more than ten lakh.12
13[14[Explanation 1.]—For the removal of doubts, it is hereby declared that revenue derived from land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of this section.]
15[Explanation 2.—For the removal of doubts, it is hereby declared that income derived from any building or land referred to in sub-clause (c) arising from the use of such building or land for any purpose (including letting for residential purpose or for the purpose of any business or profession) other than agriculture falling under sub-clause (a) or sub-clause (b) shall not be agricultural income.]
16[Explanation 3.—For the purposes of this clause, any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income;]
17[Explanation 4.—For the purposes of clause (ii) of the proviso to sub-clause (c), “population” means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year;]
18[19[(1B)] “amalgamation”, in relation to companies, means the merger of one or more companies with another company or the merger of two or more companies to form one company (the company or companies which so merge being referred to as the amalgamating company or companies and the company with which they merge or which is formed as a result of the merger, as the amalgamated company) in such a manner that—
(i) all the property of the amalgamating company or companies immediately before the amalgamation becomes the property of the amalgamated company by virtue of the amalgamation ;
(ii) all the liabilities of the amalgamating company or companies immediately before the amalgamation become the liabilities of the amalgamated company by virtue of the amalgamation ;
(iii) shareholders holding not less than 20[three-fourths] in value of the shares in the amalgamating company or companies (other than shares already held therein immediately before the amalga-mation by, or by a nominee for, the amalgamated company or its subsidiary) become shareholders of the amalgamated company by virtue of the amalgamation,
otherwise than as a result of the acquisition of the property of one company by another company pursuant to the purchase of such property by the other company or as a result of the distribution of such property to the other company after the winding up of the first-mentioned company ;]
21[(1C) “Additional Commissioner” means a person appointed to be an Additional Commissioner of Income-tax under sub-section (1) of section 117 ;
(1D) “Additional Director” means a person appointed to be an Additional Director of Income-tax under sub-section (1) of section 117 ;]
(2) “annual value”, in relation to any property, means its annual value as determined under section 23 ;
(3) 22[* * *]
(4) “Appellate Tribunal” means the Appellate Tribunal constituted under section 252 ;
(5) “approved gratuity fund” means a gratuity fund which has been and continues to be approved by the 23[23a[Principal Chief Commissioner or] Chief Commissioner or 23a[Principal Commissioner or] Commissioner] in accordance with the rules contained in Part C of the Fourth Schedule ;
(6) “approved superannuation fund” means a superannuation fund or any part of a superannuation fund which has been and continues to be approved by the 23[23a[Principal Chief Commissioner or] Chief Commissioner or 23a[Principal Commissioner or] Commissioner] in accordance with the rules contained in Part B of the Fourth Schedule ;
24(7) “assessee”25 means a person by whom 26[any tax] or any other sum of money is payable under this Act, and includes—
(a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income 27[or assessment of fringe benefits] or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person ;
(b) every person who is deemed to be an assessee under any provision of this Act ;
(c) every person who is deemed to be an assessee in default under any provision of this Act ;
28[(7A) “Assessing Officer” means the Assistant Commissioner 29[or Deputy Commissioner] 30[or Assistant Director] 29[or Deputy Director] or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act, and the 31[Additional Commissioner or] 32[Additional Director or] 33[Joint Commissioner or Joint Director] who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act ;]
(8) “assessment”34 includes reassessment ;
(9) “assessment year” means the period of twelve months commencing on the 1st day of April every year ;
35[(9A) “Assistant Commissioner” means a person appointed to be an Assistant Commissioner of Income-tax 36[or a Deputy Commissioner of Income-tax] under sub-section (1) of section 117 ;]
37[(9B) “Assistant Director” means a person appointed to be an Assistant Director of Income-tax under sub-section (1) of section 117;]
(10) “average rate of income-tax” means the rate arrived at by dividing the amount of income-tax calculated on the total income, by such total income ;
38[(11) “block of assets” means a group of assets falling within a class of assets comprising—
(a) tangible assets, being buildings, machinery, plant or furniture;
(b) intangible assets, being know-how, patents, copyrights, trade-marks, licences, franchises or any other business or commercial rights of similar nature,
in respect of which the same percentage of depreciation is prescribed ;]
(12) “Board” means the 39[Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of 1963)] ;
40[(12A) “books or books of account” includes ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as print-outs of data stored in a floppy, disc, tape or any other form of electro-magnetic data storage device;]
41(13) “business”42 includes any trade42, commerce or manufacture or any adventure42 or concern in the nature of trade42, commerce or manufacture ;
42a[(13A) “business trust” means a trust registered as an Infrastructure Investment Trust or a Real Estate Investment Trust, the units of which are required to be listed on a recognised stock exchange, in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) and notified by the Central Government in this behalf;]
43(14) 43a[“capital asset” means property44 of any kind held by an assessee, whether or not connected with his business or profession, but does not include—
(i) any stock-in-trade], consumable stores or raw materials held for the purposes of his business or profession ;
45[(ii) personal effects46, that is to say, movable property (including wearing apparel and furniture) held for personal use46 by the assessee or any member of his family dependent on him, but excludes—
(a) jewellery;
(b) archaeological collections;
(c) drawings;
(d) paintings;
(e) sculptures; or
(f) any work of art.
46a[Explanation.]—For the purposes of this sub-clause, “jewellery” includes—
(a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel;
(b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel;]
The following Explanation 2 shall be inserted after the renumbered Explanation 1 by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
Explanation 2.—For the purposes of this clause—
(a) the expression “Foreign Institutional Investor” shall have the meaning assigned to it in clause (a) of the Explanation to section 115AD;
(b) the expression “securities” shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956)46b;
47[(iii) agricultural land48 in India, not being land situate—
(a) in any area which is comprised within the jurisdiction of a municipality48 (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population48a of not less than ten thousand 49[***] ; or
50[(b) in any area within the distance, measured aerially,—
(I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or
(II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or
(III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh.
52[(iv) 6 per cent Gold Bonds, 1977,53[or 7 per cent Gold Bonds, 1980,] 54[or National Defence Gold Bonds, 1980,] issued by the Central Government ;]
55[(v) Special Bearer Bonds, 1991, issued by the Central Government ;]
56[(vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified by the Central Government.]
57[Explanation.—For the removal of doubts, it is hereby clarified that “property” includes and shall be deemed to have always included any rights in or in relation to an Indian company, including rights of management or control or any other rights whatsoever;]
58[59(15) 60“charitable purpose”61 includes relief of the poor, education61, medical relief, 62[preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest,] and the advancement of any other 61object of general public utility:
Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business61, or any activity of rendering any service in relation to any trade, commerce or business61, for a cess or fee or any other consideration, irrespective of the nature of use or appli-cation, or retention, of the income from such activity:]
63[Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is 64[twenty-five lakh rupees] or less in the previous year;]
65[(15A) “Chief Commissioner” means a person appointed to be a Chief Commissioner of Income-tax or a Principal Chief Commissioner of Income-tax under sub-section (1) of section 117;]
66[67[(15B)] “child”, in relation to an individual, includes a step-child and an adopted child of that individual ;]
68-70[(16) “Commissioner” means a person appointed to be a Commissioner of Income-tax or a Director of Income-tax or a Principal Commissioner of Income-tax or a Principal Director of Income-tax under sub-section (1) of section 117;]
71[(16A) “Commissioner (Appeals)” means a person appointed to be a Commis-sioner of Income-tax (Appeals) under sub-section (1) of section 117 ;]
72[(17) “company” means—
(i) any Indian company, or
(ii) any body corporate incorporated by or under the laws of a country outside India, or
(iii) any institution, association or body which is or was assessable or was assessed as a company for any assessment year under the Indian Income-tax Act, 1922 (11 of 1922), or which is or was assessable or was assessed under this Act as a company for any assessment year commencing on or before the 1st day of April, 1970, or
(iv) any institution, association or body, whether incorporated or not and whether Indian or non-Indian, which is declared by general or special order of the Board to be a company :
Provided that such institution, association or body shall be deemed to be a company only for such assessment year or assessment years (whether commencing before the 1st day of April, 1971, or on or after that date) as may be specified in the declaration ;]
(18) “company in which the public are substantially interested”—a company is said to be a company in which the public73 are substantially interested—
74[(a) if it is a company owned by the Government or the Reserve Bank of India or in which not less than forty per cent of the shares are held (whether singly or taken together) by the Government or the Reserve Bank of India or a corporation owned by that bank ; or]
75[(aa) if it is a company which is registered under section 25 of the Companies Act, 1956 (1 of 1956)76 ; or
(ab) if it is a company having no share capital and if, having regard to its objects, the nature and composition of its membership and other relevant considerations, it is declared by order of the Board to be a company in which the public are sub-stantially interested :
Provided that such company shall be deemed to be a company in which the public are substantially interested only for such assessment year or assessment years (whether commencing before the 1st day of April, 1971, or on or after that date) as may be specified in the declaration ; or]
77[(ac) if it is a mutual benefit finance company, that is to say, a company which carries on, as its principal business, the business of acceptance of deposits from its members and which is declared by the Central Government under section 620A78 of the Com-panies Act, 1956 (1 of 1956), to be a Nidhi or Mutual Benefit Society ; or]
79[(ad) if it is a company, wherein shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than fifty per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by, one or more co-operative societies ;]
80[(b) if it is a company which is not a 81private company as defined in the Companies Act, 1956 (1 of 1956), and the conditions specified either in item (A) or in item (B) are fulfilled, namely :—
(A) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) were, as on the last day of the relevant previous year, listed in a recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and any rules made thereunder ;
82[(B) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than fifty per cent of the voting power have been allotted uncondi- tionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by—
(a) the Government, or
(b) a corporation established by a Central, State or Provincial Act, or
(c) any company to which this clause applies or any subsidiary company of such company 83[if the whole of the share capital of such subsidiary company has been held by the parent company or by its nominees throughout the previous year.]
(19) “co-operative society” means a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies ;
84[(19A) “Deputy Commissioner” means a person appointed to be a Deputy Commissioner of Income-tax 85[* * *] under sub-section (1) of section 117 ;
86[(19AA) “demerger”, in relation to companies, means the transfer, pursuant to a scheme of arrangement under sections 391 to 39487 of the Companies Act, 1956 (1 of 1956), by a demerged company of its one or more undertakings to any resulting company in such a manner that—
(i) all the property of the undertaking, being transferred by the demerged company, immediately before the demerger, becomes the property of the resulting company by virtue of the demerger;
(ii) all the liabilities relatable to the undertaking, being transferred by the demerged company, immediately before the demerger, become the liabilities of the resulting company by virtue of the demerger;
(iii) the property and the liabilities of the undertaking or undertakings being transferred by the demerged company are transferred at values appearing in its books of account immediately before the demerger;
(iv) the resulting company issues, in consideration of the demerger, its shares to the shareholders of the demerged company on a proportionate basis 88[except where the resulting company itself is a shareholder of the demerged company];
(v) the shareholders holding not less than three-fourths in value of the shares in the demerged company (other than shares already held therein immediately before the demerger, or by a nominee for, the resulting company or, its subsidiary) become share-holders of the resulting company or companies by virtue of the demerger,
otherwise than as a result of the acquisition of the property or assets of the demerged company or any undertaking thereof by the resulting company;
(vi) the transfer of the undertaking is on a going concern basis;
(vii) the demerger is in accordance with the conditions, if any, notified under sub-section (5) of section 72A by the Central Government in this behalf.
Explanation 1.—For the purposes of this clause, “undertaking” shall include any part of an undertaking, or a unit or division of an undertaking or a business activity taken as a whole, but does not include individual assets or liabilities or any combination thereof not constituting a business activity.
Explanation 2.—For the purposes of this clause, the liabilities referred to in sub-clause (ii), shall include—
(a) the liabilities which arise out of the activities or operations of the undertaking;
(b) the specific loans or borrowings (including debentures) raised, incurred and utilised solely for the activities or operations of the undertaking; and
(c) in cases, other than those referred to in clause (a) or clause (b), so much of the amounts of general or multipurpose borrowings, if any, of the demerged company as stand in the same proportion which the value of the assets transferred in a demerger bears to the total value of the assets of such demerged company immediately before the demerger.
Explanation 3.—For determining the value of the property referred to in sub-clause (iii), any change in the value of assets consequent to their revaluation shall be ignored.
Explanation 4.—For the purposes of this clause, the splitting up or the reconstruction of any authority or a body constituted or established under a Central, State or Provincial Act, or a local authority or a public sector company, into separate authorities or bodies or local authorities or companies, as the case may be, shall be deemed to be a demerger if such split up or reconstruction fulfils 89[such conditions as may be notified in the Official Gazette90, by the Central Government];
(19AAA) “demerged company” means the company whose undertaking is transferred, pursuant to a demerger, to a resulting company;]
(19B) “Deputy Commissioner (Appeals)” means a person appointed to be a Deputy Commissioner of Income-tax (Appeals) 91[or an Additional Commissioner of Income-tax (Appeals)] under sub-section (1) of section 117 ;]
92[(19C) “Deputy Director” means a person appointed to be a Deputy Director of Income-tax 93[* * *] under sub-section (1) of section 117 ;]
(20) 94“director”, “manager” and “managing agent”, in relation to a company, have the meanings respectively assigned to them in the Companies Act, 1956 (1 of 1956) ;
95-98[(21) “Director General or Director” means a person appointed to be a Director General of Income-tax or a Principal Director General of Income-tax or, as the case may be, a Director of Income-tax or a Principal Director of Income-tax, under sub-section (1) of section 117, and includes a person appointed under that sub-section to be an Additional Director of Income-tax or a Joint Director of Income-tax or an Assistant Director or Deputy Director of Income-tax;]
(22) 99“dividend”1 includes—
(a) any distribution1 by a company of accumulated profits1, whether capitalised or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company ;
(b) any distribution1 to its shareholders by a company of debentures, debenture-stock, or deposit certificates in any form, whether with or without interest, and any distribution to its preference shareholders of shares by way of bonus, to the extent to which the company possesses accumulated profits1, whether capitalised or not ;
(c) any distribution1 made to the shareholders of a company on its liquidation, to the extent to which the distribution is attributable to the accumulated profits of the company immediately before its liquidation, whether capitalised or not ;
(d) any distribution2 to its shareholders by a company on the reduction of its capital, to the extent to which the company possesses accumulated profits2 which arose after the end of the previous year ending next before the 1st day of April, 1933, whether such accumulated profits have been capitalised or not ;
(e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) 3[made after the 31st day of May, 1987, by way of advance4 or loan to a shareholder4, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern)] or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits5 ;
but “dividend” does not include—
(i) a distribution made in accordance with sub-clause (c) or sub-clause (d) in respect of any share issued for full cash consideration, where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets ;
6[(ia) a distribution made in accordance with sub-clause (c) or sub-clause (d) in so far as such distribution is attributable to the capitalised profits of the company representing bonus shares allotted to its equity shareholders after the 31st day of March, 1964, 7[and before the 1st day of April, 1965] ;]
(ii) any advance or loan made to a shareholder 8[or the said concern] by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company ;
(iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clause (e), to the extent to which it is so set off;
9[(iv) any payment made by a company on purchase of its own shares from a shareholder in accordance with the provisions of section 77A10 of the Companies Act, 1956 (1 of 1956);
(v) any distribution of shares pursuant to a demerger by the resulting company to the shareholders of the demerged company (whether or not there is a reduction of capital in the demerged company).]
Explanation 1.—The expression “accumulated profits”, wherever it occurs in this clause, shall not include capital gains arising before the 1st day of April, 1946, or after the 31st day of March, 1948, and before the 1st day of April, 1956.
Explanation 2.—The expression “accumulated profits” in sub-clauses (a), (b), (d) and (e), shall include all profits of the company up to the date of distribution or payment referred to in those sub-clauses, and in sub-clause (c) shall include all profits of the company up to the date of liquidation, 11[but shall not, where the liquidation is consequent on the compulsory acquisition of its undertaking by the Government or a corporation owned or controlled by the Government under any law for the time being in force, include any profits of the company prior to three successive previous years immediately preceding the previous year in which such acquisition took place].
12[Explanation 3.—For the purposes of this clause,—
(a) “concern” means a Hindu undivided family, or a firm or an association of persons or a body of individuals or a company ;
(b) a person shall be deemed to have a substantial interest in a concern, other than a company, if he is, at any time during the previous year, beneficially entitled to not less than twenty per cent of the income of such concern ;]
13[(22A) “domestic company” means an Indian company, or any other com-pany which, in respect of its income liable to tax under this Act, has made the prescribed arrangements for the declaration and payment, within India, of the dividends (including dividends on preference shares) payable out of such income ;]
14[(22AA) “document” includes an electronic record as defined in clause (t)15 of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);]
16[(22AAA) “electoral trust” means a trust so approved by the Board in accordance with the scheme17 made in this regard by the Central Government;]
18[19[(22B)] “fair market value”, in relation to a capital asset, means—
(i) the price that the capital asset would ordinarily fetch on sale in the open market on the relevant date ; and
(ii) where the price referred to in sub-clause (i) is not ascertainable, such price as may be determined in accordance with the rules made under this Act ;]
20[(23) (i) “firm” shall have the meaning assigned to it in the Indian Partnership Act, 1932 (9 of 1932)21, and shall include a limited liability partnership22 as defined in the Limited Liability Partnership Act, 2008 (6 of 2009);
(ii) “partner” shall have the meaning assigned to it in the Indian Partnership Act, 1932 (9 of 1932), and shall include,—
(a) any person who, being a minor, has been admitted to the benefits of partnership; and
(b) a partner of a limited liability partnership22 as defined in the Limited Liability Partnership Act, 2008 (6 of 2009);
(iii) “partnership” shall have the meaning assigned to it in the Indian Partnership Act, 1932 (9 of 1932), and shall include a limited liability partnership22 as defined in the Limited Liability Partnership Act, 2008 (6 of 2009);]
23[(23A) “foreign company” means a company which is not a domestic company ;]
24[(23B) “fringe benefits” means any fringe benefits referred to in section 115WB;]
25(24) “income”26 includes26—
(i) profits and gains26 ;
(ii) dividend ;
27[(iia) voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes 28[or by an association or institution referred to in clause (21) or clause (23)29, or by a fund or trust or institution referred to in sub-clause (iv) or sub-clause (v) 30[or by any university or other educational institution referred to in sub-clause (iiiad) or sub-clause (vi) or by any hospital or other institution referred to in sub-clause (iiiae) or sub-clause (via)] of clause (23C) of section 10 31[or by an electoral trust]].
(iii) the value of any perquisite or profit in lieu of salary taxable under clauses (2) and (3) of section 17 ;
32[(iiia) any special allowance or benefit, other than perquisite included under sub-clause (iii), specifically granted to the assessee to meet expenses wholly, necessarily and exclusively for the performance of the duties of an office or employment of profit ;
(iiib) any allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at a place where he ordinarily resides or to compensate him for the increased cost of living ;]
(iv) the value of any benefit or perquisite33, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative of the director or such person, and any sum paid by any such company in respect of any obligation which, but for such payment, would have been payable by the director or other person aforesaid ;
34[(iva) the value of any benefit or perquisite35, whether convertible into money or not, obtained by any representative assessee mentioned in clause (iii) or clause (iv) of sub-section (1) of section 160 or by any person on whose behalf or for whose benefit any income is receivable by the representative assessee (such person being hereafter in this sub-clause referred to as the “beneficiary”) and any sum paid by the representative assessee in respect of any obligation which, but for such payment, would have been payable by the beneficiary ;]
(v) any sum chargeable to income-tax under clauses (ii) and (iii) of section 28 or section 41 or section 59 ;
36[(va) any sum chargeable to income-tax under clause (iiia) of section 28 ;]
37[(vb) any sum chargeable to income-tax under clause (iiib) of section 28 ;]
38[(vc) any sum chargeable to income-tax under clause (iiic) of section 28 ;]
39[(vd)] the value of any benefit or perquisite taxable under clause (iv) of section 28 ;
40[(ve) any sum chargeable to income-tax under clause (v) of section 28 ;]
(vi) any capital gains chargeable under section 45 ;
(vii) the profits and gains of any business of insurance carried on by a mutual insurance company or by a co-operative society, computed in accordance with section 44 or any surplus taken to be such profits and gains by virtue of provisions contained in the First Schedule ;
41[(viia) the profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society with its members;]
(viii) [Omitted by the Finance Act, 1988, w.e.f. 1-4-1988. Original sub-clause (viii) was inserted by the Finance Act, 1964, w.e.f. 1-4-1964;]
42[(ix) any winnings from lotteries43, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever.]
44[Explanation.—For the purposes of this sub-clause,—
(i) “lottery” includes winnings from prizes awarded to any person by draw of lots or by chance or in any other manner whatsoever, under any scheme or arrangement by whatever name called;
(ii) “card game and other game of any sort” includes any game show, an entertainment programme on television or electronic mode, in which people compete to win prizes or any other similar game ;]
45[(x) any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees’ State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees ;]
46[(xi) any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy.
Explanation.—For the purposes of this clause*, the expression “Keyman insurance policy” shall have the meaning assigned to it in the Explanation to clause (10D) of section 10 ;]
47[(xii) any sum referred to in 48[clause (va)] of section 28;]
49[(xiii) any sum referred to in clause (v) of sub-section (2) of section 56;]
50[(xiv) any sum referred to in clause (vi) of sub-section (2) of section 56;]
51[(xv) any sum of money or value of property referred to in clause (vii) 52[or clause (viia)] of sub-section (2) of section 56;]
53[(xvi) any consideration received for issue of shares as exceeds the fair market value of the shares referred to in clause (viib) of sub-section (2) of section 56;]
The following sub-clause (xvii) shall be inserted after sub-clause (xvi) of clause (24) of section 2 by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
(xvii) any sum of money referred to in clause (ix) of sub-section (2) of section 56;
(25) “Income-tax Officer” means a person appointed to be an Income-tax Officer under 54[* * *] section 117 ;
55[(25A) “India” means the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and subsoil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (80 of 1976), and the air space above its territory and territorial waters;]
(26) “Indian company” means a company formed and registered under the Companies Act, 195655a (1 of 1956), and includes—
(i) a company formed and registered under any law relating to companies formerly in force in any part of India (other than the State of Jammu and Kashmir 56[and the Union territories specified in sub-clause (iii) of this clause]) ;
57[(ia) a corporation established by or under a Central, State or Provincial Act ;
(ib) any institution, association or body which is declared by the Board to be a company under clause (17) ;]
(ii) in the case of the State of Jammu and Kashmir, a company formed and registered under any law for the time being in force in that State ;
58[(iii) in the case of any of the Union territories of Dadra and Nagar Haveli, Goa†, Daman and Diu, and Pondicherry, a company formed and registered under any law for the time being in force in that Union territory :]
Provided that the 59[registered or, as the case may be, principal office of the company, corporation, institution, association or body] in all cases is in India ;
60[(26A) “infrastructure capital company” means such company which makes investments by way of acquiring shares or providing long-term finance to any enterprise or undertaking wholly engaged in the business referred to in sub-section (4) of section 80-IA or sub-section (1) of section 80-IAB or an undertaking developing and building a housing project referred to in sub-section (10) of section 80-IB or a project for constructing a hotel of not less than three-star category as classified by the Central Government or a project for constructing a hospital with at least one hundred beds for patients;
(26B) “infrastructure capital fund” means such fund operating under a trust deed registered under the provisions of the Registration Act, 1908 (16 of 1908) established to raise monies by the trustees for investment by way of acquiring shares or providing long-term finance to any enterprise or undertaking wholly engaged in the business referred to in sub-section (4) of section 80-IA or sub-section (1) of section 80-IAB or an undertaking developing and building a housing project referred to in sub-section (10) of section 80-IB or a project for constructing a hotel of not less than three-star category as classified by the Central Government or a project for constructing a hospital with at least one hundred beds for patients;]
(27) 61[* * *]
(28) “Inspector of Income-tax” means a person appointed to be an Inspector of Income-tax under sub-section 62[(1)] of section 117 ;
63[64(28A) “interest”65 means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised ;]
66[(28B) “interest on securities” means,—
(i) interest on any security of the Central Government or a State Government ;
(ii) interest on debentures or other securities for money issued by or on behalf of a local authority or a company or a corporation established by a Central, State or Provincial Act ;]
67[(28BB) “insurer” means an insurer, being an Indian insurance company, as defined under clause (7A) of section 268 of the Insurance Act, 1938 (4 of 1938), which has been granted a certificate of registration under section 3 of that Act;]
69[(28C) “Joint Commissioner” means a person appointed to be a Joint Commissioner of Income-tax or an Additional Commissioner of Income-tax under sub-section (1) of section 117;
(28D) “Joint Director” means a person appointed to be a Joint Director of Income-tax or an Additional Director of Income-tax under sub-section (1) of section 117;]
(29) “legal representative” has the meaning assigned to it in clause (11) of section 2 of the Code of Civil Procedure, 1908 (5 of 1908)70 ;
71[(29A) “long-term capital asset” means a capital asset which is not a short-term capital asset ;
(29B) “long-term capital gain” means capital gain arising from the transfer of a long-term capital asset ;]
72[(29BA) “manufacture”, with its grammatical variations, means a change in a non-living physical object or article or thing,—
(a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or
(b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure;]
73[(29C) “maximum marginal rate” means the rate of income-tax (including surcharge on income-tax, if any) applicable in relation to the highest slab of income in the case of an individual 74[, association of persons or, as the case may be, body of individuals] as specified in the Finance Act of the relevant year ;]
75[(29D) “National Tax Tribunal” means the National Tax Tribunal established under section 3 of the National Tax Tribunal Act, 2005;]
(30) “non-resident” means a person who is not a “resident” 76[, and for the purposes of sections 9277, 93 78[* * *] and 168, includes a person who is not ordinarily resident within the meaning of clause (6) of section 6] ;
79(31) “person”80 includes—
(i) an individual80,
(ii) a Hindu undivided family80,
(iii) a company,
(iv) a firm81,
(v) an association of persons81 or a body of individuals81, whether incorporated or not,
(vi) a local authority, and
(vii) every artificial juridical person, not falling within any of the preceding sub-clauses.
82[Explanation.—For the purposes of this clause, an association of persons or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or esta-blished or incorporated with the object of deriving income, profits or gains;]
(32) “person who has a substantial interest in the company”, in relation to a company, means a person who is the beneficial owner of shares, not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits, carrying not less than twenty per cent of the voting power ;
(33) “prescribed” means prescribed by rules made under this Act ;
(34) “previous year” means the previous year as defined in section 3 ;
82a[(34A) “Principal Chief Commissioner of Income-tax” means a person appointed to be a Principal Chief Commissioner of Income-tax under sub-section (1) of section 117;
(34B) “Principal Commissioner of Income-tax” means a person appointed to be a Principal Commissioner of Income-tax under sub-section (1) of section 117;
(34C) “Principal Director of Income-tax” means a person appointed to be a Principal Director of Income-tax under sub-section (1) of section 117;
(34D) “Principal Director General of Income-tax” means a person appointed to be a Principal Director General of Income-tax under sub-section (1) of section 117;]
83(35) “principal officer”, used with reference to a local authority or a company or any other public body or any association of persons or any body of individuals, means—
(a) the secretary, treasurer, manager or agent of the authority, company, association or body, or
(b) any person connected with the management or administration of the local authority, company, association or body upon whom the 84[Assessing] Officer has served a notice of his intention of treating him as the principal officer thereof ;
85(36) “profession” includes vocation86 ;
87[(36A) “public sector company” means any corporation established by or under any Central, State or Provincial Act or a Government com-pany88 as defined in section 617 of the Companies Act, 1956 (1 of 1956) ;]
(37) 89“public servant” has the same meaning as in section 21 of the Indian Penal Code (45 of 1860) ;
90[(37A) “rate or rates in force” or “rates in force”, in relation to an assessment year or financial year, means—
(i) for the purposes of calculating income-tax under the first proviso to sub-section (5) of section 132, or computing the income-tax chargeable under sub-section (4) of section 172 or sub-section (2) of section 174 or section 175 or sub-section (2) of section 176 or deducting income-tax under section 192 from income charge-able under the head “Salaries” 91[* * *] or 92[computation of the “advance tax” payable under Chapter XVII-C in a case not falling under 93[section 115A or section 115B 94[or section 115BB 95[or section 115BBB] or section 115E] or] section 164 94[or section 164A 96[* * *]] 97[or section 167B], the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year, and for the purposes of computation of the “advance tax” payable under Chapter XVII-C 98[in a case falling under section 115A or section 115B 99[or section 115BB 1[or section 115BBB] or section 115E] or section 164 99[or section 164A 2[* * *]] 3[or section 167B], the rate or rates specified in section 115A or 4[section 115B or section 115BB 5[or section 115BBB] or section 115E or section 164 or section 164A 2[* * *] 3[or section 167B], as the case may be,] or the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year, whichever is applicable ;]
(ii) for the purposes of deduction of tax under sections 193, 194, 194A 6[, 194B] 7[, 194BB] 8[and 194D], the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year ;]
9[(iii) for the purposes of deduction of tax under section 195, the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year or the rate or rates of income-tax specified in 10[an agreement entered into by the Central Government under section 90, or an agreement notified by the Central Government under section 90A, whichever is applicable by virtue of the provisions of section 90, or section 90A, as the case may be];]
11(38) “recognised provident fund”12 means a provident fund which has been and continues to be recognised by the 13[13a[Principal Chief Commissioner or] Chief Commissioner or 13a[Principal Commissioner or] Commissioner] in accordance with the rules contained in Part A of the Fourth Schedule, and includes a provident fund established under a scheme framed under the Employees’ Provident Funds Act, 1952 (19 of 1952) ;
(39) 14[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993;]
(40) “regular assessment”15 means the assessment made under 16[sub-section (3) of] section 143 or section 144 ;
(41) “relative”, in relation to an individual, means the husband, wife, brother or sister or any lineal ascendant or descendant of that individual ;
17[(41A) “resulting company” means one or more companies (including a wholly owned subsidiary thereof) to which the undertaking of the demerged company is transferred in a demerger and, the resulting company in consideration of such transfer of undertaking, issues shares to the shareholders of the demerged company and includes any authority or body or local authority or public sector company or a company established, constituted or formed as a result of demerger;]
(42) “resident” means a person who is resident in India within the meaning of section 6 ;
18[19(42A) 20[“short-term capital asset” means a capital asset held by an assessee for not more than 21[thirty-six] months immediately preceding the date of its transfer22 :]
23[Provided that in the case of 23a[a share held in a company 24[or any other security listed in a recognised stock exchange in India] or a unit of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963) or 24a[a unit of a Mutual Fund specified under clause (23D) of section 10]] 25[or a zero coupon bond], the provisions of this clause shall have effect as if for the words “thirty-six months”, the words “twelve months” had been substituted.]
The following second proviso shall be inserted after the existing proviso to clause (42A) of section 2 by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
Provided further that in case of a share of company (not being a share listed in a recognised stock exchange) or a unit of a Mutual Fund specified under clause (23D) of section 10, which is transferred during the period beginning on the 1st day of April, 2014 and ending on the 10th day of July, 2014, the provisions of this clause shall have effect as if for the words “thirty-six months”, the words “twelve months” had been substituted.
26[Explanation 1].—(i) In determining the period for which any capital asset is held by the assessee—
(a) in the case of a share held in a company in liquidation, there shall be excluded the period subsequent to the date on which the company goes into liquidation ;
(b) in the case of a capital asset which becomes the property of the assessee in the circumstances mentioned in 27[sub-section (1)] of section 49, there shall be included the period for which the asset was held by the previous owner referred to in the said section ;
28[(c) in the case of a capital asset being a share or shares in an Indian company, which becomes the property of the assessee in consideration of a transfer referred to in clause (vii) of section 47, there shall be included the period for which the share or shares in the amalgamating company were held by the assessee ;]
29[(d) in the case of a capital asset, being a share or any other security (hereafter in this clause referred to as the financial asset) subscribed to by the assessee on the basis of his right to subscribe to such financial asset or subscribed to by the person in whose favour the assessee has renounced his right to subscribe to such financial asset, the period shall be reckoned from the date of allotment of such financial asset ;
(e) in the case of a capital asset, being the right to subscribe to any financial asset, which is renounced in favour of any other person, the period shall be reckoned from the date of the offer of such right by the company or institution, as the case may be, making such offer ;]
30[(f) in the case of a capital asset, being a financial asset, allotted without any payment and on the basis of holding of any other financial asset, the period shall be reckoned from the date of the allotment of such financial asset ;]
31[(g) in the case of a capital asset, being a share or shares in an Indian company, which becomes the property of the assessee in consi-deration of a demerger, there shall be included the period for which the share or shares held in the demerged company were held by the assessee ;]
32[(h) in the case of a capital asset, being trading or clearing rights of a recognised stock exchange in India acquired by a person pursuant to demutualisation or corporatisation of the recognised stock exchange in India as referred to in clause (xiii) of section 47, there shall be included the period for which the person was a member of the recognised stock exchange in India immediately prior to such demutualisation or corporatisation;
(ha) in the case of a capital asset, being equity share or shares in a company allotted pursuant to demutualisation or corporatisation of a recognised stock exchange in India as referred to in clause (xiii) of section 47, there shall be included the period for which the person was a member of the recognised stock exchange in India immediately prior to such demutualisation or corporatisation;]
33[(hb) in the case of a capital asset, being any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer free of cost or at concessional rate to his employees (including former employee or employees), the period shall be reckoned from the date of allotment or transfer of such specified security or sweat equity shares;]
33a[(hc) in the case of a capital asset, being a unit of a business trust, allotted pursuant to transfer of share or shares as referred to in clause (xvii) of section 47, there shall be included the period for which the share or shares were held by the assessee;]
(ii) In respect of capital assets other than those mentioned in clause (i), the period for which any capital asset is held by the assessee shall be determined subject to any rules which the Board may make in this behalf.]
34[Explanation 2.—For the purposes of this clause, the expression “security”35 shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956).]
36[Explanation 3.—For the purposes of this clause, the expressions “specified security” and “sweat equity shares” shall have the meanings respectively assigned to them in the Explanation to clause (d) of sub-section (1) of section 115WB;]
The following Explanation 4 shall be inserted after Explanation 3 to clause (42A) of section 2 by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
Explanation 4.—For the purposes of this clause, the expression “equity oriented fund” shall have the meaning assigned to it in the Explanation to clause (38) of section 10;
37[(42B) “short-term capital gain” means capital gain arising from the transfer of a short-term capital asset ;]
38[(42C) “slump sale”39 means the transfer of one or more undertakings as a result of the sale for a lump sum consideration without values being assigned to the individual assets and liabilities in such sales.
Explanation 1.—For the purposes of this clause, “undertaking” shall have the meaning assigned to it in Explanation 1 to clause (19AA).
Explanation 2.—For the removal of doubts, it is hereby declared that the determination of the value of an asset or liability for the sole purpose of payment of stamp duty, registration fees or other similar taxes or fees shall not be regarded as assignment of values to individual assets or liabilities ;]
40[(43) “tax” in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date 41[and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe benefit tax payable under section 115WA] ;]
42[(43A) “tax credit certificate” means a tax credit certificate granted to any person in accordance with the provisions of Chapter XXII-B43 and any scheme made thereunder ;]
(43B) 44[* * *]
45[(44) “Tax Recovery Officer” means any Income-tax Officer who may be authorised by the 45a[Principal Chief Commissioner or] Chief Commissioner or 45a[Principal Commissioner or] Commissioner, by general or special order in writing, to exercise the powers of a Tax Recovery Officer 46[and also to exercise or perform such powers and functions which are conferred on, or assigned to, an Assessing Officer under this Act and which may be prescribed];]
(45) “total income” means the total amount of income referred to in section 5, computed in the manner laid down in this Act ;
(46) 47[* * *]
48(47) 49[“transfer”50, in relation to a capital asset, includes,—
(i) the sale50, exchange50 or relinquishment50 of the asset ; or
(ii) the extinguishment of any rights therein50 ; or
(iii) the compulsory acquisition thereof under any law ; or
(iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ;] 51[or]
52[(iva) the maturity or redemption of a zero coupon bond; or]
53[(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A54 of the Transfer of Property Act, 1882 (4 of 1882) ; or
(vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immov-able property.
55[Explanation 1].—For the purposes of sub-clauses (v) and (vi), “immovable property” shall have the same meaning as in clause (d) of section 269UA.]
56[Explanation 2.—For the removal of doubts, it is hereby clarified that “transfer” includes and shall be deemed to have always included disposing of or parting with an asset or any interest therein, or creating any interest in any asset in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by way of an agreement (whether entered into in India or outside India) or otherwise, notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or flowing from the transfer of a share or shares of a company registered or incorporated outside India;]
57[(48) “zero coupon bond” means a bond—
(a) issued by any infrastructure capital company or infrastructure capital fund or public sector company 58[or scheduled bank] on or after the 1st day of June, 2005;
(b) in respect of which no payment and benefit is received or receivable before maturity or redemption from infrastructure capital company or infrastructure capital fund or public sector company 58[or scheduled bank]; and
(c) which the Central Government may, by notification59 in the Official Gazette, specify in this behalf.
60[Explanation.—For the purposes of this clause, the expression “scheduled bank” shall have the meaning assigned to it in clause (ii) of the Explanation to sub-clause (c) of clause (viia) of sub-section (1) of section 36.]]
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Provided that, in the case of a business or profession newly set up, or a source of income newly coming into existence, in the said financial year, the previous year shall be the period beginning with the date of setting up of the business or profession or, as the case may be, the date on which the source of income newly comes into existence and ending with the said financial year.]
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Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly.
(2) In respect of income chargeable under sub-section (1), income-tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act.
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(a) is received71 or is deemed to be received71 in India in such year by or on behalf of such person ; or
(b) accrues or arises71 or is 71deemed to accrue or arise to him in India during such year ; or
(c) accrues or arises71 to him outside India during such year :
Provided that, in the case of a person not ordinarily resident in India within the meaning of sub-section (6)* of section 6, the income which accrues or arises to him outside India shall not be so included unless it is derived from a business controlled in or a profession set up in India.
(2) Subject to72 the provisions of this Act, the total income73 of any previous year of a person who is a non-resident includes all income from whatever source derived which—
(a) is received73a or is deemed to be received73a in India in such year by or on behalf of such person ; or
(b) accrues or arises73a or is 73adeemed to accrue or arise to him in India during such year.
Explanation 1.—Income accruing or arising outside India shall not be deemed to be received73a in India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India.
Explanation 2.—For the removal of doubts, it is hereby declared that income which has been included in the total income of a person on the basis that it has accrued74 or arisen74 or is deemed to have accrued74 or arisen74 to him shall not again be so included on the basis that it is received or deemed to be received by him in India.
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(2) Where the husband or, as the case may be, the wife governed by the aforesaid system of community of property has any income under the head “Salaries”, such income shall be included in the total income of the spouse who has actually earned it.]
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(1) An individual is said to be resident in India in any previous year, if he—
(a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more ; or
(b) 77[* * *]
(c) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.
78[Explanation.—In the case of an individual,—
(a) being a citizen of India, who leaves India in any previous year 79[as a member of the crew of an 80Indian ship as defined in clause (18) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958), or] for the purposes of employment outside India, the provisions of sub-clause (c) shall apply in relation to that year as if for the words “sixty days”, occurring therein, the words “one hundred and eighty-two days” had been substituted ;
(b) being a citizen of India, or a person of Indian origin within the meaning of Explanation to clause (e) of section 115C, who, being outside India, comes on a visit to India in any previous year, the provisions of sub-clause (c) shall apply in relation to that year as if for the words “sixty days”, occurring therein, the words “one hundred and 81[eighty-two] days” had been substituted.]
(2) A Hindu undivided family, firm or other association of persons is said to be resident in India in any previous year in every case except where during that year the control and management81a of its affairs81a is situated wholly81a outside India.
(3) A company is said to be resident in India in any previous year, if—
(i) it is an Indian company ; or
(ii) during that year, the control and management82 of its affairs82 is situated wholly82 in India.
(4) Every other person is said to be resident in India in any previous year in every case, except where during that year the control and management of his affairs is situated wholly outside India.
(5) If a person is resident in India in a previous year relevant to an assessment year in respect of any source of income, he shall be deemed to be resident in India in the previous year relevant to the assessment year in respect of each of his other sources of income.
83[(6) A person is said to be “not ordinarily resident” in India in any previous year if such person is—
(a) an individual who has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less; or
(b) a Hindu undivided family whose manager has been a non-resident in India in nine out of the ten previous years preceding that year, or has during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and twenty-nine days or less.]
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(i) the annual accretion in the previous year to the balance at the credit of an employee participating in a recognised provident fund, to the extent provided in rule 6 of Part A of the Fourth Schedule ;
(ii) the transferred balance in a recognised provident fund, to the extent provided in sub-rule (4) of rule 11 of Part A of the Fourth Schedule ;
84[(iii) the contribution made, by the Central Government 85[or any other employer] in the previous year, to the account of an employee under a pension scheme referred to in section 80CCD.]
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(a) any dividend] declared by a company or distributed or paid by it within the meaning of sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) or sub-clause (e) of clause (22) of section 2 shall be deemed to be the income of the previous year in which it is so declared, distributed or paid, as the case may be ;
87[(b) any interim dividend shall be deemed to be the income of the previous year in which the amount of such dividend is unconditionally made available by the company to the member who is entitled to it.]
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91(i) all income accruing or arising, whether directly or indirectly92, through or from any business connection92 in India, or through or from any property92 in India, or through or from any asset or source of income in India, 93[* * *] or through the transfer of a capital asset situate in India.
94[Explanation 1].—For the purposes of this clause—
(a) in the case of a business of which all the operations95 are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations95 carried out in India ;
(b) in the case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export ;
96[* * *]
97[(c) in the case of a non-resident, being a person engaged in the business of running a news agency or of publishing newspapers, magazines or journals, no income shall be deemed to accrue or arise in India to him through or from activities which are confined to the collection of news and views in India for transmission out of India ;]
98[(d) in the case of a non-resident, being—
(1) an individual who is not a citizen of India ; or
(2) a firm which does not have any partner who is a citizen of India or who is resident in India ; or
(3) a company which does not have any shareholder who is a citizen of India or who is resident in India,
no income shall be deemed to accrue or arise in India to such individual, firm or company through or from operations99 which are confined to the shooting of any cinematograph film in India.]
1[Explanation 2.—For the removal of doubts, it is hereby declared that “business connection” shall include any business activity carried out through a person who, acting on behalf of the non-resident,—
(a) has and habitually exercises in India, an authority to conclude contracts on behalf of the non-resident, unless his activities are limited to the purchase of goods or merchandise for the non-resident; or
(b) has no such authority, but habitually maintains in India a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the non-resident; or
(c) habitually secures orders in India, mainly or wholly for the non-resident or for that non-resident and other non-residents controlling, controlled by, or subject to the same common control, as that non-resident:
Provided that such business connection shall not include any business activity carried out through a broker, general commission agent or any other agent having an independent status, if such broker, general commission agent or any other agent having an independent status is acting in the ordinary course of his business :
Provided further that where such broker, general commission agent or any other agent works mainly or wholly on behalf of a non-resident (hereafter in this proviso referred to as the principal non-resident) or on behalf of such non-resident and other non-residents which are controlled by the principal non-resident or have a controlling interest in the principal non-resident or are subject to the same common control as the principal non-resident, he shall not be deemed to be a broker, general commission agent or an agent of an independent status.
Explanation 3.—Where a business is carried on in India through a person referred to in clause (a) or clause (b) or clause (c) of Explanation 2, only so much of income as is attributable to the operations carried out in India shall be deemed to accrue or arise in India.]
2[Explanation 4.—For the removal of doubts, it is hereby clarified that the expression “through” shall mean and include and shall be deemed to have always meant and included “by means of”, “in consequence of” or “by reason of”.
Explanation 5.—For the removal of doubts, it is hereby clarified that an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India;]
(ii) income which falls under the head “Salaries”, if it is earned3 in India.
4[Explanation.—For the removal of doubts, it is hereby declared that the income of the nature referred to in this clause payable for—
(a) service rendered in India; and
(b) the rest period or leave period which is preceded and succeeded by services rendered in India and forms part of the service contract of employment,
shall be regarded as income earned in India ;]
(iii) income chargeable under the head “Salaries” payable by the Government to a citizen of India for service outside India ;
(iv) a dividend paid by an Indian company outside India ;
5[(v) income by way of interest payable by—
(a) the Government ; or
(b) a person who is a resident, except where the interest is payable in respect of any debt incurred, or moneys borrowed and used, for the purposes of a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India ; or
(c) a person who is a non-resident, where the interest is payable in respect of any debt incurred, or moneys borrowed and used, for the purposes of a business or profession carried on by such person in India ;
(vi) income by way of royalty6 payable by—
(a) the Government ; or
(b) a person who is a resident, except where the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India ; or
(c) a person who is a non-resident, where the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India :
Provided that nothing contained in this clause shall apply in relation to so much of the income by way of royalty as consists of lump sum consideration for the transfer outside India of, or the imparting of information outside India in respect of, any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process or trade mark or similar property, if such income is payable in pursuance of an agreement made before the 1st day of April, 1976, and the agreement is approved by the Central Government :
7[Provided further that nothing contained in this clause shall apply in relation to so much of the income by way of royalty as consists of lump sum payment made by a person, who is a resident, for the transfer of all or any rights (including the granting of a licence) in respect of computer software supplied by a non-resident manufacturer along with a computer or computer-based equipment under any scheme approved under the Policy on Computer Software Export, Software Development and Training, 1986 of the Government of India.]
Explanation 1.—For the purposes of the 8[first] proviso, an agree-ment made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date; so, however, that, where the recipient of the income by way of royalty is a foreign company, the agreement shall not be deemed to have been made before that date unless, before the expiry of the time allowed under sub-section (1) or sub-section (2) of section 139 (whether fixed originally or on extension) for furnishing the return of income for the assessment year commencing on the 1st day of April, 1977, or the assessment year in respect of which such income first becomes chargeable to tax under this Act, whichever assessment year is later, the company exercises an option by furnishing a declaration in writing to the 9[Assessing] Officer (such option being final for that assessment year and for every subsequent assessment year) that the agreement may be regarded as an agreement made before the 1st day of April, 1976.
Explanation 2.—For the purposes of this clause, “royalty” means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head “Capital gains”) for—
(i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property ;
(ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property ;
(iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar property ;
(iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill ;
10[(iva) the use or right to use any industrial, commercial or scientific equipment10a but not including the amounts referred to in section 44BB;]
(v) the transfer of all or any rights (including the granting of a licence) in respect of10a any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films ; or
(vi) the rendering of any services in connection with the activities referred to in sub-clauses (i) to 10[(iv), (iva) and] (v).
11[Explanation 3.—For the purposes of this clause, “computer software” means any computer programme recorded on any disc, tape, perforated media or other information storage device and includes any such programme or any customized electronic data.]
12[Explanation 4.—For the removal of doubts, it is hereby clarified that the transfer of all or any rights in respect of any right, property or information includes and has always included transfer of all or any right for use or right to use a computer software (including granting of a licence) irrespective of the medium through which such right is transferred.
Explanation 5.—For the removal of doubts, it is hereby clarified that the royalty includes and has always included consideration in respect of any right, property or information, whether or not—
(a) the possession or control of such right, property or information is with the payer;
(b) such right, property or information is used directly by the payer;
(c) the location of such right, property or information is in India.
Explanation 6.—For the removal of doubts, it is hereby clarified that the expression “process” includes and shall be deemed to have always included transmission by satellite (including up-linking, amplification, conversion for down-linking of any signal), cable, optic fibre or by any other similar technology, whether or not such process is secret;]
(vii) income by way of fees for technical services13 payable by—
(a) the Government ; or
(b) a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person14 outside India or for the purposes of making or earning any income from any source outside India13 ; or
(c) a person who is a non-resident, where the fees are payable in respect of services utilised in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India :
15[Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of an agreement made before the 1st day of April, 1976, and approved by the Central Government.]
15[Explanation 1.—For the purposes of the foregoing proviso, an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date.]
Explanation 15[2].—For the purposes of this clause, “fees for technical services” means any consideration (including any lump sum consi-deration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction16, assembly, mining or like project undertaken by the recipient16 or consideration which would be income of the recipient chargeable under the head “Salaries”.]
(2) Notwithstanding anything contained in sub-section (1), any pension payable outside India to a person residing permanently outside India shall not be deemed to accrue or arise in India, if the pension is payable to a person referred to in article 314 of the Constitution or to a person who, having been appointed before the 15th day of August, 1947, to be a Judge of the Federal Court or of a High Court within the meaning of the Government of India Act, 1935, continues to serve on or after the commencement of the Constitution as a Judge in India.
17[Explanation.—For the removal of doubts, it is hereby declared that for the purposes of this section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) and shall be included in the total income of the non-resident, whether or not,—
(i) the non-resident has a residence or place of business or business connection in India; or
(ii) the non-resident has rendered services in India.]
Top of Form
(1) agricultural income ;
18(2) 19[subject to the provisions of sub-section (2) of section 64,] any sum received by an individual as a member of a Hindu undivided family, where such sum has been paid out of the income of the family, or, in the case of any impartible estate, where such sum has been paid out of the income of the estate belonging to the family ;
20[(2A) 20ain the case of a person being a partner of a firm which is separately assessed as such, his share in the total income of the firm.
(3) 21[***]
22[(4) (i) in the case of a non-resident, any income by way of interest on such securities or bonds as the Central Government may, by notification in the Official Gazette23, specify in this behalf, including income by way of premium on the redemption of such bonds :
24[Provided that the Central Government shall not specify, for the purposes of this sub-clause, such securities or bonds on or after the 1st day of June, 2002;]
25[26(ii) in the case of an individual, any income by way of interest on moneys standing to his credit in a Non-Resident (External) Account in any bank in India in accordance with 27[the Foreign Exchange Management Act, 1999 (42 of 1999)], and the rules made thereunder :
Provided that such individual is a person resident outside India as defined in clause (q) of section 228 of the said Act or is a person who has been permitted by the Reserve Bank of India to maintain the aforesaid Account ;]]
29[***]
30[(4B) in the case of an individual, being a citizen of India or a person of Indian origin, who is a non-resident, any income from interest on such savings certificates issued 31[before the 1st day of June, 2002] by the Central Government as that Government may, by notification in the Official Gazette32, specify in this behalf :
Provided that the individual has subscribed to such certificates in convertible foreign exchange remitted from a country out- side India in accordance with the provisions of 33[the Foreign Exchange Management Act, 1999 (42 of 1999)], and any rules made thereunder.
(a) a person shall be deemed to be of Indian origin if he, or either of his parents or any of his grandparents, was born in undivided India ;
(b) “convertible foreign exchange” means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of 33[the Foreign Exchange Management Act, 1999 (42 of 1999)], and any rules made thereunder ;]
34[(5) in the case of an individual, the value of any travel concession or assistance received by, or due to, him,—
(a) from his employer for himself and his family, in connection with his proceeding on leave to any place in India ;
(b) from his employer or former employer for himself and his family, in connection with his proceeding to any place in India after retirement from service or after the termination of his service,
subject to such conditions as may be prescribed35 (including conditions as to number of journeys and the amount which shall be exempt per head) having regard to the travel concession or assistance granted to the employees of the Central Government :
Provided that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel.
(i) the spouse and children of the individual ; and
(ii) the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual; ]
(5A) 36[Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]
(5B) 37[Omitted by the Finance Act, 2002, w.e.f. 1-4-2003;]
(6) in the case of an individual who is not a citizen of India,—
(i) 38[***]
39[(ii) the remuneration received by him as an official, by whatever name called, of an embassy, high commission, legation, commission, consulate or the trade representation of a foreign State, or as a member of the staff of any of these officials, for service in such capacity :
Provided that the remuneration received by him as a trade commissioner or other official representative in India of the Government of a foreign State (not holding office as such in an honorary capacity), or as a member of the staff of any of those officials, shall be exempt only if the remuneration of the corres-ponding officials or, as the case may be, members of the staff, if any, of the Government resident for similar purposes in the country concerned enjoys a similar exemption in that country :
Provided further that such members of the staff are subjects of the country represented and are not engaged in any business or profession or employment in India otherwise than as members of such staff ;]
(iii) to (v) [Sub-clause (ii) substituted for sub-clauses (ii) to (v) by the Finance Act, 1988, w.e.f. 1-4-1989;]
(vi) the remuneration received by him as an employee of a foreign enterprise for services rendered by him during his stay in India, provided the following conditions are fulfilled—
(a) the foreign enterprise is not engaged in any trade or business in India ;
(b) his stay in India does not exceed in the aggregate a period of ninety days in such previous year ; and
(c) such remuneration is not liable to be deducted from the income of the employer chargeable under this Act ;
(via) 40[Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]
(vii) 41[Omitted by the Finance Act, 1993, w.e.f. 1-4-1993;]
(viia) 42[Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]
(viii) any income chargeable under the head “Salaries” received by or due to any such individual being a non-resident as remuneration for services rendered in connection with his employment on a foreign ship where his total stay in India does not exceed in the aggregate a period of ninety days in the previous year ;
(ix) 43[Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]
(x) 44[Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]
45[(xi) the remuneration received by him as an employee of the Government of a foreign State during his stay in India in connection with his training in any establishment or office of, or in any undertaking owned by,—
(i) the Government ; or
(ii) any company in which the entire paid-up share capital is held by the Central Government, or any State Government or Governments, or partly by the Central Government and partly by one or more State Governments ; or
(iii) any company which is a subsidiary of a company referred to in item (ii) ; or
(iv) any corporation established by or under a Central, State or Provincial Act ; or
(v) any society registered under the Societies Registration Act, 1860 (14 of 1860), or under any other corresponding law for the time being in force and wholly financed by the Cen-tral Government, or any State Government or State Governments, or partly by the Central Government and partly by one or more State Governments ;]
46[(6A) where in the case of a foreign company deriving income by way of royalty or fees for technical services received from Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or the Indian concern after the 31st day of March, 1976 47[but before the 1st day of June, 2002] 48[and,—
(a) where the agreement relates to a matter included in the industrial policy, for the time being in force, of the Government of India, such agreement is in accordance with that policy ; and
(b) in any other case, the agreement is approved by the Central Government,
the tax on such income is payable, under the terms of the agreement, by Government or the Indian concern to the Central Government, the tax so paid].
(a) “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9 ;
(b) “foreign company” shall have the same meaning as in section 80B ;
(c) “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;]
49[(6B) where in the case of a non-resident (not being a company) or of a foreign company deriving income (not being salary, royalty or fees for technical services) from Government or an Indian concern in pur-suance of an agreement entered into 50[before the 1st day of June, 2002] by the Central Government with the Government of a foreign State or an international organisation, the tax on such income is payable by Government or the Indian concern to the Central Government under the terms of that agreement or any other related agreement approved 50[before that date] by the Central Government, the tax so paid ;]
51[(6BB) where in the case of the Government of a foreign State or a foreign enterprise deriving income from an Indian company engaged in the business of operation of aircraft, as a consideration of acquiring an aircraft or an aircraft engine (other than payment for providing spares, facilities or services in connection with the operation of leased aircraft) on lease under 52[an agreement entered into after the 31st day of March, 1997 but before the 1st day of April, 1999, or entered into after the 53[31st day of March, 54[2007]] and approved by the Central Government in this behalf] and the tax on such income is payable by such Indian company under the terms of that agreement to the Central Government, the tax so paid.
Explanation.—For the purposes of this clause, the expression “foreign enterprise” means a person who is a non-resident;]
55[(6C) any income arising to such foreign company, as the Central Government may, by notification56 in the Official Gazette, specify in this behalf, by way of 57[royalty or] fees for technical services received in pursuance of an agreement entered into with that Government for providing services in or outside India in projects connected with security of India ;]
(7) any allowances or perquisites paid or allowed as such outside India by the Government to a citizen of India for rendering service outside India ;
(8) in the case of an individual who is assigned to duties in India in connection with any co-operative technical assistance programmes and projects in accordance with an agreement entered into by the Central Government and the Government of a foreign State (the terms whereof provide for the exemption given by this clause)—
(a) the remuneration received by him directly or indirectly from the Government of that foreign State for such duties, and
(b) any other income of such individual which accrues or arises outside India, and is not deemed to accrue or arise in India, in respect of which such individual is required to pay any income or social security tax to the Government of that foreign State ;
58[(8A) in the case of a consultant—
(a) any remuneration or fee received by him or it, directly or indirectly, out of the funds made available to an international organisation [hereafter referred to in this clause and clause (8B) as the agency] under a technical assistance grant agreement between the agency and the Government of a foreign State ; and
(b) any other income which accrues or arises to him or it outside India, and is not deemed to accrue or arise in India, in respect of which such consultant is required to pay any income or social security tax to the Government of the country of his or its origin.
(i) any individual, who is either not a citizen of India or, being a citizen of India, is not ordinarily resident in India ; or
(ii) any other person, being a non-resident,
engaged by the agency for rendering technical services in India in connection with any technical assistance programme or project, provided the following conditions are fulfilled, namely :—
(1) the technical assistance is in accordance with an agreement entered into by the Central Government and the agency ; and
(2) the agreement relating to the engagement of the consultant is approved by the prescribed authority59 for the purposes of this clause ;
(8B) in the case of an individual who is assigned to duties in India in connection with any technical assistance programme and project in accordance with an agreement entered into by the Central Government and the agency—
(a) the remuneration received by him, directly or indirectly, for such duties from any consultant referred to in clause (8A) ; and
(b) any other income of such individual which accrues or arises outside India, and is not deemed to accrue or arise in India, in respect of which such individual is required to pay any income or social security tax to the country of his origin, provided the following conditions are fulfilled, namely :—
(i) the individual is an employee of the consultant referred to in clause (8A) and is either not a citizen of India or, being a citizen of India, is not ordinarily resident in India ; and
(ii) the contract of service of such individual is approved by the prescribed authority60 before the commencement of his service ;]
(9) the income of any member of the family of any such individual as is referred to in clause (8) 61[or clause (8A) or, as the case may be, clause (8B)] accompanying him to India, which accrues or arises outside India, and is not deemed to accrue or arise in India, in respect of which such member is required to pay any income or social security tax to the Government of that foreign State 62[or, as the case may be, country of origin of such member];
63[64(10) 65(i) any death-cum-retirement gratuity received under the revised Pension Rules of the Central Government or, as the case may be, the Central Civil Services (Pension) Rules, 1972, or under any similar scheme applicable to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all-India services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority or any payment of retiring gratuity received under the Pension Code or Regulations applicable to the members of the defence services ;
(ii) any gratuity received under the Payment of Gratuity Act, 1972 (39 of 1972), to the extent it does not exceed an amount calculated in accordance with the provisions of sub-sections (2) and (3) of section 466 of that Act ;
(iii) any other gratuity received by an employee on his retirement or on his becoming incapacitated prior to such retirement or on termination of his employment, or any gratuity received by his widow, children or dependants on his death, to the extent it does not, in either case, exceed one-half month’s salary for each year of completed service67, 68[calculated on the basis of the average salary for the ten months immediately preceding the month in which any such event occurs, subject to such limit69 as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government] :
Provided that where any gratuities referred to in this clause70 are received by an employee from more than one employer in the same previous year, the aggregate amount exempt from income-tax under this clause 71[shall not exceed the limit so specified] :
Provided further that where any such gratuity or gratuities was or were received in any one or more earlier previous years also and the whole or any part of the amount of such gratuity or gratuities was not included in the total income of the assessee of such previous year or years, the amount exempt from income-tax under this clause 71[shall not exceed the limit so specified] as reduced by the amount or, as the case may be, the aggregate amount not included in the total income of any such previous year or years.
72[* * *]
74[75(10A) 76(i) any payment in commutation of pension received under the Civil Pensions (Commutation) Rules of the Central Government or under any similar scheme applicable 77[to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all-India services or to the members of the defence services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority] or a corporation established by a Central, State or Provincial Act ;
(ii) any payment in commutation of pension received under any scheme of any other employer, to the extent it does not exceed—
(a) in a case where the employee receives any gratuity, the commuted value of one-third of the pension which he is normally entitled to receive, and
(b) in any other case, the commuted value of one-half of such pension,
such commuted value being determined having regard to the age of the recipient, the state of his health, the rate of interest and officially recognised tables of mortality ;
78[* * *]
79[ (iii) any payment in commutation of pension received from a fund under clause (23AAB) ;]
80[81(10AA) (i) any payment received by an employee of the Central Government or a State Government as the cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his 82retirement 83[whether] on superannuation or otherwise ;
(ii) any payment of the nature referred to in sub-clause (i) received by an employee, other than an employee of the Central Government or a State Government, in respect of so much of the period of earned leave at his credit at the time of his retirement 83[whether] on superannuation 82or otherwise as does not exceed 84[ten] months, calculated on the basis of the average salary drawn by the employee during the period of ten months immediately preceding his retirement 83[whether] on superannuation or otherwise, 85[subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit86 applicable in this behalf to the employees of that Government] :
Provided that where any such payments are received by an employee from more than one employer in the same previous year, the aggregate amount exempt from income-tax under this sub-clause 87[shall not exceed the limit so specified] :
Provided further that where any such payment or payments was or were received in any one or more earlier previous years also and the whole or any part of the amount of such payment or payments was or were not included in the total income of the assessee of such previous year or years, the amount exempt from income-tax under this sub-clause 88[shall not exceed the limit so specified], as reduced by the amount or, as the case may be, the aggregate amount not included in the total income of any such previous year or years.
89[* * *]
90[* * *] the entitlement to earned leave of an employee shall not exceed thirty days for every year of actual service rendered by him as an employee of the employer from whose service he has retired ;
91[* * *]
92[(10B) any compensation received by a workman under the Industrial Disputes Act, 1947 (14 of 1947), or under any other Act or Rules, orders or notifications issued thereunder or under any standing orders or under any award, contract of service or otherwise, 93[at the time of his retrenchment :
Provided that the amount exempt under this clause shall not exceed—
(i) an amount calculated in accordance with the provisions of 94clause (b) of section 25F of the Industrial Disputes Act, 1947 (14 of 1947) ; or
95[(ii) such amount, not being less than fifty thousand rupees, as the Central Government may, by notification96 in the Official Gazette, specify in this behalf,]
whichever is less :
Provided further that the preceding proviso shall not apply in respect of any compensation received by a workman in accordance with any scheme which the Central Government may, having regard to the need for extending special protection to the workmen in the undertaking to which such scheme applies and other relevant circumstances, approve in this behalf.]
(a) compensation received by a workman at the time of the closing down of the undertaking in which he is employed shall be deemed to be compensation received at the time of his retrenchment ;
(b) compensation received by a workman, at the time of the transfer (whether by agreement or by operation of law) of the ownership or management of the undertaking in which he is employed from the employer in relation to that undertaking to a new employer, shall be deemed to be compensation received at the time of his retrenchment if—
(i) the service of the workman has been interrupted by such transfer ; or
(ii) the terms and conditions of service applicable to the workman after such transfer are in any way less favourable to the workman than those applicable to him immediately before the transfer ; or
(iii) the new employer is, under the terms of such transfer or otherwise, legally not liable to pay to the workman, in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by the transfer ;
97(c) the expressions “employer” and “workman” shall have the same meanings as in the Industrial Disputes Act, 1947 (14 of 1947);]
98[(10BB) any payments made under the Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985 (21 of 1985), and any scheme framed thereunder except payment made to any assessee in connection with the Bhopal Gas Leak Disaster to the extent such assessee has been allowed a deduction under this Act on account of any loss or damage caused to him by such disaster ;]
99[(10BC) any amount received or receivable from the Central Government or a State Government or a local authority by an individual or his legal heir by way of compensation on account of any disaster, except the amount received or receivable to the extent such individual or his legal heir has been allowed a deduction under this Act on account of any loss or damage caused by such disaster.
Explanation.—For the purposes of this clause, the expression “disaster” shall have the meaning assigned to it under clause (d) of section 21 of the Disaster Management Act, 2005 (53 of 2005);]
2[(10C) 3any amount received4 5[or receivable] by an employee of—
(i) a public sector company ; or
(ii) any other company ; or
(iii) an authority established under a Central, State or Provincial Act ; or
(iv) a local 6[authority ; or]
7[(v) a co-operative society ; or
(vi) a University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 (3 of 1956) ; or
(vii) an Indian Institute of Technology within the meaning of clause (g) of section 38 of the Institutes of Technology Act, 1961 (59 of 1961) ; or
9[(viia) any State Government; or]
10[(viib) the Central Government; or]
11[(viic) an institution, having importance throughout India or in any State or States, as the Central Government may, by notification in the Official Gazette12, specify in this behalf; or]
(viii) such institute of management as the Central Government may, by notification13 in the Official Gazette, specify in this behalf,]
14[on his] 15[voluntary retirement or termination of his service, in accordance with any scheme or schemes of voluntary retirement or in the case of a public sector company referred to in sub-clause (i), a scheme of voluntary separation, to the extent such amount does not exceed five lakh rupees] :
Provided that the schemes of the said companies or authorities 16[or societies or Universities or the Institutes referred to in sub-clauses (vii) and (viii)], as the case may be, governing the payment of such amount are framed in accordance with such guidelines (including inter alia criteria of economic viability) as may be 17prescribed 18[***]:
Provided further that where exemption has been allowed to an employee under this clause for any assessment year, no exemption thereunder shall be allowed to him in relation to any other assessment year :]
19[Provided also that where any relief has been allowed to an assessee under section 89 for any assessment year in respect of any amount received or receivable on his voluntary retirement or termination of service or voluntary separation, no exemption under this clause shall be allowed to him in relation to such, or any other, assessment year;]
20[(10CC) in the case of an employee, being an individual deriving income in the nature of a perquisite, not provided for by way of monetary payment, within the meaning of clause (2) of section 17, the tax on such income actually paid by his employer, at the option of the employer, on behalf of such employee, notwithstanding anything contained in section 20021 of the Companies Act, 1956 (1 of 1956);]
22[(10D) any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, other than—
(a) any sum received under sub-section (3) of section 80DD or sub-section (3) of section 80DDA*; or
(b) any sum received under a Keyman insurance policy; or
(c) any sum received under an insurance policy issued on or after the 1st day of April, 2003 23[but on or before the 31st day of March, 2012] in respect of which the premium payable for any of the years during the term of the policy exceeds twenty per cent of the actual capital sum assured 23[; or]
23[(d) any sum received under an insurance policy issued on or after the 1st day of April, 2012 in respect of which the premium payable for any of the years during the term of the policy exceeds ten per cent of the actual capital sum assured:]
Provided that the provisions of 24[sub-clauses (c) and (d)] shall not apply to any sum received on the death of a person:
Provided further that for the purpose of calculating the actual capital sum assured under 25[sub-clause (c)], effect shall be given to the 26[Explanation to sub-section (3) of section 80C or the Explanation to sub-section (2A) of section 88, as the case may be] :
27[Provided also that where the policy, issued on or after the 1st day of April, 2013, is for insurance on life of any person, who is—
(i) a person with disability or a person with severe disability as referred to in section 80U; or
(ii) suffering from disease or ailment as specified in the rules made under section 80DDB,
the provisions of this sub-clause shall have effect as if for the words “ten per cent”, the words “fifteen per cent” had been substituted.]
28[Explanation 1].—For the purposes of this clause, “Keyman insurance policy” means a life insurance policy taken by a person on the life of another person who is or was the employee of the first-mentioned person or is or was connected in any manner whatsoever with the business of the first-mentioned person 29[and includes such policy which has been assigned to a person, at any time during the term of the policy, with or without any consideration];]
30[Explanation 2.—For the purposes of sub-clause (d), the expression “actual capital sum assured” shall have the meaning assigned to it in the Explanation to sub-section (3A) of section 80C;]
(11) any payment from a provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies 31[or from any other provident fund set up by the Central Government and notified32 by it in this behalf in the Official Gazette];
(12) the accumulated balance due and becoming payable to an employee participating in a recognised provident fund, to the extent provided in rule 8 of Part A of the Fourth Schedule ;
33[(13) any payment from an approved superannuation fund made—
(i) on the death of a beneficiary ; or
(ii) to an employee in lieu of or in commutation of an annuity on his retirement at or after a specified age or on his becoming incapa-citated prior to such retirement ; or
(iii) by way of refund of contributions on the death of a beneficiary ; or
(iv) by way of refund of contributions to an employee on his leaving the service in connection with which the fund is established otherwise than by retirement at or after a specified age or on his becoming incapacitated prior to such retirement, to the extent to which such payment does not exceed the contributions made prior to the commencement of this Act and any interest thereon;]
34[35(13A) any special allowance specifically granted to an assessee by his employer to meet expenditure actually incurred on payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee, to such extent 36[* * *] as may be prescribed37 having regard to the area or place in which such accommodation is situate and other relevant considerations.]
38[Explanation.—For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply in a case where—
(a) the residential accommodation occupied by the assessee is owned by him ; or
(b) the assessee has not actually incurred expenditure on payment of rent (by whatever name called) in respect of the residential accommodation occupied by him ;]
39[(14) (i) any such special allowance or benefit, not being in the nature of a perquisite within the meaning of clause (2) of section 17, specifically granted to meet expenses wholly, necessarily and exclusively incurred40 in the performance of the duties of an office or employment of profit41, 42[as may be prescribed], to the extent to which such expenses are actually incurred for that purpose ;
(ii) any such allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit41 are ordinarily performed by him or at the place where he ordinarily resides, or to compensate him for the increased cost of living, 43[as may be prescribed and to the extent as may be prescribed] :]
44[Provided that nothing in sub-clause (ii) shall apply to any allowance in the nature of personal allowance granted to the assessee to remunerate or compensate him for performing duties of a special nature relating to his office or employment unless such allowance is related to the place of his posting or residence ;]
(14A) 45[***]
(15) 46[(i) income by way of interest, premium on redemption or other payment on such securities, bonds, annuity certificates, savings certificates, other certificates issued by the Central Government and deposits as the Central Government may, by notification47 in the Official Gazette, specify in this behalf, subject to such conditions and limits as may be specified in the said notification ;]
48[(iib) 49[in the case of an individual or a Hindu undivided family,] interest on such Capital Investment Bonds as the Central Government may, by notification50 in the Official Gazette, specify in this behalf :]
51[Provided that the Central Government shall not specify, for the purposes of this sub-clause, such Capital Investment Bonds on or after the 1st day of June, 2002;]
52[(iic) in the case of an individual or a Hindu undivided family, interest on such Relief Bonds53 as the Central Government may, by notification in the Official Gazette, specify in this behalf ;]
54[(iid) interest on such bonds, as the Central Government may, by notification55 in the Official Gazette, specify, arising to—
(a) a non-resident Indian, being an individual owning the bonds ; or
(b) any individual owning the bonds by virtue of being a nominee or survivor of the non-resident Indian ; or
(c) any individual to whom the bonds have been gifted by the non-resident Indian :
Provided that the aforesaid bonds are purchased by a non-resident Indian in foreign exchange and the interest and principal received in respect of such bonds, whether on their maturity or otherwise, is not allowable to be taken out of India :
Provided further that where an individual, who is a non-resident Indian in any previous year in which the bonds are acquired, becomes a resident in India in any subsequent year, the provisions of this sub-clause shall continue to apply in relation to such individual :
Provided also that in a case where the bonds are encashed in a previous year prior to their maturity by an individual who is so entitled, the provisions of this sub-clause shall not apply to such individual in relation to the assessment year relevant to such previous year :
56[Provided also that the Central Government shall not specify, for the purposes of this sub-clause, such bonds on or after the 1st day of June, 2002.]
(iii) interest on securities held by the Issue Department of the Central Bank of Ceylon constituted under the Ceylon Monetary Law Act, 1949;
57[(iiia) interest payable to any bank incorporated in a country outside India and authorised to perform central banking functions in that country on any deposits made by it, with the approval of the Reserve Bank of India, with any scheduled bank.
59[(iiib) interest payable to the Nordic Investment Bank, being a multilateral financial institution constituted by the Governments of Denmark, Finland, Iceland, Norway and Sweden, on a loan advanced by it to a project approved by the Central Government in terms of the Memorandum of Understanding entered into by the Central Government with that Bank on the 25th day of November, 1986;]
60[(iiic) interest payable to the European Investment Bank, on a loan granted by it in pursuance of the framework-agreement for financial co-operation entered into on the 25th day of November, 1993 by the Central Government with that Bank;]
(iv) interest payable—
61[(a) by Government or a local authority on moneys borrowed by it before the 1st day of June, 2001 from, or debts owed by it before the 1st day of June, 2001 to, sources outside India;]
(b) by an industrial undertaking in India on moneys borrowed by it under 62[a loan agreement entered into before the 1st day of June, 2001 with any such financial institution] in a foreign country as may be approved63 in this behalf by the Central Government by general or special order ;
64(c) by an industrial undertaking in India on any moneys borrowed or debt incurred by it 65[before the 1st day of June, 2001] in a foreign country in respect of the purchase outside India of raw materials 66[or components] or capital plant and machinery, 67[to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf68, having regard to the terms of the loan or debt and its repayment.]
69[70[Explanation 1.]—For the purposes of this item, “purchase of capital plant and machinery” includes the purchase of such capital plant and machinery under a hire-purchase agreement or a lease agreement with an option to purchase such plant and machinery.]
71[Explanation 2.—For the removal of doubts, it is hereby declared that the usance interest payable outside India by an undertaking engaged in the business of ship-breaking in respect of purchase of a ship from outside India shall be deemed to be the interest payable on a debt incurred in a foreign country in respect of the purchase outside India;]
72[(d) by the Industrial Finance Corporation of India established by the Industrial Finance Corporation Act, 1948 (15 of 1948), or the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964), 73[or the Export-Import Bank of India established under the Export-Import Bank of India Act, 1981 (28 of 1981),] 74[or the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987),] 75[or the Small Industries Development Bank of India established under section 3 of the Small Industries Development Bank of India Act, 1989 (39 of 1989),] or the Industrial Credit and Investment Corporation of India [a company formed and registered under the Indian Companies Act, 1913 (7 of 1913)], on any moneys borrowed by it from sources outside India 76[before the 1st day of June, 2001], to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment;]
77[(e) by any other financial institution established in India or a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act), on any moneys borrowed by it from sources outside India 78[before the 1st day of June, 2001] under a loan agreement approved by the Central Government where the moneys are borrowed either for the purpose of advancing loans to industrial undertakings in India for purchase outside India of raw materials or capital plant and machinery or for the purpose of importing any goods which the Central Government may consider necessary to import in the public interest, to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment;]
79[(f) by an industrial undertaking in India on any moneys borrowed by it in foreign currency from sources outside India under a loan agreement approved by the Central Government 80[before the 1st day of June, 2001] having regard to the need for industrial development in India, to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment;
81[(fa) by a scheduled bank 82[***] 83[to a non-resident or to a person who is not ordinarily resident within the meaning of sub-section (6)† of section 6] on deposits in foreign currency where the acceptance of such deposits by the bank is approved by the Reserve Bank of India.
84[Explanation.—For the purposes of this item, the expression “scheduled bank” means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsi-diary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934), but does not include a co-operative bank;]
85[(g) by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes, 86[being a company eligible for deduction under clause (viii) of sub-section (1) of section 36] on any moneys borrowed by it in foreign currency from sources outside India under a loan agreement approved by the Central Government 87[before the 1st day of June, 2003], to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment.]
92[(h) by any public sector company in respect of such bonds or debentures and subject to such conditions, including the condition that the holder of such bonds or debentures registers his name and the holding with that company, as the Central Government may, by notification93 in the Official Gazette, specify in this behalf;]
94[(i) by Government on deposits made by an employee of the Central Government or a State Government 95[or a public sector company], in accordance with such scheme as the Central Government may, by notification96 in the Official Gazette, frame in this behalf, out of the moneys due to him on account of his retirement, whether on superannuation or otherwise.]
97[98[Explanation 1].—For the purposes of this sub-clause, the expression “industrial undertaking” means any undertaking which is engaged in—
(a) the manufacture or processing of goods; or
99[(aa) the manufacture of computer software or recording of programme on any disc, tape, perforated media or other information device; or]
(b) the business of generation or distribution of electricity or any other form of power; or
1[(ba) the business of providing telecommunication services; or]
(c) mining; or
(d) the construction of ships; or
2[(da) the business of ship-breaking; or]
3[(e) the operation of ships or aircrafts or construction or operation of rail systems.]]
4[Explanation 1A.—For the purposes of this sub-clause, the expression “interest” shall not include interest paid on delayed payment of loan or on default if it is in excess of two per cent per annum over the rate of interest payable in terms of such loan.]
5[Explanation 2.—For the purposes of this clause, the expression “interest” includes hedging transaction charges on account of currency fluctuation;]
6[(v) interest on—
(a) securities held by the Welfare Commissioner, Bhopal Gas Victims, Bhopal, in the Reserve Bank’s SGL Account No. SL/DH 048;
(b) deposits for the benefit of the victims of the Bhopal gas leak disaster held in such account, with the Reserve Bank of India or with a public sector bank, as the Central Government may, by notification7 in the Official Gazette, specify, whether prospectively or retrospectively but in no case earlier than the 1st day of April, 1994 in this behalf.
8[(vi) interest on Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified by the Central Government;]
9[(vii) interest on bonds—
(a) issued by a local authority or by a State Pooled Finance Entity; and
(b) specified by the Central Government by notification10 in the Official Gazette.
Explanation.—For the purposes of this sub-clause, the expression “State Pooled Finance Entity” shall mean such entity which is set up in accordance with the guidelines for the Pooled Finance Development Scheme notified by the Central Government in the Ministry of Urban Development;]
11[(viii) any income by way of interest received by a non-resident or a person who is not ordinarily resident, in India on a deposit made on or after the 1st day of April, 2005, in an Offshore Banking Unit12 referred to in clause (u) of section 2 of the Special Economic Zones Act, 2005;]
13[(15A) any payment made, by an Indian company engaged in the business of operation of aircraft, to acquire an aircraft or an aircraft engine (other than a payment for providing spares, facilities or services in connection with the operation of leased aircraft) on lease14 from the Government of a foreign State or a foreign enterprise under an agreement 15[16[, not being an agreement entered into between the 1st day of April, 1997 and the 31st day of March, 1999,] and] approved by the Central Government in this behalf :
17[Provided that nothing contained in this clause shall apply to any such agreement entered into on or after the 18[1st day of April, 19[2007]].]
20(16) 21scholarships granted to meet the cost of education;
22[(17) any income by way of—
(i) daily allowance received by any person by reason of his membership of Parliament or of any State Legislature or of any Committee thereof; 23[* * *]
24[(ii) any allowance received by any person by reason of his membership of Parliament under the Members of Parliament (Constituency Allowance) Rules, 1986;
25[(iii) any constituency allowance received by any person by reason of his membership of any State Legislature under any Act or rules made by that State Legislature;]]]
26[(17A) any payment made, whether in cash or in kind,—
(i) in pursuance of any award instituted in the public interest by the Central Government or any State Government or instituted by any other body and approved27 by the Central Government in this behalf; or
(ii) as a reward by the Central Government or any State Government for such purposes as may be approved27 by the Central Government in this behalf in the public interest;]
28[(18) any income by way of—
(i) pension received by an individual who has been in the service of the Central Government or State Government and has been awarded “Param Vir Chakra” or “Maha Vir Chakra” or “Vir Chakra” or such other gallantry award as the Central Government may, by notification29 in the Official Gazette, specify in this behalf;
(ii) family pension received by any member of the family of an individual referred to in sub-clause (i).
Explanation.—For the purposes of this clause, the expression “family” shall have the meaning assigned to it in the Explanation to clause (5);]
(18A) 30[Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]
31[(19) family pension received by the widow or children or nominated heirs, as the case may be, of a member of the armed forces (including para-military forces) of the Union, where the death of such member has occurred in the course of operational duties, in such circumstances and subject to such conditions, as may be prescribed32;]
33[(19A) the annual value of any one palace in the occupation of a Ruler, being a palace, the annual value whereof was exempt from income-tax before the commencement of the Constitution (Twenty-sixth Amendment) Act, 1971, by virtue of the provisions of the Merged States (Taxation Concessions) Order, 1949, or the Part B States (Taxation Concessions) Order, 1950, or, as the case may be, the Jammu and Kashmir (Taxation Concessions) Order, 1958:
Provided that for the assessment year commencing on the 1st day of April, 1972, the annual value of every such palace in the occupation34 of such Ruler during the relevant previous year shall be exempt from income-tax;]
35(20) the income of a local authority which is chargeable under the head 36[* * *] “Income from house property”, “Capital gains” or “Income from other sources” or from a trade or business carried on by it which accrues or arises from the supply of a commodity or service 37[(not being water or electricity) within its own jurisdictional area or from the supply of water or electricity within or outside its own jurisdictional area].
38[Explanation.—For the purposes of this clause, the expression “local authority” means—
(i) Panchayat as referred to in clause (d) of article 243 of the Constitution39; or
(ii) Municipality as referred to in clause (e) of article 243P of the Constitution40; or
(iii) Municipal Committee and District Board,
legally entitled to, or entrusted by the Government with, the control or management of a Municipal or local fund; or
(iv) Cantonment Board as defined in section 341 of the Cantonments Act, 1924 (2 of 1924);]
(20A) 42[***]
43[44(21) 45any income of a 46[research association] for the time being approved for the purpose of clause (ii) 47[or clause (iii)] of sub-section (1) of section 35:
Provided that the 46[research association]—
(a) applies its income, or accumulates it for application, wholly and exclusively to the objects for which it is established, and the provisions of sub-section (2) and sub-section (3) of section 11 shall apply in relation to such accumulation subject to the following modifications, namely :—
(i) in sub-section (2),—
(1) the words, brackets, letters and figure “referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section” shall be omitted;
(2) for the words “to charitable or religious purposes”, the words “for the purposes of 48[scientific research or research in social science or statistical research]” shall be substituted;
(3) the reference to “Assessing Officer” in clause (a) thereof shall be construed as a reference to the “prescribed authority” referred to in clause (ii) 47[or clause (iii)] of sub-section (1) of section 35;
(ii) in sub-section (3), in clause (a), for the words “charitable or religious purposes”, the words “the purposes of 48[scientific research or research in social science or statistical research]” shall be substituted; and
49[(b) does not invest or deposit its funds, other than—
(i) any assets held by the 50[research association] where such assets form part of the corpus of the fund of the association as on the 1st day of June, 1973;
(ii) any assets (being debentures issued by, or on behalf of, any company or corporation), acquired by the 50[research association] before the 1st day of March, 1983;
(iii) any accretion to the shares, forming part of the corpus of the fund mentioned in sub-clause (i), by way of bonus shares allotted to the 50[research association];
(iv) voluntary contributions received and maintained in the form of jewellery, furniture or any other article as the Board may, by notification in the Official Gazette, specify,
for any period during the previous year otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11:]
51[Provided further that the exemption under this clause shall not be denied in relation to voluntary contribution, other than voluntary contribution in cash or voluntary contribution of the nature referred to in clause (b) of the first proviso to this clause, subject to the condition that such voluntary contribution is not held by the 50[research association], otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, 1992, whichever is later:
Provided also] that nothing contained in this clause shall apply in relation to any income of the 50[research association], being profits and gains of business, unless the business is incidental to the attainment of its objectives and separate books of account are maintained by it in respect of such business:]
52[Provided also that where the 50[research association] is approved by the Central Government and subsequently that Government is satisfied that—
(i) the 50[research association] has not applied its income in accordance with the provisions contained in clause (a) of the first proviso; or
(ii) the 50[research association] has not invested or deposited its funds in accordance with the provisions contained in clause (b) of the first proviso; or
(iii) the activities of the 50[research association] are not genuine; or
(iv) the activities of the 53[research association] are not being carried out in accordance with all or any of the conditions subject to which such association was approved,
it may, at any time after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned association, by order, withdraw the approval and forward a copy of the order withdrawing the approval to such association and to the Assessing Officer;]
(22) 54[Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]
(22A) 55[Omitted by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999;]
56[(22B) any income of such news agency set up in India solely for collection and distribution of news as the Central Government may, by notification57 in the Official Gazette, specify in this behalf:
Provided that the news agency applies its income or accumulates it for application solely for collection and distribution of news and does not distribute its income in any manner to its members:
Provided further that any notification issued by the Central Government under this clause shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years (including an assessment year or years commencing before the date on which such notification is issued) as may be specified in the notification:]
58[Provided also that where the news agency has been specified, by notification, by the Central Government and subsequently that Government is satisfied that such news agency has not applied or accumulated or distributed its income in accordance with the provisions contained in the first proviso, it may, at any time after giving a reasonable opportunity of showing cause, rescind the notification and forward a copy of the order rescinding the notification to such agency and to the Assessing Officer;]
(23) 59[Omitted by the Finance Act, 2002, w.e.f. 1-4-2003;]
60[61(23A) any income (other than income chargeable under the head 62[* * *] “Income from house property” or any income received for rendering any specific services or income by way of interest or dividends derived from its investments) of an association or institution established in India having as its object the control, supervision, regulation or encouragement of the profession of law, medicine, accountancy, engineering or architecture or such other profession63 as the Central Government may specify in this behalf, from time to time, by notification in the Official Gazette:
Provided that—
(i) the association or institution applies its income, or accumulates it for application, solely to the objects for which it is established; and
(ii) the association or institution is for the time being approved64 for the purpose of this clause by the Central Government by general or special order:]
65[Provided further that where the association or institution has been approved by the Central Government and subsequently that Government is satisfied that—
(i) such association or institution has not applied or accumulated its income in accordance with the provisions contained in the first proviso; or
(ii) the activities of the association or institution are not being carried out in accordance with all or any of the conditions subject to which such association or institution was approved,
it may, at any time after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned association or institution, by order, withdraw the approval and forward a copy of the order withdrawing the approval to such association or institution and to the Assessing Officer;]
66[(23AA) any income received by any person on behalf of any Regimental Fund or Non-Public Fund established by the armed forces of the Union for the welfare of the past and present members of such forces or their dependants;]
67[(23AAA) any income received by any person on behalf of a fund established, for such purposes as may be notified68 by the Board in the Official Gazette, for the welfare of employees or their dependants and of which fund such employees are members if such fund fulfils the following conditions, namely :—
(a) the fund—
(i) applies its income or accumulates it for application, wholly and exclusively to the objects for which it is established; and
(ii) invests its funds and contributions and other sums received by it in the forms or modes specified in sub-section (5) of section 11;
(b) the fund is approved by the 68a[Principal Commissioner or] Commissioner in accordance with the rules69 made in this behalf:
Provided that any such approval shall at any one time have effect for such assessment year or years not exceeding three assessment years as may be specified in the order of approval;]
70[(23AAB) any income of a fund, by whatever name called, set up by the Life Insurance Corporation of India on or after the 1st day of August, 1996 71[or any other insurer] under a pension scheme,—
(i) to which contribution is made by any person for the purpose of receiving pension from such fund;
(ii) which is approved by the Controller of Insurance 72[or the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), as the case may be].
Explanation.—For the purposes of this clause, the expression “Controller of Insurance” shall have the meaning assigned to it in clause (5B) of section 2 of the Insurance Act, 1938 (4 of 1938)73;]
74[(23B) any income of an institution constituted as a public charitable trust or registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India, and existing solely for the development of khadi or village industries or both, and not for purposes of profit, to the extent such income is attributable to the business of production, sale, or marketing, of khadi or products of village industries:
Provided that—
(i) the institution applies its income, or accumulates it for application, solely for the development of khadi or village industries or both; and
(ii) the institution is, for the time being, approved for the purpose of this clause by the Khadi and Village Industries Commission:
Provided further that the Commission shall not, at any one time, grant such approval for more than three assessment years beginning with the assessment year next following the financial year in which it is granted:
75[Provided also that where the institution has been approved by the Khadi and Village Industries Commission and subsequently that Commission is satisfied that—
(i) the institution has not applied or accumulated its income in accordance with the provisions contained in the first proviso; or
(ii) the activities of the institution are not being carried out in accordance with all or any of the conditions subject to which such institution was approved,
it may, at any time after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned institution, by order, withdraw the approval and forward a copy of the order withdrawing the approval to such institution and to the Assessing Officer.]
(i) “Khadi and Village Industries Commission” means the Khadi and Village Industries Commission established under the Khadi and Village Industries Commission Act, 1956 (61 of 1956);
(ii) 76“khadi” and “village industries” have the meanings respectively assigned to them in that Act;]
77[(23BB) any income of an authority (whether known as the Khadi and Village Industries Board or by any other name) established in a State by or under a State or Provincial Act for the development of khadi or village industries in the State.
77[(23BBA) any income of any body or authority (whether or not a body corporate or corporation sole) established, constituted or appointed by or under any Central, State or Provincial Act which provides for the administration of any one or more of the following, that is to say, public religious or charitable trusts or endowments (including maths, temples, gurdwaras, wakfs, churches, synagogues, agiaries or other places of public religious worship) or societies for religious or charitable purposes registered as such under the Societies Registration Act, 1860 (21 of 1860), or any other law for the time being in force:
Provided that nothing in this clause shall be construed to exempt from tax the income of any trust, endowment or society referred to therein;]
78[(23BBB) any income of the European Economic Community derived in India by way of interest, dividends or capital gains from investments made out of its funds under such scheme79 as the Central Government may, by notification in the Official Gazette, specify in this behalf.
80[(23BBC ) any income of the SAARC Fund for Regional Projects set up by Colombo Declaration issued on the 21st day of December, 1991 by the Heads of State or Government of the Member Countries of South Asian Association for Regional Cooperation established on the 8th day of December, 1985 by the Charter of the South Asian Association for Regional Cooperation;]
81[(23BBD) any income of the Secretariat of the Asian Organisation of the Supreme Audit Institutions registered as “ASOSAI-SECRETARIAT” under the Societies Registration Act, 1860 (21 of 1860) for 82[ten previous years relevant to the assessment years beginning on the 1st day of April, 2001 and ending on the 31st day of March, 2011];
(23BBE) any income of the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);]
83[(23BBF) any income of the North-Eastern Development Finance Corporation Limited, being a company formed and registered under the Companies Act, 1956 (1 of 1956) 83a:
Provided that in computing the total income of the North-Eastern Development Finance Corporation Limited, the amount to the extent of—
(i) twenty per cent of the total income for assessment year beginning on the 1st day of April, 2006;
(ii) forty per cent of the total income for assessment year beginning on the 1st day of April, 2007;
(iii) sixty per cent of the total income for assessment year beginning on the 1st day of April, 2008;
(iv) eighty per cent of the total income for assessment year beginning on the 1st day of April, 2009;
(v) one hundred per cent of the total income for assessment year beginning on the 1st day of April, 2010 and any subsequent assessment year or years,
shall be included in such total income;]
84[(23BBG) any income of the Central Electricity Regulatory Commission constituted under sub-section (1) of section 76 of the Electricity Act, 2003 (36 of 2003);]
85[(23BBH) any income of the Prasar Bharati (Broadcasting Corporation of India) established under sub-section (1) of section 3 of the Prasar Bharati (Broadcasting Corporation of India) Act, 1990 (25 of 1990);]
86[87(23C) any income88 received by any person on behalf of—
(i) the Prime Minister’s National Relief Fund; or
(ii) the Prime Minister’s Fund (Promotion of Folk Art); or
(iii) the Prime Minister’s Aid to Students Fund; 89[or]
90[(iiia) the National Foundation for Communal Harmony; or]
91[(iiiab) any university or other educational institution92 existing92 solely92 for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government; or
(iiiac) any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, and which is wholly or substantially financed by the Government; or
The following Explanation shall be inserted after sub-clause (iiiac) of clause (23C) of section 10 by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
Explanation.—For the purposes of sub-clauses (iiiab) and (iiiac), any university or other educational institution, hospital or other institution referred therein, shall be considered as being substantially financed by the Government for any previous year, if the Government grant to such university or other educational institution, hospital or other institution exceeds such percentage of the total receipts including any voluntary contributions, as may be prescribed, of such university or other educational institution, hospital or other institution, as the case may be, during the relevant previous year.
(iiiad) any university or other educational institution92 existing92 solely92 for educational purposes and not for purposes of profit if the aggregate annual receipts of such university or educational institution do not exceed the amount of annual receipts as may be prescribed93; or
(iiiae) any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, if the aggregate annual receipts of such hospital or institution do not exceed the amount of annual receipts as may be prescribed93; or]
94[(iv) 95any other fund or institution established for charitable purposes 96[which may be approved by the prescribed authority97], having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States; or
(v) 98any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable purposes, 99[which may be approved by the prescribed authority1], having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto is properly applied for the objects thereof;
2[(vi) any university or other educational institution3 existing3 solely3 for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved4 by the prescribed authority5; or
(via) any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiac) or sub-clause (iiiae) and which may be approved6 by the prescribed authority7:]
Provided that the fund or trust or institution 8[or any university or other educational institution9 or any hospital or other medical institution] referred to in sub-clause (iv) or sub-clause (v) 8[or sub-clause (vi) or sub-clause (via)] shall make an application in the prescribed form10 and manner to the prescribed authority11 for the purpose of grant of the exemption, or continuance thereof, under sub-clause (iv) or sub-clause (v) 12[or sub-clause (vi) or sub-clause (via)] :
13[Provided further that the prescribed authority, before approving any fund or trust or institution or any university or other educational institution or any hospital or other medical institution, under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), may call for such documents (including audited annual accounts) or information from the fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, as it thinks necessary in order to satisfy itself about the genuineness of the activities of such fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, and the prescribed authority may also make such inquiries as it deems necessary in this behalf:]
Provided also that the fund or trust or institution 14[or any university or other educational institution15 or any hospital or other medical institution] referred to in sub-clause (iv) or sub-clause (v) 14[or sub-clause (vi) or sub-clause (via)]—
16[(a) applies its income, or accumulates it for application, wholly and exclusively to the objects for which it is established and in a case where more than fifteen per cent of its income is accumulated on or after the 1st day of April, 2002, the period of the accumulation of the amount exceeding fifteen per cent of its income shall in no case exceed five years; and]
17[(b) does not invest or deposit its funds, other than—
(i) any assets held by the fund, trust or institution 18[or any university or other educational institution19 or any hospital or other medical institution] where such assets form part of the corpus of the fund, trust or institution 20[or any university or other educational institution or any hospital or other medical institution] as on the 1st day of June, 1973;
21[(ia) any asset, being equity shares of a public company, held by any university or other educational institution or any hospital or other medical institution where such assets form part of the corpus of any university or other educational institution or any hospital or other medical institution as on the 1st day of June, 1998;]
(ii) any assets (being debentures issued by, or on behalf of, any company or corporation), acquired by the fund, trust or institution 22[or any university or other educational institution23 or any hospital or other medical institution] before the 1st day of March, 1983;
(iii) any accretion to the shares, forming part of the corpus mentioned in sub-clause (i) 24[and sub-clause (ia)], by way of bonus shares allotted to the fund, trust or institution 24a[or any university or other educational institution or any hospital or other medical institution] ;
(iv) voluntary contributions received and maintained in the form of jewellery, furniture or any other article as the Board may, by notification in the Official Gazette, specify,
for any period during the previous year otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11:]
Provided also that the exemption under sub-clause (iv) or sub-clause (v) shall not be denied in relation to any funds invested or deposited before the 1st day of April, 1989, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 if such funds do not continue to remain so invested or deposited after the 30th day of March, 25[1993] :
26[Provided also that the exemption under sub-clause (vi) or sub-clause (via) shall not be denied in relation to any funds invested or deposited before the 1st day of June, 1998, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 if such funds do not continue to remain so invested or deposited after the 30th day of March, 2001:]
27[Provided also that the exemption under sub-clause (iv) or sub-clause (v) 26[or sub-clause (vi) or sub-clause (via)] shall not be denied in relation to voluntary contribution, other than voluntary contribution in cash or voluntary contribution of the nature referred to in clause (b) of the third proviso to this sub-clause, subject to the condition that such voluntary contribution is not held by the trust or institution 28[or any university or other educational institution or any hospital or other medical institution], otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, 1992, whichever is later:]
Provided also that nothing contained in sub-clause (iv) or sub-clause (v) 29[or sub-clause (vi) or sub-clause (via)] shall apply in relation to any income of the fund or trust or institution 29[or any university or other educational institution or any hospital or other medical institution], being profits and gains of business, unless the business is incidental to the attainment of its objectives and separate books of account are maintained by it in respect of such business:
Provided also that any 30[notification issued by the Central Government under sub-clause (iv) or sub-clause (v), before the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President*, shall, at any one time31, have effect for such assessment year or years, not exceeding three assessment years] (including an assessment year or years commencing before the date on which such notification is issued) as may be specified in the notification:]
32[Provided also that where an application under the first proviso is made on or after the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President,* every notification under sub-clause (iv) or sub-clause (v) shall be issued or approval under 33[sub-clause (iv) or sub-clause (v) or] sub-clause (vi) or sub-clause (via) shall be granted or an order rejecting the application shall be passed within the period of twelve months from the end of the month in which such application was received:
Provided also that where the total income, of the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), without giving effect to the provisions of the said sub-clauses, exceeds the maximum amount which is not chargeable to tax in any previous year, such trust or institution or any university or other educational institution or any hospital or other medical institution shall get its accounts audited in respect of that year by an accountant as defined in the Explanation below sub-section (2) of section 288 and furnish along with the return of income for the relevant assessment year, the report of such audit in the prescribed form34 duly signed and verified by such accountant and setting forth such particulars as may be prescribed:]
35[Provided also that any amount of donation received by the fund or institution in terms of clause (d) of sub-section (2) of section 80G 36[in respect of which accounts of income and expenditure have not been rendered to the authority prescribed under clause (v) of sub-section (5C) of that section, in the manner specified in that clause, or] which has been utilised for purposes other than providing relief to the victims of earthquake in Gujarat or which remains unutilised in terms of sub-section (5C) of section 80G and not transferred to the Prime Minister’s National Relief Fund on or before the 31st day of March, 37[2004] shall be deemed to be the income of the previous year and shall accordingly be charged to tax:]
38[***]
39[Provided also that where the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) does not apply its income during the year of receipt and accumulates it, any payment or credit out of such accumulation to any trust or institution registered under section 12AA or to any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) shall not be treated as application of income to the objects for which such fund or trust or institution or university or educational institution or hospital or other medical institution, as the case may be, is established :
Provided also that where the fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) is notified by the Central Government 40[or is approved by the prescribed authority, as the case may be,] or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via), is approved by the prescribed authority and subsequently that Government or the prescribed authority is satisfied that—
(i) such fund or institution or trust or any university or other educational institution or any hospital or other medical institution has not—
(A) applied its income in accordance with the provisions contained in clause (a) of the third proviso; or
(B) invested or deposited its funds in accordance with the provisions contained in clause (b) of the third proviso; or
(ii) the activities of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution—
(A) are not genuine; or
(B) are not being carried out in accordance with all or any of the conditions subject to which it was notified or approved,
it may, at any time after giving a reasonable opportunity of showing cause against the proposed action to the concerned fund or institution or trust or any university or other educational institution or any hospital or other medical institution, rescind the notification or, by order, withdraw the approval, as the case may be, and forward a copy of the order rescinding the notification or withdrawing the approval to such fund or institution or trust or any university or other educational institution or any hospital or other medical institution and to the Assessing Officer:]
41[Provided also that in case the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in the first proviso makes an application on or after the 1st day of June, 2006 for the purposes of grant of exemption or continuance thereof, such application shall be 42[made on or before the 30th day of September of the relevant assessment year] from which the exemption is sought :]
43[Provided also that any anonymous donation referred to in section 115BBC on which tax is payable in accordance with the provisions of the said section shall be included in the total income :]
44[Provided also that all pending applications, on which no notification has been issued under sub-clause (iv) or sub-clause (v) before the 1st day of June, 2007, shall stand transferred on that day to the prescribed authority and the prescribed authority may proceed with such applications under those sub-clauses from the stage at which they were on that day:]
45[Provided also that the income of a trust or institution referred to in sub-clause (iv) or sub-clause (v) shall be included in its total income of the previous year if the provisions of the first proviso to clause (15) of section 2 become applicable to such trust or institution in the said previous year, whether or not any approval granted or notification issued in respect of such trust or institution has been withdrawn or rescinded;]
The following proviso and the Explanation shall be inserted after the seventeenth proviso to clause (23C) of section 10 by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
Provided also that where the fund or institution referred to in sub-clause (iv) or the trust or institution referred to in sub-clause (v) has been notified by the Central Government or approved by the prescribed authority, as the case may be, or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via), has been approved by the prescribed authority, and the notification or the approval is in force for any previous year, then, nothing contained in any other provision of this section [other than clause (1) thereof] shall operate to exclude any income received on behalf of such fund or trust or institution or university or other educational institution or hospital or other medical institution, as the case may be, from the total income of the person in receipt thereof for that previous year.
Explanation.—In this clause, where any income is required to be applied or accumulated, then, for such purpose the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this clause in the same or any other previous year;
46[(23D) 47[48[49[subject to the provisions of Chapter XII-E, any income of]—]
(i) a Mutual Fund registered under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or regulations made thereunder;
(ii) such other Mutual Fund set up by a public sector bank or a public financial institution or authorised by the Reserve Bank of India and subject to such conditions as the Central Government may, by notification50 in the Official Gazette, specify in this behalf.]
(a) the expression “public sector bank” means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new Bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Under-takings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Under-takings) Act, 1980 (40 of 1980) 51[and a bank included in the category “other public sector banks” by the Reserve Bank of India];
(b) the expression “public financial institution” shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956)52;]
53-54[(c) the expression “Securities and Exchange Board of India” shall have the meaning assigned to it in clause (a) of sub-section (1) of section 2 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);]
55[(23DA) any income of a securitisation trust from the activity of securitisation.
(a) “securitisation” shall have the same meaning as assigned to it,—
(i) in clause (r) of sub-regulation (1) of regulation 256 of the Securities and Exchange Board of India (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) and the Securities Contracts (Regulation) Act, 1956 (42 of 1956); or
(ii) under the guidelines on securitisation of standard assets issued by the Reserve Bank of India;
(b) “securitisation trust” shall have the meaning assigned to it in the Explanation below section 115TC;]
(23E) 57[Omitted by the Finance Act, 2002, w.e.f. 1-4-2003;]
58[(23EA) any income 59[, by way of contributions received from recognised stock exchanges and the members thereof,] of such Investor Protection Fund set up by recognised stock exchanges in India, either jointly or separately, as the Central Government may, by notification60 in the Official Gazette, specify in this behalf:
Provided that where 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 recognised stock exchange, 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;]
61[(23EB) any income of the Credit Guarantee Fund Trust for Small 62[***] Industries, being a trust created by the Government of India and the Small Industries Development Bank of India established under sub-section (1) of section 3 of the Small Industries Development Bank of India Act, 1989 (39 of 1989), for five previous years relevant to the assessment years beginning on the 1st day of April, 2002 and ending on the 31st day of March, 2007;]
63[(23EC) any income, by way of contributions received from commodity exchanges and the members thereof, of such Investor Protection Fund set up by commodity exchanges in India, either jointly or separately, as the Central Government may, by notification in the Official Gazette, specify in this behalf:
Provided that where any amount standing to the credit of the said Fund and not charged to income-tax during any previous year is shared, either wholly or in part, with a commodity exchange, 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, “commodity exchange” shall mean a “registered association” as defined in clause (jj) of section 2 of the Forward Contracts (Regulation) Act, 1952 (74 of 1952)64;]
65[(23ED) any income, by way of contributions received from a depository, of such Investor Protection Fund set up in accordance with the regulations by a depository as the Central Government may, by notification in the Official Gazette, specify in this behalf:
Provided that where 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 depository, 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.
(i) “depository” shall have the same meaning as assigned to it in clause (e) of sub-section (1) of section 266 of the Depositories Act, 1996 (22 of 1996);
(ii) “regulations” means the regulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992) and the Depositories Act, 1996 (22 of 1996);]
67[(23F) any income by way of dividends or long-term capital gains of a venture capital fund or a venture capital company from investments made by way of equity shares in a venture capital undertaking :
Provided that such venture capital fund or venture capital company is approved for the purposes of this clause by the prescribed autho-rity68 in accordance with the rules69 made in this behalf and satisfies the prescribed conditions :
Provided further that any approval by the prescribed authority shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years, as may be specified in the order of approval :
70[Provided also that nothing contained in this clause shall apply in respect of any investment made after the 31st day of March, 1999.]
71[* * *]
71[* * *]
Explanation.—For the purposes of this clause,—
(a) “venture capital fund” means such fund, operating under a trust deed registered under the provisions of the Registration Act, 1908 (16 of 1908), established to raise monies by the trustees for investments mainly by way of acquiring equity shares of a venture capital undertaking in accordance with the prescribed guidelines;
(b) “venture capital company” means such company as has made investments by way of acquiring equity shares of venture capital undertakings in accordance with the prescribed guidelines;
72[(c) “venture capital undertaking” means such domestic company whose shares are not listed in a recognised stock exchange in India and which is engaged in the business of generation or generation and distribution of electricity or any other form of power or engaged in the business of providing telecommunication services or in the business of developing, maintaining and operating any infrastructure facility or engaged in the manufacture or production of such articles or things (including computer software) as may be notified73 by the Central Government in this behalf; and
(d) “infrastructure facility” means a road, highway, bridge, airport, port, rail system, a water supply project, irrigation project, sanitation and sewerage system or any other public facility of a similar nature as may be notified by the Board in this behalf in the Official Gazette and which fulfils the conditions specified in sub-section (4A) of section 80-IA;]
74[(23FA) any income by way of dividends 75[, other than dividends referred to in section 115-O], or long-term capital gains of a venture capital fund or a venture capital company from investments made by way of equity shares in a venture capital undertaking :
Provided that such venture capital fund or venture capital company is approved, for the purposes of this clause, by the Central Government on an application made to it in accordance with the rules76 made in this behalf and which satisfies the prescribed conditions :
Provided further that any approval by the Central Government shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years, as may be specified in the order of approval :
77[Provided also that nothing contained in this clause shall apply in respect of any investment made after the 31st day of March, 2000.]
Explanation.—For the purposes of this clause,—
(a) “venture capital fund” means such fund, operating under a trust deed registered under the provisions of the Registration Act, 1908 (16 of 1908), established to raise monies by the trustees for investments mainly by way of acquiring equity shares of a venture capital undertaking in accordance with the prescribed guidelines;
(b) “venture capital company” means such company as has made investments by way of acquiring equity shares of venture capital undertakings in accordance with the prescribed guidelines; and
(c) “venture capital undertaking” means such domestic company whose shares are not listed in a recognised stock exchange in India and which is engaged in the—
(i) business of—
(A) software;
(B) information technology;
(C) production of basic drugs in the pharmaceutical sector;
(D) bio-technology;
(E) agriculture and allied sectors; or
(F) such other sectors as may be notified78 by the Central Government in this behalf; or
(ii) production or manufacture of any article or substance for which patent has been granted to the National Research Laboratory or any other scientific research institution approved by the Department of Science and Technology;]
79[(23FB) any income of a venture capital company or venture capital fund 80[from investment] in a venture capital undertaking.
81[Explanation.—For the purposes of this clause,—
(a) “venture capital company” means a company which—
(A) has been granted a certificate of registration, before the 21st day of May, 2012, as a Venture Capital Fund and is regulated under the Securities and Exchange Board of India (Venture Capital Funds) Regulations, 1996 (hereinafter referred to as the Venture Capital Funds Regulations) made under the Securities and Exchange Board of India Act, 1992 (15 of 1992); or
(B) has been granted a certificate of registration as Venture Capital Fund as a sub-category of Category I Alternative Investment Fund and is regulated under the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012 (hereinafter referred to as the Alternative Investment Funds Regulations) made under the Securities and Exchange Board of India Act, 1992 (15 of 1992), and which fulfils the following conditions, namely:—
(i) it is not listed on a recognised stock exchange;
(ii) it has invested not less than two-thirds of its investible funds in unlisted equity shares or equity linked instruments of venture capital undertaking; and
(iii) it has not invested in any venture capital undertaking in which its director or a substantial shareholder (being a beneficial owner of equity shares exceeding ten per cent of its equity share capital) holds, either individually or collectively, equity shares in excess of fifteen per cent of the paid-up equity share capital of such venture capital undertaking;
(b) “venture capital fund” means a fund—
(A) operating under a trust deed registered under the provisions of the Registration Act, 1908 (16 of 1908), which—
(I) has been granted a certificate of registration, before the 21st day of May, 2012, as a Venture Capital Fund and is regulated under the Venture Capital Funds Regulations; or
(II) has been granted a certificate of registration as Venture Capital Fund as a sub-category of Category I Alternative Investment Fund under the Alternative Investment Funds Regulations and which fulfils the following conditions, namely:—
(i) it has invested not less than two-thirds of its investible funds in unlisted equity shares or equity linked instruments of venture capital undertaking;
(ii) it has not invested in any venture capital undertaking in which its trustee or the settler holds, either individually or collectively, equity shares in excess of fifteen per cent of the paid-up equity share capital of such venture capital undertaking; and
(iii) the units, if any, issued by it are not listed in any recognised stock exchange; or
(B) operating as a venture capital scheme made by the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963);
(c) “venture capital undertaking” means—
(i) a venture capital undertaking as defined in clause (n) of regulation 2 of the Venture Capital Funds Regulations82; or
(ii) a venture capital undertaking as defined in clause (aa) of sub-regulation (1) of regulation 2 of the Alternative Investment Funds Regulations82;]
83[***]
The following clauses (23FC) and (23FD) shall be inserted after clause (23FB) of section 10 by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
(23FC) any income of a business trust by way of interest received or receivable from a special purpose vehicle.
Explanation.—For the purposes of this clause, the expression “special purpose vehicle” means an Indian company in which the business trust holds controlling interest and any specific percentage of shareholding or interest, as may be required by the regulations under which such trust is granted registration;
(23FD) any distributed income, referred to in section 115UA, received by a unit holder from the business trust, not being that proportion of the income which is of the same nature as the income referred to in clause (23FC);
(23G) 84[Omitted by the Finance Act, 2006, w.e.f. 1-4-2007;]
85[86(24) any income chargeable under the heads “Income from house property” and “Income from other sources” of—
(a) a registered union within the meaning of the Trade Unions Act, 1926 (16 of 1926), formed primarily for the purpose of regulating the relations between workmen and employers or between workmen and workmen;
(b) an association of registered unions referred to in sub-clause (a);]
(25) (i) interest on securities which are held by, or are the property of, any provident fund to which the Provident Funds Act, 1925 (19 of 1925), applies, and any capital gains of the fund arising from the sale, exchange or transfer of such securities;
(ii) any income received by the trustees on behalf of a recognised provident fund;
(iii) any income received by the trustees on behalf of an approved superannuation fund;
87[(iv) any income received by the trustees on behalf of an approved gratuity fund;]
88[(v) any income received—
(a) by the Board of Trustees constituted under the Coal Mines Provident Funds and Miscellaneous Provisions Act, 1948 (46 of 1948), on behalf of the Deposit-linked Insurance Fund established under section 3G of that Act; or
(b) by the Board of Trustees constituted under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952), on behalf of the Deposit-linked Insurance Fund established under section 6C of that Act;]
89[(25A) any income of the Employees’ State Insurance Fund set up under the provisions of the Employees’ State Insurance Act, 1948 (34 of 1948);]
90[(26) 91in the case of a member of a 92Scheduled Tribe as defined in clause (25) of article 366 of the Constitution, residing93 in any area specified93 in Part I or Part II of the Table appended to paragraph 20 of the Sixth Schedule to the Constitution or in the 94[States of Arunachal Pradesh, Manipur, Mizoram, Nagaland and Tripura] or in the areas covered by notification No. TAD/R/35/50/109, dated the 23rd February, 1951, issued by the Governor of Assam under the proviso to sub-paragraph (3) of the said paragraph 20 [as it stood immediately before the commencement of the North-Eastern Areas (Reorganisation) Act, 1971 (81 of 1971)] 95[or in the Ladakh region of the State of Jammu and Kashmir], any income which accrues or arises to him,—
(a) from any source in the areas 96[or States aforesaid], or
(b) by way of dividend or interest on securities;]
97[(26A) any income accruing or arising to any person 98[* * *] from any source in the district of Ladakh or outside India in any previous year relevant to any assessment year commencing before the 1st day of April, 99[1989], where such person is resident in the said district in that previous year :
Provided that this clause shall not apply in the case of any such person unless he was resident in that district in the previous year relevant to the assessment year commencing on the 1st day of April, 1962.
1[Explanation 1].—For the purposes of this clause, a person shall be deemed to be resident in the district of Ladakh if he fulfils the requirements of sub-section (1)2 or sub-section (2) or sub-section (3) or sub-section (4) of section 6, as the case may be, subject to the modifications that—
(i) references in those sub-sections to India shall be construed as references to the said district; and
(ii) in clause (i) of sub-section (3), reference to Indian company shall be construed as reference to a company formed and registered under any law for the time being in force in the State of Jammu and Kashmir and having its registered office in that district in that year.]
3[Explanation 2.—In this clause, references to the district of Ladakh shall be construed as references to the areas comprised in the said district on the 30th day of June, 1979;]
(26AA) 4[* * *]
5[(26AAA) 6in case of an individual, being a Sikkimese, any income which accrues or arises to him—
(a) from any source in the State of Sikkim; or
(b) by way of dividend or interest on securities:
Provided that nothing contained in this clause shall apply to a Sikkimese woman who, on or after the 1st day of April, 2008, marries an individual who is not a Sikkimese.
Explanation.—For the purposes of this clause, “Sikkimese” shall mean—
(i) an individual, whose name is recorded in the register maintained under the Sikkim Subjects Regulation, 1961 read with the Sikkim Subject Rules, 1961 (hereinafter referred to as the “Register of Sikkim Subjects” ), immediately before the 26th day of April, 1975; or
(ii) an individual, whose name is included in the Register of Sikkim Subjects by virtue of the Government of India Order No. 26030/36/90-I.C.I., dated the 7th August, 1990 and Order of even number dated the 8th April, 1991; or
(iii) any other individual, whose name does not appear in the Register of Sikkim Subjects, but it is established beyond doubt that the name of such individual’s father or husband or paternal grand-father or brother from the same father has been recorded in that register;]
7-8[(26AAB) any income of an agricultural produce market committee or board constituted under any law for the time being in force for the purpose of regulating the marketing of agricultural produce;]
9[(26B) any income of a corporation established by a Central, State or Provincial Act or of any other body, institution or association (being a body, institution or association wholly financed by Government) where such corporation or other body or institution or association has been established or formed for promoting the interests of the 10[members of the Scheduled Castes or the Scheduled Tribes or backward classes or of any two or all of them].
11[Explanation.—For the purposes of this clause,—
(a) 12“Scheduled Castes” and 13“Scheduled Tribes” shall have the meanings respectively assigned to them in clauses (24) and (25) of article 366 of the Constitution;
(b) “backward classes” means such classes of citizens, other than the Scheduled Castes and the Scheduled Tribes, as may be notified—
(i) by the Central Government; or
(ii) by any State Government,
as the case may be, from time to time;]
14[(26BB) any income of a corporation established by the Central Government or any State Government for promoting the interests of the members of a minority community.
16[(26BBB) any income of a corporation established by a Central, State or Provincial Act for the welfare and economic upliftment of ex-servicemen being the citizens of India.
Explanation.—For the purposes of this clause, “ex-serviceman” means a person who has served in any rank, whether as combatant or non-combatant, in the armed forces of the Union or armed forces of the Indian States before the commencement of the Constitution (but excluding the Assam Rifles, Defence Security Corps, General Reserve Engineering Force, Lok Sahayak Sena, Jammu and Kashmir Militia and Territorial Army) for a continuous period of not less than six months after attestation and has been released, otherwise than by way of dismissal or discharge on account of misconduct or inefficiency, and in the case of a deceased or incapacitated ex-serviceman includes his wife, children, father, mother, minor brother, widowed daughter and widowed sister, wholly dependant upon such ex-serviceman immediately before his death or incapacitation;]
17[(27) any income of a co-operative society formed for promoting the interests of the members of either the Scheduled Castes or Scheduled Tribes or both referred to in clause (26B) :
Provided that the membership of the co-operative society consists of only other co-operative societies formed for similar purposes and the finances of the society are provided by the Government and such other societies;]
(28) 18[* * *]
(29) 19[Omitted by the Finance Act, 2002, w.e.f. 1-4-2003;]
20[(29A) any income accruing or arising to—
(a) the Coffee Board constituted under section 4 of the Coffee Act, 1942 (7 of 1942) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1962 or the previous year in which such Board was constituted, whichever is later;
(b) the Rubber Board constituted under sub-section (1) of section 4 of the Rubber Board Act, 1947 (24 of 1947) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1962 or the previous year in which such Board was constituted, whichever is later;
(c) the Tea Board established under section 4 of the Tea Act, 1953 (29 of 1953) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1962 or the previous year in which such Board was constituted, whichever is later;
(d) the Tobacco Board constituted under the Tobacco Board Act, 1975 (4 of 1975) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1975 or the previous year in which such Board was constituted, whichever is later;
(e) the Marine Products Export Development Authority established under section 4 of the Marine Products Export Development Authority Act, 1972 (13 of 1972) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1972 or the previous year in which such Authority was constituted, whichever is later;
(f) the Agricultural and Processed Food Products Export Development Authority established under section 4 of the Agricultural and Processed Food Products Export Development Act, 1985 (2 of 1986) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1985 or the previous year in which such Authority was constituted, whichever is later;
(g) the Spices Board constituted under sub-section (1) of section 3 of the Spices Board Act, 1986 (10 of 1986) in any previous year relevant to any assessment year commencing on or after the 1st day of April, 1986 or the previous year in which such Board was constituted, whichever is later;]
21[(h) the Coir Board established under section 4 of the Coir Industry Act, 1953 (45 of 1953);]
22[(30) 23in the case of an assessee who carries on the business of growing and manufacturing tea in India, the amount of any subsidy received from or through the Tea Board under any such scheme24 for replantation or replacement of tea bushes 25[or for rejuvenation or consolidation of areas used for cultivation of tea] as the Central Government may, by notification in the Official Gazette, specify:
Provided that the assessee furnishes to the 26[Assessing] Officer, along with his return of income27 for the assessment year concerned or within such further time as the 26[Assessing] Officer may allow, a certificate from the Tea Board as to the amount of such subsidy paid to the assessee during the previous year.
28[(31) in the case of an assessee who carries on the business of growing and manufacturing rubber, coffee, cardamom or such other commodity in India, as the Central Government may, by notification in the Official Gazette, specify in this behalf, the amount of any subsidy received from or through the concerned Board under any such scheme for replantation or replacement of rubber plants, coffee plants, cardamom plants or plants for the growing of such other commodity or for rejuvenation or consolidation of areas used for cultivation of rubber, coffee, cardamom or such other commodity as the Central Government may, by notification in the Official Gazette, specify:
Provided that the assessee furnishes to the Assessing Officer, along with his return of income29 for the assessment year concerned or within such further time as the Assessing Officer may allow, a certificate from the concerned Board, as to the amount of such subsidy paid to the assessee during the previous year.
(i) in relation to rubber, the Rubber Board constituted under section 4 of the Rubber Act, 1947 (24 of 1947),
(ii) in relation to coffee, the Coffee Board constituted under section 4 of the Coffee Act, 1942 (7 of 1942),
(iii) in relation to cardamom, the Spices Board constituted under section 3 of the Spices Board Act, 1986 (10 of 1986),
(iv) in relation to any other commodity specified under this clause, any Board or other authority established under any law for the time being in force which the Central Government may, by notification in the Official Gazette, specify in this behalf;]
30[(32) in the case of an assessee referred to in sub-section (1A) of section 64, any income includible in his total income under that sub-section, to the extent such income does not exceed one thousand five hundred rupees in respect of each minor child whose income is so includible;]
31[(33) any income arising from the transfer of a capital asset, being a unit of the Unit Scheme, 1964 referred to in Schedule I to the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002)32 and where the transfer of such asset takes place on or after the 1st day of April, 2002;]
33[(34) any income by way of dividends referred to in section 115-O;
34[***]
35[(34A) any income arising to an assessee, being a shareholder, on account of buy back of shares (not being listed on a recognised stock exchange) by the company as referred to in section 115QA;]
(35) any income by way of,—
(a) income received in respect of the units of a Mutual Fund specified under clause (23D); or
(b) income received in respect of units from the Administrator of the specified undertaking; or
(c) income received in respect of units from the specified company:
Provided that this clause shall not apply to any income arising from transfer of units of the Administrator of the specified undertaking or of the specified company or of a mutual fund, as the case may be.
Explanation.—For the purposes of this clause,—
(a) “Administrator” means the Administrator as referred to in clause (a) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002)36;
(b) “specified company” means a company as referred to in clause (h) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002)36;
37[(35A) any income by way of distributed income referred to in section 115TA received from a securitisation trust by any person being an investor of the said trust.
(36) any income arising from the transfer of a long-term capital asset, being an eligible equity share in a company purchased on or after the 1st day of March, 2003 and before the 1st day of March, 2004 and held for a period of twelve months or more.
Explanation.—For the purposes of this clause, “eligible equity share” means,—
(i) any equity share in a company being a constituent of BSE-500 Index of the Stock Exchange, Mumbai as on the 1st day of March, 2003 and the transactions of purchase and sale of such equity share are entered into on a recognised stock exchange in India;
(ii) any equity share in a company allotted through a public issue on or after the 1st day of March, 2003 and listed in a recognised stock exchange in India before the 1st day of March, 2004 and the transaction of sale of such share is entered into on a recognised stock exchange in India;]
38[(37) in the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head “Capital gains” arising from the transfer of agricultural land, where—
(i) such land is situate in any area referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of section 2;
(ii) such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual or a parent of his;
(iii) such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India;
(iv) such income has arisen from the compensation or consideration for such transfer received by such assessee on or after the 1st day of April, 2004.
(38) any income arising from the transfer of a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund 38a[or a unit of a business trust] where—
(a) the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force39; and
(b) such transaction is chargeable to securities transaction tax under that Chapter :
40[Provided that the income by way of long-term capital gain of a company shall be taken into account in computing the book profit and income-tax payable under section 115JB.]
The following proviso shall be inserted after the existing proviso to clause (38) of section 10 by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
Provided further that the provisions of this clause shall not apply in respect of any income arising from transfer of units of a business trust which were acquired in consideration of a transfer referred to in clause (xvii) of section 47.
Explanation.—For the purposes of this clause, “equity oriented fund” means a fund—
(i) where the investible funds are invested by way of equity shares in domestic companies to the extent of more than 41[sixty-five] per cent of the total proceeds of such fund; and
(ii) which has been set up under a scheme of a Mutual Fund specified under clause (23D) :
Provided that the percentage of equity shareholding of the fund shall be computed with reference to the annual average of the monthly averages of the opening and closing figures;]
42[(39) any specified income, arising from any international sporting event held in India, to the person or persons notified43 by the Central Government in the Official Gazette, if such international sporting event—
(a) is approved by the international body regulating the international sport relating to such event;
(b) has participation by more than two countries;
(c) is notified43 by the Central Government in the Official Gazette for the purposes of this clause.
Explanation.—For the purposes of this clause, “the specified income” means the income, of the nature and to the extent, arising from the international sporting event, which the Central Government may notify43 in this behalf;
(40) any income of any subsidiary company by way of grant or otherwise received from an Indian company, being its holding company engaged in the business of generation or transmission or distribution of power if receipt of such income is for settlement of dues in connection with reconstruction or revival of an existing business of power generation:
Provided that the provisions of this clause shall apply if reconstruction or revival of any existing business of power generation is by way of transfer of such business to the Indian company notified under sub-clause (a) of clause (v) of sub-section (4) of section 80-IA;
(41) any income arising from transfer of a capital asset, being an asset of an undertaking engaged in the business of generation or transmission or distribution of power where such transfer is effected on or before the 31st day of March, 2006, to the Indian company notified under sub-clause (a) of clause (v) of sub-section (4) of section 80-IA;]
44[(42) any specified income arising to a body or authority which—
(a) has been established or constituted or appointed under a treaty or an agreement entered into by the Central Government with two or more countries or a convention signed by the Central Government;
(b) is established or constituted or appointed not for the purposes of profit;
(c) is notified by the Central Government in the Official Gazette45 for the purposes of this clause.
Explanation.—For the purposes of this clause, “specified income” means the income, of the nature and to the extent, arising to the body or authority referred to in this clause, which the Central Government may notify45 in this behalf;]
46[(43) any amount received by an individual as a loan, either in lump sum or in instalment, in a transaction of reverse mortgage referred to in clause (xvi) of section 47;]
47[(44) any income received by any person for, or on behalf of, the New Pension System Trust established on the 27th day of February, 2008 under the provisions of the Indian Trusts Act, 1882 (2 of 1882);]
48[(45) any allowance or perquisite, as may be notified49 by the Central Government in the Official Gazette in this behalf, paid to the Chairman or a retired Chairman or any other member or retired member of the Union Public Service Commission;]
50[(46) any specified income arising to a body or authority or Board or Trust or Commission (by whatever name called) which—
(a) has been established or constituted by or under a Central, State or Provincial Act, or constituted by the Central Government or a State Government, with the object of regulating or administering any activity for the benefit of the general public;
(b) is not engaged in any commercial activity; and
(c) is notified51 by the Central Government in the Official Gazette for the purposes of this clause.
Explanation.—For the purposes of this clause, “specified income” means the income, of the nature and to the extent arising to a body or authority or Board or Trust or Commission (by whatever name called) referred to in this clause, which the Central Government may, by notification in the Official Gazette, specify in this behalf;
(47) any income of an infrastructure debt fund, set up in accordance with the guidelines as may be prescribed,52 which is notified by the Central Government in the Official Gazette for the purposes of this clause;]
53[(48) any income received in India in Indian currency by a foreign company on account of 54[sale of crude oil, any other goods or rendering of services, as may be notified by the Central Government in this behalf, to any person] in India:
Provided that—
(i) receipt of such income in India by the foreign company is pursuant to an agreement or an arrangement entered into by the Central Government or approved by the Central Government;
(ii) having regard to the national interest, the foreign company and the agreement or arrangement are notified55 by the Central Government in this behalf; and
(iii) the foreign company is not engaged in any activity, other than receipt of such income, in India;]
56[(49) any income of the National Financial Holdings Company Limited, being a company set up by the Central Government, of any previous year relevant to any assessment year commencing on or before the 1st day of April, 2014.]
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Provided that where in computing the total income59 of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to deduction referred to in this sub-section only for the unexpired period of the aforesaid ten consecutive assessment years :
Provided further that where an undertaking initially located in any free trade zone or export processing zone is subsequently located in a special economic zone by reason of conversion of such free trade zone or export processing zone into a special economic zone, the period of ten consecutive assessment years referred to in this sub-section shall be reckoned from the assessment year relevant to the previous year in which the 60[undertaking began to manufacture or produce such articles or things or computer software] in such free trade zone or export processing zone :
61[Provided also that for the assessment year beginning on the 1st day of April, 2003, the deduction under this sub-section shall be ninety per cent of the profits and gains derived by an undertaking from the export of such articles or things or computer software :]
Provided also that no deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, 62[2012] and subsequent years.
63[(1A) Notwithstanding anything contained in sub-section (1), the deduction, in computing the total income of an undertaking, which begins to manufacture or produce articles or things or computer software during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2003, in any special economic zone, shall be,—
(i) hundred per cent of profits and gains derived from the export of such articles or things or computer software for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, and thereafter, fifty per cent of such profits and gains for further two consecutive assessment years, and thereafter;
(ii) for the next three consecutive assessment years, so much of the amount not exceeding fifty per cent of the profit as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account (to be called the “Special Economic Zone Re-investment Allowance Reserve Account” ) to be created and utilised for the purposes of the business of the assessee in the manner laid down in sub-section (1B) :
64[Provided that no deduction under this section shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under sub-section (1) of section 139.]
(1B) The deduction under clause (ii) of sub-section (1A) shall be allowed only if the following conditions are fulfilled, namely:—
(a) the amount credited to the Special Economic Zone Re-investment Allowance Reserve Account is to be utilised—
(i) for the purposes of acquiring new machinery or plant which is first put to use before the expiry of a period of three years next following the previous year in which the reserve was created; and
(ii) until the acquisition of new machinery or plant as aforesaid, for the purposes of the business of the undertaking other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India;
(b) the particulars, as may be prescribed65 in this behalf, have been furnished by the assessee in respect of new machinery or plant along with the return of income for the assessment year relevant to the previous year in which such plant or machinery was first put to use.
(1C) Where any amount credited to the Special Economic Zone Re-investment Allowance Reserve Account under clause (ii) of sub-section (1A),—
(a) has been utilised for any purpose other than those referred to in sub-section (1B), the amount so utilised; or
(b) has not been utilised before the expiry of the period specified in sub-clause (i) of clause (a) of sub-section (1B), the amount not so utilised,
shall be deemed to be the profits,—
(i) in a case referred to in clause (a), in the year in which the amount was so utilised; or
(ii) in a case referred to in clause (b), in the year immediately following the period of three years specified in sub-clause (i) of clause (a) of sub-section (1B),
and shall be charged to tax accordingly.]
(2) This section applies to any undertaking which fulfils all the following conditions, namely :—
(i) it has begun or begins to manufacture or produce articles or things or computer software during the previous year relevant to the assessment year—
(a) commencing on or after the 1st day of April, 1981, in any free trade zone; or
(b) commencing on or after the 1st day of April, 1994, in any electronic hardware technology park, or, as the case may be, software technology park;
(c) commencing on or after the 1st day of April, 2001 in any special economic zone;
(ii) it is not formed by the splitting up66, or the reconstruction66, of a business already in existence :
Provided that this condition shall not apply in respect of any undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertakings as is referred to in section 33B, in the circumstances and within the period specified in that section;
(iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose.
Explanation.—The provisions of Explanation 1 and Explanation 2 to sub-section (2) of section 80-I shall apply for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section.
(3) This section applies to the undertaking, if the sale proceeds66 of articles or things or computer software exported out of India are received in, or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf.
Explanation 1.—For the purposes of this sub-section, the expression “competent authority” means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange.
Explanation 2.—The sale proceeds referred to in this sub-section shall be deemed to have been received in India where such sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India.
67[(4) For the purposes of 68[sub-sections (1) and (1A)], the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking.]
(5) The deduction under 68[this section] shall not be admissible for any assessment year beginning on or after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form69, alongwith the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section.
(6) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee of the previous year relevant to the assessment year immediately succeeding the last of the relevant assessment years, or of any previous year, relevant to any subsequent assessment year,—
(i) section 32, section 32A, section 33, section 35 and clause (ix) of sub-section (1) of section 36 shall apply as if every allowance or deduction referred to therein and relating to or allowable for any of the relevant assessment years 70[ending before the 1st day of April, 2001], in relation to any building, machinery, plant or furniture used for the purposes of the business of the undertaking in the previous year relevant to such assessment year or any expenditure incurred for the purposes of such business in such previous year had been given full effect to for that assessment year itself and accordingly sub-section (2) of section 32, clause (ii) of sub-section (3) of section 32A, clause (ii) of sub-section (2) of section 33, sub-section (4) of section 35 or the second proviso to clause (ix) of sub-section (1) of section 36, as the case may be, shall not apply in relation to any such allowance or deduction;
(ii) no loss referred to in sub-section (1) of section 72 or sub-section (1) or sub-section (3) of section 74, in so far as such loss relates to the business of the undertaking, shall be carried forward or set off where such loss relates to any of the relevant assessment years 70[ending before the 1st day of April, 2001];
(iii) no deduction shall be allowed under section 80HH or section 80HHA or section 80-I or section 80-IA or section 80-IB in relation to the profits and gains of the undertaking; and
(iv) in computing the depreciation allowance under section 32, the written down value of any asset used for the purposes of the business of the undertaking shall be computed as if the assessee had claimed and been actually allowed the deduction in respect of depreciation for each of the relevant assessment year.
(7) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as may be, apply in relation to the undertaking referred to in this section as they apply for the purposes of the undertaking referred to in section 80-IA.
71[(7A) Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger,—
(a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and
(b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place.]
72[(7B) The provisions of this section shall not apply to any undertaking, being a Unit referred to in clause (zc) of section 273 of the Special Economic Zones Act, 2005, which has begun or begins to manufacture or produce articles or things or computer software during the previous year relevant to the assessment year commencing on or after the 1st day of April, 2006 in any Special Economic Zone.]
(8) Notwithstanding anything contained in the foregoing provisions of this section, where the assessee, before the due date for furnishing the return of income under sub-section (1) of section 139, furnishes to the Assessing Officer a declaration in writing that the provisions of this section may not be made applicable to him, the provisions of this section shall not apply to him for any of the relevant assessment years.
(9) 74[Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]
(9A) 75[Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]
Explanation 1.— 76[Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]
Explanation 2.—For the purposes of this section,—
(i) “computer software” 77 means—
(a) any computer programme recorded on any disc, tape, perforated media or other information storage device; or
(b) any customized electronic data or any product or service of similar nature, as may be notified78 by the Board,
which is transmitted or exported from India to any place outside India by any means;
(ii) “convertible foreign exchange” means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of 79[the Foreign Exchange Management Act, 1999 (42 of 1999)], and any rules made thereunder or any other corresponding law for the time being in force;
(iii) “electronic hardware technology park” means any park set up in accordance with the Electronic Hardware Technology Park (EHTP) Scheme notified80 by the Government of India in the Ministry of Commerce and Industry;
(iv) “export turnover” means the consideration in respect of export 81[by the undertaking] of articles or things or computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India;
(v) “free trade zone” means the Kandla Free Trade Zone and the Santacruz Electronics Export Processing Zone and includes any other free trade zone which the Central Government may, by notification in the Official Gazette,82 specify for the purposes of this section;
(vi) “relevant assessment year” means any assessment year falling within a period of ten consecutive assessment years referred to in this section;
(vii) “software technology park” means any park set up in accordance with the Software Technology Park Scheme notified83 by the Government of India in the Ministry of Commerce and Industry;
(viii) “special economic zone” means a zone which the Central Government may, by notification in the Official Gazette, specify as a special economic zone for the purposes of this section.]
84[Explanation 3.—For the removal of doubts, it is hereby declared that the profits and gains derived from on site development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India.]
85[Explanation 4.—For the purposes of this section, “manufacture or produce” shall include the cutting and polishing of precious and semi-precious stones.]
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(i) hundred per cent of profits and gains derived from the export, of such articles or things or from services for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the Unit begins to manufacture or produce such articles or things or provide services, as the case may be, and fifty per cent of such profits and gains for further five assessment years and thereafter;
(ii) for the next five consecutive assessment years, so much of the amount not exceeding fifty per cent of the profit as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account (to be called the “Special Economic Zone Re-investment Reserve Account” ) to be created and utilized for the purposes of the business of the assessee in the manner laid down in sub-section (2).
(2) The deduction under clause (ii) of sub-section (1) shall be allowed only if the following conditions are fulfilled, namely :—
(a) the amount credited to the Special Economic Zone Re-investment Reserve Account is to be utilised—
(i) for the purposes of acquiring machinery or plant which is first put to use before the expiry of a period of three years following the previous year in which the reserve was created; and
(ii) until the acquisition of the machinery or plant as aforesaid, for the purposes of the business of the undertaking other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India;
(b) the particulars, as may be specified by the Central Board of Direct Taxes in this behalf, under clause (b) of sub-section (1B) of section 10A have been furnished by the assessee in respect of machinery or plant along with the return of income90 for the assessment year relevant to the previous year in which such plant or machinery was first put to use.
(3) Where any amount credited to the Special Economic Zone Re-investment Reserve Account under clause (ii) of sub-section (1),—
(a) has been utilised for any purpose other than those referred to in sub-section (2), the amount so utilised; or
(b) has not been utilised before the expiry of the period specified in sub-clause (i) of clause (a) of sub-section (2), the amount not so utilised,
shall be deemed to be the profits,—
(i) in a case referred to in clause (a), in the year in which the amount was so utilised; or
(ii) in a case referred to in clause (b), in the year immediately following the period of three years specified in sub-clause (i) of clause (a) of sub-section (2),
and shall be charged to tax accordingly :
Provided that where in computing the total income of the Unit for any assessment year, its profits and gains had not been included by application of the provisions of sub-section (7B) of section 10A, the undertaking, being the Unit shall be entitled to deduction referred to in this sub-section only for the unexpired period of ten consecutive assessment years and thereafter it shall be eligible for deduction from income as provided in clause (ii) of sub-section (1).
Provided further that where a Unit initially located in any free trade zone or export processing zone is subsequently located in a Special Economic Zone by reason of conversion of such free trade zone or export processing zone into a Special Economic Zone, the period of ten consecutive assessment years referred to above shall be reckoned from the assessment year relevant to the previous year in which the Unit began to manufacture, or produce or process such articles or things or services in such free trade zone or export processing zone :
Provided also that where a Unit initially located in any free trade zone or export processing zone is subsequently located in a Special Economic Zone by reason of conversion of such free trade zone or export processing zone into a Special Economic Zone and has completed the period of ten consecutive assessment years referred to above, it shall not be eligible for deduction from income as provided in clause (ii) of sub-section (1) with effect from the 1st day of April, 2006.
91[(4) This section applies to any undertaking, being the Unit, which fulfils all the following conditions, namely:—
(i) it has begun or begins to manufacture or produce articles or things or provide services during the previous year relevant to the assessment year commencing on or after the 1st day of April, 2006 in any Special Economic Zone;
(ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence:
Provided that this condition shall not apply in respect of any undertaking, being the Unit, which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section;
(iii) it is not formed by the transfer to a new business, of machinery or plant previously used for any purpose.
Explanation.—The provisions of Explanations 1 and 2 to sub-section (3) of sec-tion 80-IA shall apply for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section.]
(5) Where any undertaking being the Unit which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another undertaking, being the Unit in a scheme of amalgamation or demerger,—
(a) no deduction shall be admissible under this section to the amalgamating or the demerged Unit, being the company for the previous year in which the amalgamation or the demerger takes place; and
(b) the provisions of this section shall, as they would have applied to the amalgamating or the demerged Unit being the company as if the amalgamation or demerger had not taken place.
(6) Loss referred to in sub-section (1) of section 72 or sub-section (1) or sub-section (3) of section 74, in so far as such loss relates to the business of the undertaking, being the Unit shall be allowed to be carried forward or set off.
(7) For the purposes of sub-section (1), the profits derived from the export of articles or things or services (including computer software) shall be the amount which bears to the profits of the business of the undertaking, being the Unit, the same proportion as the export turnover in respect of such articles or things or services bears to the total turnover of the business carried on 92[by the under-taking] :
93[Provided that the provisions of this sub-section [as amended by section 6 of the Finance (No. 2) Act, 2009 (33 of 2009)] shall have effect for the assessment year beginning on the 1st day of April, 2006 and subsequent assessment years.]
(8) The provisions of sub-sections (5)93a and (6) of section 10A shall apply to the articles or things or services referred to in sub-section (1) as if—
(a) for the figures, letters and word “1st April, 2001”, the figures, letters and word “1st April, 2006” had been substituted;
(b) for the word “undertaking”, the words “undertaking, being the Unit” had been substituted.
(9) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as may be, apply in relation to the undertaking referred to in this section as they apply for the purposes of the undertaking referred to in section 80-IA.
The following sub-section (10) shall be inserted after sub-section (9) of section 10AA by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
(10) Where a deduction under this section is claimed and allowed in respect of profits of any of the specified business, referred to in clause (c) of sub-section (8) of section 35AD, for any assessment year, no deduction shall be allowed under the provisions of section 35AD in relation to such specified business for the same or any other assessment year.
Explanation 1.—For the purposes of this section,—
(i) “export turnover” means the consideration in respect of export by the undertaking, being the Unit of articles or things or services received in, or brought into, India by the assessee but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things outside India or expenses, if any, incurred in foreign exchange in rendering of services (including computer software) outside India;
(ii) “export in relation to the Special Economic Zones” means taking goods or providing services out of India from a Special Economic Zone by land, sea, air, or by any other mode, whether physical or otherwise;
(iii) “manufacture” shall have the same meaning as assigned to it in clause (r) of section 2 of the Special Economic Zones Act, 200594;
(iv) “relevant assessment year” means any assessment year falling within a period of fifteen consecutive assessment years referred to in this section;
(v) “Special Economic Zone” and “Unit” shall have the same meanings as assigned to them under clauses (za) and (zc)94 of section 2 of the Special Economic Zones Act, 2005.
Explanation 2.—For the removal of doubts, it is hereby declared that the profits and gains derived from on site development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India.]
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Provided that where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to the deduction referred to in this sub-section only for the unexpired period of aforesaid ten consecutive assessment years :
97[Provided 98[further] that for the assessment year beginning on the 1st day of April, 2003, the deduction under this sub-section shall be ninety per cent of the profits and gains derived by an undertaking from the export of such articles or things or computer software:]
Provided also that no deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, 99[2012] and subsequent years :
1[Provided also that no deduction under this section shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under sub-section (1) of section 139.]
(2) This section applies to any undertaking which fulfils all the following conditions, namely :—
(i) it manufactures or produces any articles or things or computer software;
(ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence :
Provided that this condition shall not apply in respect of any undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section ;
(iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose.
Explanation.—The provisions of Explanation 1 and Explanation 2 to subsection (2) of section 80-I shall apply for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section.
(3) This section applies to the undertaking, if the sale proceeds of articles or things or computer software exported out of India are received in, or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf.
Explanation 1.—For the purposes of this sub-section, the expression “competent authority” means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange.
Explanation 2.—The sale proceeds referred to in this sub-section shall be deemed to have been received in India where such sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India.
2[(4) For the purposes of sub-section (1), the profits derived from export of articles or things or computer software shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things or computer software bears to the total turnover of the business carried on by the undertaking.]
(5) The deduction under sub-section (1) shall not be admissible for any assessment year beginning on or after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form3, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section.
(6) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee of the previous year relevant to the assessment year immediately succeeding the last of the relevant assessment years, or of any previous year, relevant to any subsequent assessment year,—
(i) section 32, section 32A, section 33, section 35 and clause (ix) of sub-section (1) of section 36 shall apply as if every allowance or deduction referred to therein and relating to or allowable for any of the relevant assessment years 4[ending before the 1st day of April, 2001], in relation to any building, machinery, plant or furniture used for the purposes of the business of the undertaking in the previous year relevant to such assessment year or any expenditure incurred for the purposes of such business in such previous year had been given full effect to for that assessment year itself and accordingly sub-section (2) of section 32, clause (ii) of sub-section (3) of section 32A, clause (ii) of sub-section (2) of section 33, sub-section (4) of section 35 or the second proviso to clause (ix) of sub-section (1) of section 36, as the case may be, shall not apply in relation to any such allowance or deduction;
(ii) no loss referred to in sub-section (1) of section 72 or sub-section (1) or sub-section (3) of section 74, in so far as such loss relates to the business of the undertaking, shall be carried forward or set-off where such loss relates to any of the relevant assessment years 5[ending before the 1st day of April, 2001];
(iii) no deduction shall be allowed under section 80HH or section 80HHA or section 80-I or section 80-IA or section 80-IB in relation to the profits and gains of the undertaking; and
(iv) in computing the depreciation allowance under section 32, the written down value of any asset used for the purposes of the business of the undertaking shall be computed as if the assessee had claimed and been actually allowed the deduction in respect of depreciation for each of the relevant assessment year.
(7) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as may be, apply in relation to the undertaking referred to in this section as they apply for the purposes of the undertaking referred to in section 80-IA.
6[(7A) Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger—
(a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and
(b) the provisions of this section shall, as far as may be, apply to the amalgamated or resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or the demerger had not taken place.]
(8) Notwithstanding anything contained in the foregoing provisions of this section, where the assessee, before the due date for furnishing the return of income under sub-section (1) of section 139, furnishes to the Assessing Officer a declaration in writing that the provisions of this section may not be made applicable to him, the provisions of this section shall not apply to him for any of the relevant assessment year.
(9) 7[Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]
(9A) 8[Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]
Explanation 1.— 9[Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]
Explanation 2.—For the purposes of this section,—
(i) “computer software” means—
(a) any computer programme recorded on any disc, tape, perforated media or other information storage device; or
(b) any customized electronic data or any product or service of similar nature as may be notified10 by the Board,
which is transmitted or exported from India to any place outside India by any means;
(ii) “convertible foreign exchange” means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of 11[the Foreign Exchange Management Act, 1999 (42 of 1999)], and any rules made thereunder or any other corresponding law for the time being in force;
(iii) “export turnover” means the consideration in respect of export 12[by the undertaking] of articles or things or computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India;
(iv) “hundred per cent export-oriented undertaking” means an undertaking which has been approved as a hundred per cent export-oriented undertaking by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by section 1413 of the Industries (Development and Regulation) Act, 1951 (65 of 1951), and the rules made under that Act;
(v) “relevant assessment years” means any assessment years falling within a period of ten consecutive assessment years, referred to in this section.]
14[Explanation 3.—For the removal of doubts, it is hereby declared that the profits and gains derived from on site development of computer software (including services for development of software) outside India shall be deemed to be the profits and gains derived from the export of computer software outside India.]
15[Explanation 4.—For the purposes of this section, “manufacture or produce” shall include the cutting and polishing of precious and semi-precious stones.]
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Provided that where in computing the total income of the undertaking for any assessment year, deduction under section 10A or section 10B has been claimed, the undertaking shall not be entitled to the deduction under this section :
Provided further that no deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, 2010 and subsequent years.
(2) This section applies to any undertaking which fulfils the following conditions, namely :—
(a) it manufactures or produces the eligible articles or things without the use of imported raw materials;
(b) it is not formed by the splitting up, or the reconstruction, of a business already in existence :
Provided that this condition shall not apply in respect of any undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section;
(c) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose.
Explanation.—The provisions of Explanation 1 and Explanation 2 to sub-section (2) of section 80-I shall apply for the purposes of this clause as they apply for the purposes of clause (ii) of sub-section (2) of that section;
(d) ninety per cent or more of its sales during the previous year relevant to the assessment year are by way of exports of the eligible articles or things;
(e) it employs twenty or more workers during the previous year in the process of manufacture or production.
(3) This section applies to the undertaking, if the sale proceeds of the eligible articles or things exported out of India are received in or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf.
Explanation.—For the purposes of this sub-section, the expression “competent authority” means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange.
(4) For the purposes of sub-section (1), the profits derived from export out of India of the eligible articles or things shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things bears to the total turnover of the business carried on by the undertaking.
(5) The deduction under sub-section (1) shall not be admissible, unless the assessee furnishes in the prescribed form17, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section.
(6) Notwithstanding anything contained in any other provision of this Act, where a deduction is allowed under this section in computing the total income of the assessee, no deduction shall be allowed under any other section in respect of its export profits.
(7) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as may be, apply in relation to the undertaking referred to in this section as they apply for the purposes of the undertaking referred to in section 80-IA.
Explanation.—For the purposes of this section,—
(a) “convertible foreign exchange” means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Management Act, 1999 (42 of 1999), and any rules made thereunder or any other corresponding law for the time being in force;
(b) “eligible articles or things” means all hand-made articles or things, which are of artistic value and which requires the use of wood as the main raw material;
(c) “export turnover” means the consideration in respect of export by the undertaking of eligible articles or things received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things outside India;
(d) “export out of India” shall not include any transaction by way of sale or otherwise, in a shop, emporium or any other establishment situate in India, not involving clearance of any customs station18 as defined in the Customs Act, 1962 (52 of 1962).]
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Provided that where in computing the total income of the undertaking for any assessment year, deduction under section 10A or section 10B has been claimed, the undertaking shall not be entitled to the deduction under this section :
Provided further that no deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, 2010 and subsequent years.
(2) This section applies to any undertaking which fulfils the following conditions, namely :—
(a) it manufactures or produces the eligible articles or things without the use of imported raw materials;
(b) it is not formed by the splitting up, or the reconstruction, of a business already in existence :
Provided that this condition shall not apply in respect of any undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section;
(c) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose.
Explanation.—The provisions of Explanation 1 and Explanation 2 to sub-section (2) of section 80-I shall apply for the purposes of this clause as they apply for the purposes of clause (ii) of sub-section (2) of that section;
(d) ninety per cent or more of its sales during the previous year relevant to the assessment year are by way of exports of the eligible articles or things;
(e) it employs twenty or more workers during the previous year in the process of manufacture or production.
(3) This section applies to the undertaking, if the sale proceeds of the eligible articles or things exported out of India are received in or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf.
Explanation.—For the purposes of this sub-section, the expression “competent authority” means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange.
(4) For the purposes of sub-section (1), the profits derived from export out of India of the eligible articles or things shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things bears to the total turnover of the business carried on by the undertaking.
(5) The deduction under sub-section (1) shall not be admissible, unless the assessee furnishes in the prescribed form17, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section.
(6) Notwithstanding anything contained in any other provision of this Act, where a deduction is allowed under this section in computing the total income of the assessee, no deduction shall be allowed under any other section in respect of its export profits.
(7) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as may be, apply in relation to the undertaking referred to in this section as they apply for the purposes of the undertaking referred to in section 80-IA.
Explanation.—For the purposes of this section,—
(a) “convertible foreign exchange” means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Management Act, 1999 (42 of 1999), and any rules made thereunder or any other corresponding law for the time being in force;
(b) “eligible articles or things” means all hand-made articles or things, which are of artistic value and which requires the use of wood as the main raw material;
(c) “export turnover” means the consideration in respect of export by the undertaking of eligible articles or things received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things outside India;
(d) “export out of India” shall not include any transaction by way of sale or otherwise, in a shop, emporium or any other establishment situate in India, not involving clearance of any customs station18 as defined in the Customs Act, 1962 (52 of 1962).]
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(2) This section applies to any industrial undertaking which fulfils all the following conditions, namely :—
(i) it is not formed by the splitting up, or the reconstruction of, a business already in existence :
Provided that this condition shall not apply in respect of any indus-trial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee 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 ;
(ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose.
Explanation.—The provisions of Explanation 1 and Explanation 2 to sub-section (3) of section 80-IA shall apply for the purposes of clause (ii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section.
(3) The profits and gains referred to in sub-section (1) shall not be included in the total income of the assessee in respect of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things.
(4) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee of any previous year relevant to any subsequent assessment year,—
(i) section 32, section 35 and clause (ix) of sub-section (1) of section 36 shall apply as if deduction referred to therein and relating to or allowable for any of the relevant assessment years, in relation to any building, machinery, plant or furniture used for the purposes of the business of the industrial undertaking in the previous year relevant to such assessment year or any expenditure incurred for the purposes of such business in such previous year had been given full effect to for that assessment year itself and, accordingly, sub-section (2) of section 32, sub-section (4) of section 35 or the second proviso to clause (ix) of sub-section (1) of section 36, as the case may be, shall not apply in relation to any such deduction;
(ii) no loss referred to in sub-section (1) of section 72 or sub-section (1) or sub-section (3) of section 74, in so far as such loss relates to the business of the industrial undertaking, shall be carried forward or set off where such loss relates to any of the relevant assessment years;
(iii) no deduction shall be allowed under section 80HH or section 80HHA or section 80-I or section 80-IA or section 80-IB or section 80JJA in relation to the profits and gains of the industrial undertakings; and
(iv) in computing the depreciation allowance under section 32, the written down value of any asset used for the purposes of the business of the industrial undertaking shall be computed as if the assessee had claimed and been actually allowed the deduction in respect of depreciation for each of the relevant assessment years.
(5) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as may be, apply in relation to the industrial undertaking referred to in this section as they apply for the purposes of the industrial undertaking referred to in section 80-IA or section 80-IB, as the case may be.
(6) Notwithstanding anything contained in the foregoing provisions of this section, where the assessee before the due date for furnishing the return of his income under sub-section (1) of section 139, furnishes to the Assessing Officer a declaration in writing that the provisions of this section may not be made applicable to him, the provisions of this section shall not apply to him in any of the relevant assessment years :
21[Provided that no deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, 2004 and subsequent years.]
Explanation.—For the purposes of this section,—
(i) “Integrated Infrastructure Development Centre” means such centres located in the States of the North-Eastern Region, which the Central Government, may, by notification in the Official Gazette, specify22 for the purposes of this section;
(ii) “Industrial Growth Centre” means such centres located in the States of the North-Eastern Region, which the Central Government may, by notification in the Official Gazette, specify22 for the purposes of this section;
(iii) “North-Eastern Region” means the region comprising the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura;
(iv) “relevant assessment years” means the ten consecutive years beginning with the year in which the industrial undertaking begins to manufacture or produce articles or things.]
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26[(a) income derived from property24 held under trust wholly24 for charitable or religious purposes, to the extent to which such income24 is applied24 to such purposes in India; and, where any such income24 is 24accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart27 is not in excess of 28[fifteen] per cent of the income from such property;
(b) income derived from property held under trust in part27 only for such purposes, the trust having been created before the commencement of this Act, to the extent to which such income27 is applied to such purposes in India; and, where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of 28[fifteen] per cent of the income from such property;
(c) income 29[derived] from property held under trust—
(i) created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and
(ii) for charitable or religious purposes, created before the 1st day of April, 1952, to the extent to which such income is applied to such purposes outside India:
Provided that the Board, by general or special order, has directed in either case that it shall not be included in the total income of the person in receipt of such income;
30[(d) income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus31 of the trust or institution.]
32[Explanation.—For the purposes of clauses (a) and (b),—
(1) in computing the 33[fifteen] per cent of the income which may be accumulated or set apart, any such voluntary contributions as are referred to in section 12 shall be deemed to be part of the income;
(2) if, in the previous year, the income applied to charitable or religious purposes in India falls short of 34[eighty-five] per cent of the income derived during that year from property held under trust, or, as the case may be, held under trust in part, by any amount—
(i) for the reason that the whole or any part of the income has not been received during that year, or
(ii) for any other reason,
then—
(a) in the case referred to in sub-clause (i), so much of the income applied to such purposes in India during the previous year in which the income is received or during the previous year immediately following as does not exceed the said amount, and
(b) in the case referred to in sub-clause (ii), so much of the income applied to such purposes in India during the previous year immediately following the previous year in which the income was derived as does not exceed the said amount,
may, at the option of the person in receipt of the income (such option to be exercised in writing before the expiry of the time allowed under sub-section (1) 35[* * *] of section 139 36[* * *] for furnishing the return of income) be deemed to be income applied to such purposes during the previous year in which the income was derived; and the income so deemed to have been applied shall not be taken into account in calculating the amount of income applied to such purposes, in the case referred to in sub-clause (i), during the previous year in which the income is received or during the previous year immediately following, as the case may be, and, in the case referred to in sub-clause (ii), during the previous year immediately following the previous year in which the income was derived.]
37[(1A) For the purposes of sub-section (1),—
(a) where a capital asset, being property held under trust wholly for charitable or religious purposes, is transferred and the whole or any part of the net consideration is utilised for acquiring another capital asset to be so held, then, the capital gain arising from the transfer shall be deemed to have been applied to charitable or religious purposes to the extent specified hereunder, namely:—
(i) where the whole of the net consideration is utilised in acquiring the new capital asset, the whole of such capital gain;
(ii) where only a part of the net consideration is utilised for acquiring the new capital asset, so much of such capital gain as is equal to the amount, if any, by which the amount so utilised exceeds the cost of the transferred asset;
(b) where a capital asset, being property held under trust in part only for such purposes, is transferred and the whole or any part of the net consideration is utilised for acquiring another capital asset to be so held, then, the appropriate fraction of the capital gain arising from the transfer shall be deemed to have been applied to charitable or religious purposes to the extent specified hereunder, namely:—
(i) where the whole of the net consideration is utilised in acquiring the new capital asset, the whole of the appropriate fraction of such capital gain;
(ii) in any other case, so much of the appropriate fraction of the capital gain as is equal to the amount, if any, by which the appropriate fraction of the amount utilised for acquiring the new asset exceeds the appropriate fraction of the cost of the transferred asset.
(i) “appropriate fraction” means the fraction which represents the extent to which the income derived from the capital asset transferred was immediately before such transfer applicable to charitable or religious purposes;
(ii) “cost of the transferred asset” means the aggregate of the cost of acquisition (as ascertained for the purposes of sections 48 and 49) of the capital asset which is the subject of the transfer and the cost of any improvement thereto within the meaning assigned to that expression in sub-clause (b) of clause (1) of section 55;
(iii) “net consideration” means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.]
38[(1B) Where any income in respect of which an option is exercised under clause (2) of the Explanation to sub-section (1) is not applied to charitable or religious purposes in India during the period referred to in sub-clause (a) or, as the case may be, sub-clause (b), of the said clause, then, such income shall be deemed to be the income of the person in receipt thereof—
(a) in the case referred to in sub-clause (i) of the said clause, of the previous year immediately following the previous year in which the income was received; or
(b) in the case referred to in sub-clause (ii) of the said clause, of the previous year immediately following the previous year in which the income was derived.]
39[(2) 40[Where 41[eighty-five] per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with, namely:—]
(a) such person specifies, by notice in writing given to the 42[Assessing] Officer in the prescribed43 manner44, the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed ten years;
45[(b) the money so accumulated46 or set apart is invested or deposited in the forms or modes specified in sub-section (5)]:]
47[Provided that in computing the period of ten years referred to in clause (a), the period during which the income could not be applied for the purpose for which it is so accumulated or set apart, due to an order or injunction of any court, shall be excluded:]
48[Provided further that in respect of any income accumulated or set apart on or after the 1st day of April, 2001, the provisions of this sub-section shall have effect as if for the words “ten years” at both the places where they occur, the words “five years” had been substituted.]
49[Explanation.—Any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to that sub-section, which is not applied, but is accumulated or set apart, to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter.]
50[(3) Any income referred to in sub-section (2) which—
(a) is applied to purposes other than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for application thereto, or
51[(b) ceases to remain invested or deposited in any of the forms or modes specified in sub-section (5), or]
(c) is not utilised52 for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub-section or in the year immediately following the expiry thereof,
53[(d) is credited or paid to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) of section 10,]
shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart or ceases to remain so invested or deposited or 53[credited or paid or], as the case may be, of the previous year immediately following the expiry of the period aforesaid.]
54[(3A) Notwithstanding anything contained in sub-section (3), where due to circumstances beyond the control of the person in receipt of the income, any income invested or deposited in accordance with the provisions of clause (b) of sub-section (2) cannot be applied for the purpose for which it was accumulated or set apart, the 55[Assessing] Officer may, on an application made to him in this behalf, allow such person to apply such income for such other charitable or religious purpose in India as is specified in the application by such person and as is in conformity with the objects of the trust; and thereupon the provisions of sub-section (3) shall apply as if the purpose specified by such person in the application under this sub-section were a purpose specified in the notice given to the 55[Assessing] Officer under clause (a) of sub-section (2):]
56[Provided that the Assessing Officer shall not allow application of such income by way of payment or credit made for the purposes referred to in clause (d) of sub-section (3) of section 11:]
57[Provided further that in case the trust or institution, which has invested or deposited its income in accordance with the provisions of clause (b) of sub-section (2), is dissolved, the Assessing Officer may allow application of such income for the purposes referred to in clause (d) of sub-section (3) in the year in which such trust or institution was dissolved.]
(4) For the purposes of this section “property held under trust” includes a business undertaking so held, and where a claim is made that the income of any such undertaking shall not be included in the total income of the persons in receipt thereof, the 58[Assessing] Officer shall have power to determine the income of such undertaking in accordance with the provisions of this Act relating to assessment; and where any income so determined is in excess of the income as shown in the accounts of the undertaking, such excess shall be deemed to be applied to purposes other than charitable or religious purposes 59[* * *].
60[(4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the trust or, as the case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business.]
61[62(5) The forms and modes of investing or depositing the money referred to in clause (b) of sub-section (2) shall be the following, namely :—
(i) investment in savings certificates as defined in clause (c) of section 263 of the Government Savings Certificates Act, 1959 (46 of 1959), and any other securities or certificates issued by the Central Government under the Small Savings Schemes of that Government;
(ii) deposit in any account with the Post Office Savings Bank;
(iii) deposit in any account with a scheduled bank or a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank).
(iv) investment in units of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963);
(v) investment in any security for money created and issued by the Central Government or a State Government;
(vi) investment in debentures issued by, or on behalf of, any company or corporation both the principal whereof and the interest whereon are fully and unconditionally guaranteed by the Central Government or by a State Government;
(vii) investment or deposit64 in any 65[public sector company]:
66[Provided that where an investment or deposit in any public sector company has been made and such public sector company ceases to be a public sector company,—
(A) such investment made in the shares of such company shall be deemed to be an investment made under this clause for a period of three years from the date on which such public sector company ceases to be a public sector company;
(B) such other investment or deposit shall be deemed to be an investment or deposit made under this clause for the period up to the date on which such investment or deposit becomes repayable by such company;]
(viii) deposits with or investment in any bonds issued by a financial corporation which is engaged in providing long-term finance for industrial development in India and 67[which is eligible for deduction under clause (viii) of sub-section (1) of section 36];
(ix) deposits with or investment in any bonds issued by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes and 67[which is eligible for deduction under clause (viii) of sub-section (1) of section 36];
68[(ixa) deposits with or investment in any bonds issued by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for urban infrastructure in India.
(a) “long-term finance” means any loan64 or advance where the terms under which moneys are loaned or advanced provide for repayment along with interest thereof during a period of not less than five years;
(b) “public company” 69 shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956);
(c) “urban infrastructure” means a project for providing potable water supply, sanitation and sewerage, drainage, solid waste management, roads, bridges and flyovers or urban transport;]
(x) investment in immovable property.
70[(xi) deposits with the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964);]
71[(xii) any other form or mode of investment or deposit as may be prescribed.72]
The following sub-sections (6) and (7) shall be inserted after sub-section (5) of section 11 by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015:
(6) In this section where any income is required to be applied or accumulated or set apart for application, then, for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year.
(7) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) of section 12AA or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and the said registration is in force for any previous year, then, nothing contained in section 10 [other than clause (1) and clause (23C) thereof] shall operate to exclude any income derived from the property held under trust from the total income of the person in receipt thereof for that previous year.
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78[(2) The value of any services, being medical or educational services, made available by any charitable or religious trust running a hospital or medical institution or an educational institution, to any person referred to in clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3) of section 13, shall be deemed to be income of such trust or institution derived from property held under trust wholly for charitable or religious purposes during the previous year in which such services are so provided and shall be chargeable to income-tax notwithstanding the provisions of sub-section (1) of section 11.
Explanation.—For the purposes of this sub-section, the expression “value” shall be the value of any benefit or facility granted or provided free of cost or at concessional rate to any person referred to in clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3) of section 13.]
79[(3) Notwithstanding anything contained in section 11, any amount of donation received by the trust or institution in terms of clause (d) of sub-section (2) of section 80G 80[in respect of which accounts of income and expenditure have not been rendered to the authority prescribed under clause (v) of sub-section (5C) of that section, in the manner specified in that clause, or] which has been utilised for purposes other than providing relief to the victims of earthquake in Gujarat or which remains unutilised in terms of sub-section (5C) of section 80G and not transferred to the Prime Minister’s National Relief Fund on or before the 31st day of March, 81[2004] shall be deemed to be the income of the previous year and shall accordingly be charged to tax.]
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8412A. 85[(1)] 86The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:—
(a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form87 and in the prescribed manner to the 88[***] 88a[Principal Commissioner or] Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, 89[whichever is later and such trust or institution is registered under section 12AA] :
90[Provided that where an application for registration of the trust or institution is made after the expiry of the period aforesaid, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution,—
(i) from the date of the creation of the trust or the establishment of the institution if the 91[***] 91a[Principal Commissioner or] Commissioner is, for reasons to be recorded in writing, satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period92 aforesaid for sufficient reasons;
(ii) from the 1st day of the financial year in which the application is made, if the 93[***] 93a[Principal Commissioner or] Commissioner is not so satisfied:]
94[Provided further that the provisions of this clause shall not apply in relation to any application made on or after the 1st day of June, 2007;]
94[(aa) the person in receipt of the income has made an application for registration of the trust or institution on or after the 1st day of June, 2007 in the prescribed form95 and manner to the 95a[Principal Commissioner or] Commissioner and such trust or institution is registered under section 12AA;]
(b) where the total income of the trust or institution as computed under this Act without giving effect to 96[the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year], the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form97 duly signed and verified by such accountant and setting forth such particulars as may be prescribed.]
(c) 98[***]
99[(2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made:]
99a[Provided that where registration has been granted to the trust or institution under section 12AA, then, the provisions of sections 11 and 12 shall apply in respect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year:
Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year:
Provided also that provisions contained in the first and second proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA.]
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(a) call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf; and
(b) after satisfying himself about the objects of the trust or institution and the genuineness of its activities, he—
(i) shall pass an order in writing registering the trust or institution;
(ii) shall, if he is not so satisfied, pass an order in writing refusing to register the trust or institution,
and a copy of such order shall be sent to the applicant :
Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonable opportunity of being heard.
3[(1A) All applications, pending before the 2a[Principal Chief Commissioner or] Chief Commissioner on which no order has been passed under clause (b) of sub-section (1) before the 1st day of June, 1999, shall stand transferred on that day to the 2a[Principal Commissioner or] Commissioner and the 2a[Principal Commissioner or] Commissioner may proceed with such applications under that sub-section from the stage at which they were on that day.]
(2) Every order granting or refusing registration under clause (b) of sub-section (1) shall be passed before the expiry of six months from the end of the month in which the application was received under clause (a) 4[or clause (aa) of sub-section (1)] of section 12A.]
5[(3) Where a trust or an institution has been granted registration under clause (b) of sub-section (1) 6[or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)]] and subsequently the 6a[Principal Commissioner or] Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or institution:
Provided that no order under this sub-section shall be passed unless such trust or institution has been given a reasonable opportunity of being heard.]
6b[(4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently it is noticed that the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13, then, the Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution:
Provided that the registration shall not be cancelled under this sub-section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner.]
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(a) any part of the 10income from the property held under a trust for private religious purposes which does not enure for the benefit10 of the public;
(b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit10 of any particular religious community or caste;
(bb) 11[* * *]
(c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof—
(i) if such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income enures, or
(ii) if any part of such income or any property of the trust or the institution (whenever created or established) is during the previous year used or applied,
directly or indirectly for the benefit12 of any person referred to in sub-section (3) :
Provided that in the case of a trust or institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3), if such use or application is by way of compliance with a mandatory term of the trust or a mandatory rule governing the institution :
Provided further that in the case of a trust for religious purposes or a religious institution (whenever created or established) or a trust for charitable purposes or a charitable institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3) in so far as such use or application relates to any period before the 1st day of June, 1970;
13[(d) 14in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof, if for any period during the previous year—
(i) any funds15 of the trust or institution are invested or deposited15 after the 28th day of February, 1983 otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11; or
(ii) any funds15 of the trust or institution invested or deposited15 before the 1st day of March, 1983 otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 continue to remain so invested or deposited after the 30th day of November, 1983; or
16[(iii) any shares in a company, other than—
(A) shares in a public sector company ;
(B) shares prescribed as a form or mode of investment under clause (xii) of sub-section (5) of section 11,
are held by the trust or institution after the 30th day of November, 1983:]
Provided that nothing in this clause shall apply in relation to—
(i) any assets held by the trust or institution where such assets form part of the corpus of the trust or institution as on the 1st day of June, 1973 17[***];
18[(ia) any accretion to the shares, forming part of the corpus mentioned in clause (i), by way of bonus shares allotted to the trust or institution;]
(ii) any assets (being debentures issued by, or on behalf of, any company or corporation) acquired by the trust or institution before the 1st day of March, 1983;
19[(iia) any asset, not being an investment or deposit in any of the forms or modes specified in sub-section (5) of section 11, where such asset is not held by the trust or institution, otherwise than in any of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, 20[1993], whichever is later;]
(iii) any funds representing the profits and gains of business, being profits and gains of any previous year relevant to the assessment year commencing on the 1st day of April, 1984 or any subsequent assessment year.
21[Explanation.—For the purposes of sub-clause (ii) of clause (c), in determining whether any part of the income or any property of any trust or institution is during the previous year used or applied, directly or indirectly, for the benefit of any person referred to in sub-section (3), in so far as such use or application relates to any period before the 1st day of July, 1972, no regard shall be had to the amendments made to this section by section 7 [other than sub-clause (ii) of clause (a) thereof] of the Finance Act, 1972.]
(2) Without prejudice to the generality of the provisions of clause (c) 22[and clause (d)] of sub-section (1), the income or the property23 of the trust or institution or any part of such income or property shall, for the purposes of that clause, be deemed to have been used or applied for the benefit of a person referred to in sub-section (3),—
(a) if any part of the income or property24 of the trust or institution is, or continues to be, lent24 to any person referred to in sub-section (3) for any period during the previous year without either adequate security or adequate interest or both;
(b) if any land, building or other property24 of the trust or institution is, or continues to be, made available for the use of any person referred to in sub-section (3), for any period during the previous year without charging adequate rent or other compensation;
(c) if any amount is paid by way of salary, allowance or otherwise during the previous year to any person referred to in sub-section (3) out of the resources of the trust or institution for services rendered by that person to such trust or institution and the amount so paid is in excess of what may be reasonably paid for such services;
(d) if the services of the trust or institution are made available to any person referred to in sub-section (3) during the previous year without adequate remuneration or other compensation;
(e) if any share, security or other property is purchased by or on behalf of the trust or institution from any person referred to in sub-section (3) during the previous year for consideration which is more than adequate;
(f) if any share, security or other property is sold by or on behalf of the trust or institution to any person referred to in sub-section (3) during the previous year for consideration which is less than adequate;
25[(g) if any income or property of the trust or institution is diverted during the previous year in favour of any person referred to in sub-section (3):
Provided that this clause shall not apply where the income, or the value of the property or, as the case may be, the aggregate of the income and the value of the property, so diverted does not exceed one thousand rupees;]
(h) if any funds26 of the trust or institution are, or continue to remain, invested26 for any period during the previous year (not being a period before the 1st day of January, 1971), in any concern26 in which any person referred to in sub-section (3) has a substantial interest.
(3) The persons referred to in clause (c) of sub-section (1) and sub-section (2) are the following, namely :—
(a) the author of the trust or the founder26 of the institution26;
(b) any person who has made a substantial contribution to the trust or institution, 27[that is to say, any person whose total contribution up to the end of the relevant previous year exceeds 28[fifty] thousand rupees];
(c) where such author, founder or person is a Hindu undivided family, a member of the family;
29[(cc) any trustee of the trust or manager (by whatever name called) of the institution;]
(d) any relative of any such author, founder, person, 30[member, trustee or manager] as aforesaid;
(e) any concern in which any of the persons referred to in clauses (a), (b), (c) 31[, (cc)] and (d) has a substantial interest.
(4) Notwithstanding anything contained in clause (c) of sub-section (1) 32[but without prejudice to the provisions contained in clause (d) of that sub-section], in a case where the aggregate of the funds of the trust or institution invested in a concern in which any person referred to in sub-section (3) has a substantial interest, does not exceed five per cent of the capital33 of that concern, the exemption under section 11 34[or section 12] shall not be denied in relation to any income other than the income arising to the trust or the institution from such investment, by reason only that the 35[funds] of the trust or the institution have been invested in a concern in which such person has a substantial interest.
36[(5) Notwithstanding anything contained in clause (d) of sub-section (1), where any assets (being debentures issued by, or on behalf of, any company or corpora-tion) are acquired by the trust or institution after the 28th day of February, 1983 but before the 25th day of July, 1991, the exemption under section 11 or section 12 shall not be denied in relation to any income other than the income arising to the trust or the institution from such assets, by reason only that the funds of the trust or the institution have been invested in such assets if such funds do not continue to remain so invested in such assets after the 31st day of March, 1992.]
37[(6) Notwithstanding anything contained in sub-section (1) or sub-section (2), but without prejudice to the provisions contained in sub-section (2) of section 12, in the case of a charitable or religious trust running an educational institution or a medical institution or a hospital, the exemption under section 11 or section 12 shall not be denied in relation to any income, other than the income referred to in sub-section (2) of section 12, by reason only that such trust has provided educational or medical facilities to persons referred to in clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3).]
38[(7) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof, any anonymous donation referred to in section 115BBC on which tax is payable in accordance with the provisions of that section.]
39[(8) Nothing contained in section 11 or section 12 shall operate so as to exclude any income from the total income of the previous year of the person in receipt thereof if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in the said previous year.]
40[Explanation 1.—For the purposes of sections 11, 12, 12A and this section, “trust” includes any other legal obligation and for the purposes of this section “relative”, in relation to an individual, means—
(i) spouse of the individual;
(ii) brother or sister of the individual;
(iii) brother or sister of the spouse of the individual;
(iv) any lineal ascendant or descendant of the individual;
(v) any lineal ascendant or descendant of the spouse of the individual;
(vi) spouse of a person referred to in sub-clause (ii), sub-clause (iii), sub-clause (iv) or sub-clause (v);
(vii) any lineal descendant of a brother or sister of either the individual or of the spouse of the individual.]
Explanation 2.—A trust or institution created or established for the benefit of Scheduled Castes, backward classes, Scheduled Tribes or women and children shall not be deemed to be a trust or institution created or established for the benefit of a religious community or caste within the meaning of clause (b) of sub-section (1).
Explanation 3.—For the purposes of this section, a person shall be deemed to have a substantial interest in a concern,—
(i) in a case where the concern is a company, if its shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than twenty per cent of the voting power are, at any time during the previous year, owned beneficially by such person or partly by such person and partly by one or more of the other persons referred to in sub-section (3);
(ii) in the case of any other concern, if such person is entitled, or such person and one or more of the other persons referred to in sub-section (3) are entitled in the aggregate, at any time during the previous year, to not less than twenty per cent of the profits of such concern.]
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Provided that—
(a) such political party keeps and maintains such books of account and other documents as would enable the 44[Assessing] Officer to properly deduce its income therefrom;
(b) in respect of each such voluntary contribution in excess of 45[twenty] thousand rupees, such political party keeps and maintains a record of such contribution and the name and address of the person who has made such contribution; and
(c) the accounts of such political party are audited by an accountant as defined in the Explanation below sub-section (2) of section 288 :
46[Provided further that if the treasurer of such political party or any other person authorised by that political party in this behalf fails to submit a report under sub-section (3) of section 29C of the Representation of the People Act, 1951 (43 of 1951) for a financial year, no exemption under this section shall be available for that political party for such financial year.]
47[Explanation.—For the purposes of this section, “political party” means a political party registered under section 29A of the Representation of the People Act, 1951 (43 of 1951).]
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(a) such electoral trust distributes to any political party, registered under section 29A of the Representation of the People Act, 1951 (43 of 1951), during the said previous year, ninety-five per cent of the aggregate donations received by it during the said previous year along with the surplus, if any, brought forward from any earlier previous year; and
(b) such electoral trust functions in accordance with the rules49 made by the Central Government.]
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Heads of income.
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54[(2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed56, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act.
(3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act :]
57[Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001.]
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(a) any salary due60 from an employer or a former employer to an assessee in the previous year, whether paid60 or not;
(b) any salary paid60 or allowed60 to him in the previous year by or on behalf of an employer or a former employer though not due or before it became due to him;
(c) any arrears of salary paid or allowed to him in the previous year by or on behalf of an employer or a former employer, if not charged to income-tax for any earlier previous year.
61[Explanation 1].—For the removal of doubts, it is hereby declared that where any salary paid in advance is included in the total income of any person for any previous year it shall not be included again in the total income of the person when the salary becomes due.
62[Explanation 2.—Any salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from the firm shall not be regarded as “salary” for the purposes of this section.]
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(i) 64[***]
65[(ii) a deduction in respect of any allowance in the nature of an entertainment allowance specifically granted by an employer to the assessee who is in receipt of a salary from the Government, a sum equal to one-fifth of his salary (exclusive of any allowance, benefit or other perquisite) or five thousand rupees, whichever is less;]
66[(iii) a deduction of any sum paid by the assessee on account of a tax on employment within the meaning of clause (2) of article 27667 of the Constitution, leviable by or under any law.]
(iv) 68[***]
(v) 69[***]
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(1) “salary” 72 includes72—
(i) wages;
(ii) any annuity or pension;
(iii) any gratuity72;
(iv) any fees72, commissions, perquisites or profits72 in lieu of or in addition to any salary or wages;
(v) any advance of salary;
73[(va) any payment received by an employee in respect of any period of leave not availed of by him;]
(vi) the annual accretion to the balance at the credit of an employee participating in a recognised provident fund, to the extent to which it is chargeable to tax under rule 6 of Part A of the Fourth Schedule;
(vii) the aggregate of all sums that are comprised in the transferred balance as referred to in sub-rule (2) of rule 11 of Part A of the Fourth Schedule of an employee participating in a recognised provident fund, to the extent to which it is chargeable to tax under sub-rule (4) thereof; and
74[(viii) the contribution made by the Central Government 75[or any other employer] in the previous year, to the account of an employee under a pension scheme referred to in section 80CCD;]
76(2) “perquisite” includes—
77(i) the value of rent-free accommodation provided to the assessee by his employer;
(ii) the value of any concession in the matter of rent78 respecting any accommodation provided to the assessee by his employer;
79[Explanation 1.—For the purposes of this sub-clause, concession in the matter of rent shall be deemed to have been provided if,—
80[(a) in a case where an unfurnished accommodation is provided by any employer other than the Central Government or any State Government and—
(i) the accommodation is owned by the employer, the value of the accommodation determined at the specified rate in respect of the period during which the said accommodation was occupied by the assessee during the previous year, exceeds the rent recoverable from, or payable by, the assessee;
(ii) the accommodation is taken on lease or rent by the employer, the value of the accommodation being the actual amount of lease rental paid or payable by the employer or fifteen per cent of salary, whichever is lower, in respect of the period during which the said accommodation was occupied by the assessee during the previous year, exceeds the rent recoverable from, or payable by, the assessee;]
(b) in a case where a furnished accommodation is provided by the Central Government or any State Government, the licence fee determined by the Central Government or any State Government in respect of the accommodation in accordance with the rules framed by such Government as increased by the value of furniture and fixtures in respect of the period during which the said accommodation was occupied by the assessee during the previous year, exceeds the aggregate of the rent recoverable from, or payable by, the assessee and any charges paid or payable for the furniture and fixtures by the assessee;
(c) in a case where a furnished accommodation is provided by an employer other than the Central Government or any State Government and—
(i) the accommodation is owned by the employer, the value of the accommodation determined under sub-clause (i) of clause (a) as increased by the value of the furniture and fixtures in respect of the period during which the said accommodation was occupied by the assessee during the previous year, exceeds the rent recoverable from, or payable by, the assessee;
(ii) the accommodation is taken on lease or rent by the employer, the value of the accommodation determined under sub-clause (ii) of clause (a) as increased by the value of the furniture and fixtures in respect of the period during which the said accommodation was occupied by the assessee during the previous year, exceeds the rent recoverable from, or payable by, the assessee;
(d) in a case where the accommodation is provided by the employer in a hotel (except where the assessee is provided such accommodation for a period not exceeding in aggregate fifteen days on his transfer from one place to another), the value of the accommodation determined at the rate of twenty-four per cent of salary paid or payable for the previous year or the actual charges paid or payable to such hotel, whichever is lower, for the period during which such accommodation is provided, exceeds the rent recoverable from, or payable by, the assessee.
Explanation 2.—For the purposes of this sub-clause, value of furniture and fixture shall be ten per cent per annum of the cost of furniture (including television sets, radio sets, refrigerators, other household appliances, air-conditioning plant or equipment or other similar appliances or gadgets) or if such furniture is hired from a third party, the actual hire charges payable for the same as reduced by any charges paid or payable for the same by the assessee during the previous year.
Explanation 3.—For the purposes of this sub-clause, “salary” includes the pay, allowances, bonus or commission payable monthly or otherwise or any monetary payment, by whatever name called, from one or more employers, as the case may be, but does not include the following, namely:—
(a) dearness allowance or dearness pay unless it enters into the computation of superannuation or retirement benefits of the employee concerned;
(b) employer’s contribution to the provident fund account of the employee;
(c) allowances which are exempted from the payment of tax;
(d) value of the perquisites specified in this clause;
(e) any payment or expenditure specifically excluded under the proviso to this clause.]
81[Explanation 4.—For the purposes of this sub-clause, “specified rate” shall be—
(i) fifteen per cent of salary in cities having population exceeding twenty-five lakhs as per 2001 census;
(ii) ten per cent of salary in cities having population exceeding ten lakhs but not exceeding twenty-five lakhs as per 2001 census; and
(iii) seven and one-half per cent of salary in any other place;]
(iii) the value of any benefit or amenity granted or provided free of cost or at concessional rate in any of the following cases—
(a) by a company to an employee who is a director thereof;
(b) by a company to an employee being a person who has a substantial interest in the company;
(c) by any employer (including a company) to an employee to whom the provisions of paragraphs (a) and (b) of this sub-clause do not apply and whose income 82[under the head “Salaries” (whether due from, or paid or allowed by, one or more employers), exclusive of the value of all benefits or amenities not provided for by way of monetary payment, exceeds 83[fifty] thousand rupees:]
84[***]
85[Explanation.—For the removal of doubts, it is hereby declared that the use of any vehicle provided by a company or an employer for journey by the assessee from his residence to his office or other place of work, or from such office or place to his residence, shall not be regarded as a benefit or amenity granted or provided to him free of cost or at concessional rate for the purposes of this sub-clause;]
(iiia) 86[***]
(iv) any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee;
(v) any sum payable by the employer, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund 87[or a Deposit-linked Insurance Fund established under section 3G of the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948), or, as the case may be, section 6C of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952)], to effect an assurance on the life of the assessee or to effect a contract for an annuity; 88[***]
89[(vi) the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at concessional rate to the assessee.
Explanation.—For the purposes of this sub-clause,—
(a) “specified security” means the securities as defined in clause (h) of section 290 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and, where employees’ stock option has been granted under any plan or scheme therefor, includes the securities offered under such plan or scheme;
(b) “sweat equity shares” means equity shares issued by a company to its employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called;
(c) the value of any specified security or sweat equity shares shall be the fair market value of the specified security or sweat equity shares, as the case may be, on the date on which the option is exercised by the assessee as reduced by the amount actually paid by, or recovered from, the assessee in respect of such security or shares;
(d) “fair market value” means the value determined in accordance with the method as may be prescribed;
(e) “option” means a right but not an obligation granted to an employee to apply for the specified security or sweat equity shares at a predetermined price;
(vii) the amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds one lakh rupees; and
(viii) the value of any other fringe benefit or amenity91 as may be prescribed92:]
93[Provided that nothing in this clause shall apply to,—
(i) the value of any medical treatment provided to an employee or any member of his family in any hospital maintained by the employer;
94[(ii) any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family—
(a) in any hospital maintained by the Government or any local authority or any other hospital approved95 by the Government for the purposes of medical treatment of its employees;
(b) in respect of the prescribed diseases96 or ailments, in any hospital approved by the 96a[Principal Chief Commissioner or] Chief Commissioner having regard to the prescribed guidelines97 :
Provided that, in a case falling in sub-clause (b), the employee shall attach98 with his return of income a certificate from the hospital specifying the disease or ailment for which medical treatment was required and the receipt for the amount paid to the hospital;]
(iii) any portion of the premium paid by an employer in relation to an employee, to effect or to keep in force an insurance on the health of such employee under any scheme approved by the Central Government 99[or the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999),] for the purposes of clause (ib) of sub-section (1) of section 36;
(iv) any sum paid by the employer in respect of any premium paid by the employee to effect or to keep in force an insurance on his health or the health of any member of his family under any scheme approved by the Central Government 1[or the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999),] for the purposes of section 80D;
(v) any sum paid by the employer in respect of any expenditure actually incurred by the employee on his medical treatment or treatment of any member of his family [other than the treatment referred to in clauses (i) and (ii)]; so, however, that such sum does not exceed 2[fifteen] thousand rupees in the previous year;
(vi) any expenditure incurred by the employer on—
(1) medical treatment of the employee, or any member of the family of such employee, outside India;
(2) travel 3[and] stay abroad of the employee or any member of the family of such employee for medical treatment;
(3) travel and stay abroad of one attendant who accompanies the patient in connection with such treatment,
4[subject to the condition that—
(A) the expenditure on medical treatment and stay abroad shall be excluded from perquisite only to the extent permitted by the Reserve Bank of India; and
(B) the expenditure on travel shall be excluded from perquisite only in the case of an employee whose gross total income, as computed before including therein the said expenditure, does not exceed two lakh rupees;]
(vii) any sum paid by the employer in respect of any expenditure actually incurred by the employee for any of the purposes specified in clause (vi) subject to the conditions specified in or under that clause :
5[Provided further that for the assessment year beginning on the 1st day of April, 2002, nothing contained in this clause shall apply to any employee whose income under the head “Salaries” (whether due from, or paid or allowed by, one or more employers) exclusive of the value of all perquisites not provided for by way of monetary payment, does not exceed one lakh rupees.]
(i) “hospital” includes a dispensary or a clinic 6[or a nursing home];
(ii) “family”, in relation to an individual, shall have the same meaning as in clause (5) of section 10; and
(iii) “gross total income” shall have the same meaning as in clause (5) of section 80B;]
7[* * *]
8(3) “profits9 in lieu of salary”9 includes—
(i) the amount of any compensation9 due to or received by an assessee from his employer or former employer at or in connection with the termination of his employment or the modification of the terms and conditions relating thereto;
(ii) any payment (other than any payment referred to in clause (10) 10[, clause (10A)] 11[, clause (10B)], clause (11), 12[clause (12) 13[, clause (13)] or clause (13A)] of section 10), due to or received by an assessee from an employer or a former employer or from a provident or other fund 14[* * *], to the extent to which it does not consist of contributions by the assessee or 15[interest on such contributions or any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy.
Explanation.—For the purposes of this sub-clause, the expression “Keyman insurance policy” shall have the meaning assigned to it in clause (10D) of section 10;]
16[(iii) any amount due to or received, whether in lump sum or otherwise, by any assessee from any person—
(A) before his joining any employment with that person; or
(B) after cessation of his employment with that person.]
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17[***]
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17[***]
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17[***]
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17[***]
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Income from house property.
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(a) the sum for which the property might reasonably be expected to let from year to year; or
(b) where the property or any part of the property is let and the actual rent received or receivable20 by the owner in respect thereof is in excess of the sum referred to in clause (a), the amount so received or receivable; or
(c) where the property or any part of the property is let and was vacant during the whole or any part of the previous year and owing to such vacancy the actual rent received or receivable by the owner in respect thereof is less than the sum referred to in clause (a), the amount so received or receivable :
Provided that the taxes levied22 by any local authority in respect of the property shall be deducted (irrespective of the previous year in which the liability to pay such taxes was incurred by the owner according to the method of accounting regularly employed by him) in determining the annual value of the property of that previous year in which such taxes are actually paid by him.
Explanation.—For the purposes of clause (b) or clause (c) of this sub-section, the amount of actual rent received or receivable by the owner shall not include, subject to such rules23-24 as may be made in this behalf, the amount of rent which the owner cannot realise.
(2) Where the property consists of a house or part of a house which—
(a) is in the occupation of the owner for the purposes of his own residence; or
(b) cannot actually be occupied by the owner by reason of the fact that owing to his employment, business or profession carried on at any other place, he has to reside at that other place in a building not belonging to him,
the annual value of such house or part of the house shall be taken to be nil.
(3) The provisions of sub-section (2) shall not apply if—
(a) the house or part of the house is actually let during the whole or any part of the previous year; or
(b) any other benefit therefrom is derived by the owner.
(4) Where the property referred to in sub-section (2) consists of more than one house—
(a) the provisions of that sub-section shall apply only in respect of one of such houses, which the assessee may, at his option, specify in this behalf;
(b) the annual value of the house or houses, other than the house in respect of which the assessee has exercised an option under clause (a), shall be determined under sub-section (1) as if such house or houses had been let.]
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(a) a sum equal to thirty per cent of the annual value;
(b) where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital, the amount of any interest payable on such capital:
Provided that in respect of property referred to in sub-section (2) of section 23, the amount of deduction shall not exceed thirty thousand rupees :
Provided further that where the property referred to in the first proviso is acquired or constructed with capital borrowed on or after the 1st day of April, 1999 and such acquisition or construction is completed 26[within three years from the end of the financial year in which capital was borrowed], the amount of deduction under this clause shall not exceed 26a[one lakh fifty thousand rupees].
Explanation.—Where the property has been acquired or constructed with borrowed capital, the interest, if any, payable on such capital borrowed for the period prior to the previous year in which the property has been acquired or constructed, as reduced by any part thereof allowed as deduction under any other provision of this Act, shall be deducted under this clause in equal instalments for the said previous year and for each of the four immediately succeeding previous years:]
27[Provided also that no deduction shall be made under the second proviso unless the assessee furnishes a certificate, from the person to whom any interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of the property, or, conversion of the whole or any part of the capital borrowed which remains to be repaid as a new loan.
Explanation.—For the purposes of this proviso, the expression “new loan” means the whole or any part of a loan taken by the assessee subsequent to the capital borrowed, for the purpose of repayment of such capital.]
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(a) is the owner of any property consisting of any buildings or lands appurtenant thereto which has been let to a tenant; and
(b) has received any amount, by way of arrears of rent from such property, not charged to income-tax for any previous year,
the amount so received, after deducting 33[a sum equal to thirty per cent of such amount], shall be deemed to be the income chargeable under the head “Income from house property” and accordingly charged to income-tax as the income of that previous year in which such rent is received, whether the assessee is the owner of that property in that year or not.]
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36[Explanation.—For the purposes of this section, in applying the provisions of sub-section (2) of section 23 for computing the share of each such person as is referred to in this section, such share shall be computed, as if each such person is individually entitled to the relief provided in that sub-section.]
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(i) an individual who transfers otherwise than for adequate considera-tion any house property to his or her spouse, not being a transfer in connection with an agreement to live apart, or to a minor child not being a married daughter, shall be deemed to be the owner of the house property so transferred;
(ii) the holder of an impartible estate shall be deemed to be the individual owner of all the properties comprised in the estate ;
38[(iii) a member of a co-operative society, company or other association of persons to whom a building or part thereof is allotted or leased under a house building scheme of the society, company or association, as the case may be, shall be deemed to be the owner of that building or part thereof ;
(iiia) a person who is allowed to take or retain possession of any building or part thereof in part performance of a contract of the nature referred to in 39section 53A of the Transfer of Property Act, 1882 (4 of 1882), shall be deemed to be the owner of that building or part thereof ;
(iiib) a person who acquires any rights (excluding any rights by way of a lease from month to month or for a period not exceeding one year) in or with respect to any building or part thereof, by virtue of any such transaction as is referred to in clause (f) of section 269UA, shall be deemed to be the owner of that building or part thereof;]
(iv) 40[***]
(v) 40[***]
(vi) taxes levied by a local authority in respect of any property shall be deemed to include service taxes levied by the local authority in respect of the property.
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Profits and gains of business or profession.
(i) the profits and gains43 of any business or profession43 which was carried on by the assessee at any time during the previous year ;
(ii) any compensation43 or other payment due to43 or received by43,—
(a) any person, by whatever name called, managing the whole or substantially the whole of the affairs of an Indian company, at or in connection with the termination of his management or the modification of the terms and conditions relating thereto;
(b) any person, by whatever name called, managing the whole or substantially the whole of the affairs in India of any other company, at or in connection with the termination of his office or the modification of the terms and conditions relating thereto ;
(c) any person, by whatever name called, holding an agency in India for any part of the activities relating to the business of any other person, at or in connection with the termination of the agency or the modification of the terms and conditions relating thereto ;
44[(d) any person, for or in connection with the vesting in the Government, or in any corporation owned or controlled by the Government, under any law for the time being in force, of the management of any property or business ;]
(iii) income derived by a trade, professional or similar45 association from specific services45 performed for its members ;
46[(iiia) profits on sale of a licence granted under the Imports (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947 (18 of 1947) ;]
47[(iiib) cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India ;]
48[(iiic) any duty of customs or excise re-paid or re-payable as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971 ;]
49[(iiid) any profit50 on the transfer of the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme under the export and import policy formulated and announced under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992);]
51[(iiie) any profit on the transfer of the Duty Free Replenishment Certificate, being the Duty Remission Scheme under the export and import policy formulated and announced under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992) ;]
52[(iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession ;]
53[(v) any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from such firm :
Provided that where any interest, salary, bonus, commission or remuneration, by whatever name called, or any part thereof has not been allowed to be deducted under clause (b) of section 40, the income under this clause shall be adjusted to the extent of the amount not so allowed to be deducted ;]
54[(va) any sum, whether received or receivable, in cash or kind, under an agreement for—
(a) not carrying out any activity in relation to any business; or
(b) not sharing any know-how, patent, copyright, trade-mark, licence, franchise or any other business or commercial right of similar nature or information or technique likely to assist in the manufacture or processing of goods or provision for services:
Provided that sub-clause (a) shall not apply to—
(i) any sum, whether received or receivable, in cash or kind, on account of transfer of the right to manufacture, produce or process any article or thing or right to carry on any business, which is chargeable under the head “Capital gains” ;
(ii) any sum received as compensation, from the multilateral fund of the Montreal Protocol on Substances that Deplete the Ozone layer under the United Nations Environment Programme, in accordance with the terms of agreement entered into with the Government of India.
(i) “agreement” includes any arrangement or understanding or action in concert,—
(A) whether or not such arrangement, understanding or action is formal or in writing; or
(B) whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings;
(ii) “service” means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial nature such as accounting, banking, communication, conveying of news or information, advertising, entertainment, amusement, education, financing, insurance, chit funds, real estate, construction, transport, storage, processing, supply of electrical or other energy, boarding and lodging;]
55[(vi) any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy.
Explanation.—For the purposes of this clause, the expression “Keyman insurance policy” shall have the meaning assigned to it in clause (10D) of section 10;]
56[(vii) any sum, whether received or receivable, in cash or kind, on account of any capital asset (other than land or goodwill or financial instrument) being demolished, destroyed, discarded or transferred, if the whole of the expenditure on such capital asset has been allowed as a deduction under section 35AD.]
Explanation 1.—[Omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.]
Explanation 2.—Where speculative transactions carried on by an assessee are of such a nature as to constitute a business, the business (hereinafter referred to as “speculation business” ) shall be deemed to be distinct and separate from any other business.
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(a) where the premises are occupied by the assessee—
(i) as a tenant, the rent paid for such premises ; and further if he has undertaken to bear the cost of repairs to the premises, the amount paid on account of such repairs ;
(ii) otherwise than as a tenant, the amount paid by him on account of current repairs59 to the premises ;
(b) any sums paid on account of land revenue, local rates or municipal taxes ;
(c) the amount of any premium paid in respect of insurance against risk of damage or destruction of the premises.
60[Explanation.—For the removal of doubts, it is hereby declared that the amount paid on account of the cost of repairs referred to in sub-clause (i), and the amount paid on account of current repairs referred to in sub-clause (ii), of clause (a), shall not include any expenditure in the nature of capital expenditure.]
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(i) the amount paid on account of current repairs63 thereto ;
(ii) the amount of any premium paid in respect of insurance against risk of damage or destruction thereof.
64[Explanation.—For the removal of doubts, it is hereby declared that the amount paid on account of current repairs shall not include any expenditure in the nature of capital expenditure.]
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(i) buildings67, machinery67, plant or furniture, being tangible assets;
(ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature67, being intangible assets acquired on or after the 1st day of April, 1998,
owned67, wholly or partly, by the assessee67 and used for the purposes of the business67 or profession, the following deductions shall be allowed—]
68[(i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed69;]
(ii) 70[in the case of any block of assets, such percentage on the written down value thereof as may be prescribed71:]
72[***]
73[Provided 74[***] that no deduction shall be allowed under this clause in respect of—
(a) any motor car manufactured outside India, where such motor car is acquired by the assessee after the 28th day of February, 1975 75[but before the 1st day of April, 2001], unless it is used—
(i) in a business of running it on hire for tourists ; or
(ii) outside India in his business or profession in another country ; and
(b) any machinery or plant if the actual cost thereof is allowed as a deduction in one or more years under an agreement entered into by the Central Government under section 42 :]
76[Provided further that where an asset referred to in clause (i) or clause (ii) 77[or clause (iia)], as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under this sub-section in respect of such asset shall be restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (i) or clause (ii) 77[or clause (iia)], as the case may be :]
78[Provided also that where an asset being commercial vehicle is acquired by the assessee on or after the 1st day of October, 1998 but before the 1st day of April, 1999 and is put to use before the 1st day of April, 1999 for the purposes of business or profession, the deduction in respect of such asset shall be allowed on such percentage on the written down value thereof as may be prescribed.
Explanation.—For the purposes of this proviso,—
(a) the expression “commercial vehicle” means “heavy goods vehicle”, “heavy passenger motor vehicle”, “light motor vehicle”, “medium goods vehicle” and “medium passenger motor vehicle” but does not include “maxi-cab”, “motor-cab”, “tractor” and “road-roller” ;
(b) the expressions “heavy goods vehicle” 79, “heavy passenger motor vehicle” 79, “light motor vehicle” 79, “medium goods vehicle” 79, “medium passenger motor vehicle” 79, “maxi-cab” 79, “motor-cab” 79, “tractor” 79 and “road roller” shall have the meanings respectively as assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988):]
80[Provided also that, in respect of the previous year relevant to the assessment year commencing on the 1st day of April, 1991, the deduction in relation to any block of assets under this clause shall, in the case of a company, be restricted to seventy-five per cent of the amount calculated at the percentage, on the written down value of such assets, prescribed under this Act immediately before the commencement of the Taxation Laws (Amendment) Act, 1991:]
81[Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets or know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the successor in the case of succession referred to in 82[clause (xiii), clause (xiiib) and clause (xiv)] of section 47 or section 170 or to the amalgamating company and the amalgamated company in the case of amalgamation, or to the demerged company and the resulting company in the case of demerger, as the case may be, shall not exceed in any previous year the deduction calculated at the prescribed rates as if the succession or the amalgamation or the demerger, as the case may be, had not taken place, and such deduction shall be apportioned between the predecessor and the successor, or the amalgamating company and the amalgamated company, or the demerged company and the resulting company, as the case may be, in the ratio of the number of days for which the assets were used by them.]
83[Explanation 1.—Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the 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, the building, then, the provisions of this clause shall apply as if the said structure or work is a building owned by the assessee.
Explanation 2.—For the purposes of this 84[sub-section] “written down value of the block of assets” shall have the same meaning as in clause* (c) of sub-section† (6) of section 43.]
85[Explanation 3.—For the purposes of this sub-section, 86[the expression “assets” ] shall mean—
(a) tangible assets, being buildings, machinery, plant or furniture;
(b) intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature87.
Explanation 4.—For the purposes of this sub-section, the expression “know-how” means any industrial information or technique likely to assist in the manufacture or processing87 of goods or in the working of a mine, oil-well or other sources of mineral deposits (including searching for discovery or testing of deposits for the winning of access thereto).
88[Explanation 5.—For the removal of doubts, it is hereby declared that the provisions of this sub-section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income;]
89[(iia) in the case of any new machinery or plant (other than ships and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing 90[or in the business of generation or generation and distribution of power], a further sum equal to twenty per cent of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii) :
Provided that no deduction shall be allowed in respect of—
(A) any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person; or
(B) any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature of a guest-house; or
(C) any office appliances or road transport vehicles; or
(D) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any one previous year;]
91[(iii) in the case of any building, machinery, plant or furniture in respect of which depreciation is claimed and allowed under clause (i) and which is sold, discarded, demolished or destroyed in the previous year (other than the previous year in which it is first brought into use), the amount by which the moneys payable in respect of such building, machinery, plant or furniture, together with the amount of scrap value, if any, fall short of the written down value thereof :
Provided that such deficiency is actually written off in the books of the assessee.
Explanation.—For the purposes of this clause,—
(1) “moneys payable” in respect of any building, machinery, plant or furniture includes—
(a) any insurance, salvage or compensation moneys payable in respect thereof;
(b) where the building, machinery, plant or furniture is sold, the price for which it is sold,
so, however, that where the actual cost of a motor car is, in accordance with the proviso to clause (1) of section 43, taken to be twenty-five thousand rupees, the moneys payable in respect of such motor car shall be taken to be a sum which bears to the amount for which the motor car is sold or, as the case may be, the amount of any insurance, salvage or compensation moneys payable in respect thereof (including the amount of scrap value, if any) the same proportion as the amount of twenty-five thousand rupees bears to the actual cost of the motor car to the assessee as it would have been computed before applying the said proviso;
(2) “sold” includes a transfer by way of exchange or a compulsory acquisition under any law for the time being in force but does not include a transfer, in a scheme of amalgamation, of any asset by the amalgamating company to the amalgamated company where the amalgamated company is 92[an Indian company or in a scheme of amalgamation of a banking company, as referred to in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949) with a banking institution as referred to in sub-section (15) of section 45 of the said Act, sanctioned and brought into force by the Central Government under sub-section (7) of section 45 of that Act93, of any asset by the banking company to the banking institution.]]
(iv) 94[***]
(v) 95[***]
(vi) 96[***]
(1A) 97[***]
98[(2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous year99, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub-section (2) of section 72 and sub-section (3) of section 73, the allowance or the part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years.]
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332A. (1) In respect of a ship or an aircraft or machinery or plant specified in sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business4 carried on by him, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction, in respect of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed4 or, if the ship, aircraft, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, of a sum by way of investment allowance equal to twenty-five per cent of the actual cost of the ship, aircraft, machinery or plant to the assessee :
5[Provided that in respect of a ship or an aircraft or machinery or plant specified in sub-section (8B), this sub-section shall have effect as if for the words “twenty-five per cent”, the words “twenty per cent” had been substituted :]
Provided 5[further] that no deduction shall be allowed under this section in respect of—
(a) any machinery or plant installed in any office premises or any residential accommodation, including any accommodation in the nature of a guest house ;
(b) any office appliances6 or road transport vehicles6 ;
(c) any ship, machinery or plant in respect of which the deduction by way of development rebate is allowable under section 33 ; and
(d) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any one previous year.
5[Explanation.—For the purposes of this sub-section, “actual cost” means the actual cost of the ship, aircraft, machinery or plant to the assessee as reduced by that part of such cost which has been met out of the amount released to the assessee under sub-section (6) of section 32AB.]
(2) The ship or aircraft or machinery or plant referred to in sub-section (1) shall be the following, namely :—
(a) a new ship or new aircraft acquired after the 31st day of March, 1976, by an assessee engaged in the business of operation of ships or aircraft ;
(b) any new machinery or plant installed6 after the 31st day of March, 1976,—
(i) for the purposes of business of generation or distribution of electricity or any other form of power ; or
7[(ii) in a small-scale industrial undertaking8 for the purposes of business of manufacture8 or production8 of any article or thing8 ; or
(iii) in any other industrial undertaking8 for the purposes of business of construction, manufacture8 or production8 of any article or thing8, not being an article or thing8 specified in the list in the Eleventh Schedule :]
9[Provided that nothing contained in clauses (a) and (b) shall apply in relation to,—
(i) a new ship or new aircraft acquired, or
(ii) any new machinery or plant installed,
after the 31st day of March, 1987 but before the 1st day of April, 1988, unless such ship or aircraft is acquired or such machinery or plant is installed in the circumstances specified in clause (a) of sub-section (8B) and the assessee furnishes evidence to the satisfaction of the Assessing Officer as specified in that clause ;]
10[(c) any new machinery or plant installed after the 31st day of March, 1983, but before the 11[1st day of April, 1987], for the purposes of business of repairs to ocean-going vessels or other powered craft if the business is carried on by an Indian company and the business so carried on is for the time being approved12 for the purposes of this clause by the Central Government.]
15[(1)(a) “new ship” or “new aircraft” includes a ship or aircraft which before the date of acquisition by the assessee was used by any other person, if it was not at any time previous to the date of such acquisition owned by any person resident in India ;
(b) “new machinery or plant” includes machinery or plant which before its installation by the assessee was used outside India by any other person, if the following conditions are fulfilled, namely :—
(i) such machinery or plant was not, at any time previous to the date of such installation by the assessee, used in India ;
(ii) such machinery or plant is imported into India from any country outside India ; and
(iii) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee,]
(2) an industrial undertaking shall be deemed to be a small-scale industrial undertaking, if the aggregate value of the machinery and plant (other than tools, jigs, dies and moulds) installed, as on the last day of the previous year, for the purposes of the business of the undertaking 16[does not exceed,—
17[(i) in a case where the previous year ends before the 1st day of August, 1980, ten lakh rupees ;
(ii) in a case where the previous year ends after the 31st day of July, 1980, but before the 18th day of March, 1985, twenty lakh rupees; and
(iii) in a case where the previous year ends after the 17th day of March, 1985, thirty-five lakh rupees,]]
and for this purpose the value of any machinery or plant shall be,—
(a) in the case of any machinery or plant owned by the assessee, the actual cost thereof to the assessee ; and
(b) in the case of any machinery or plant hired by the assessee, the actual cost thereof as in the case of the owner of such machinery or plant.
18[(2A) The deduction under sub-section (1) shall not be denied in respect of any machinery or plant installed and used mainly for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule, by reason only that such machinery or plant is also used for the purposes of business of construction, manufacture or production of any article or thing specified in the said list.]
18[(2B) Where any new machinery or plant is installed after the 30th day of June, 1977, but before the 1st day of April, 19[1987], for the purposes of business of manufacture or production of any article or thing and such article or thing—
(a) is manufactured or produced by using any technology (including any process) or other know-how developed in, or
(b) is an article or thing invented in,
a laboratory owned or financed by the Government, or a laboratory owned by a public sector company or a University or by an institution recognised in this behalf by the prescribed authority,20
the provisions of sub-section (1) shall have effect in relation to such machinery or plant as if for the words “twenty-five per cent”, the words “thirty-five per cent” had been substituted, if the following conditions are fulfilled, namely :—
(i) the right to use such technology (including any process) or other know-how or to manufacture or produce such article or thing has been acquired from the owner of such laboratory or any person deriving title from such owner ;
(ii) the assessee furnishes, along with his return of income for the assessment year for which the deduction is claimed, a certificate from the prescribed authority20 to the effect that such article or thing is manufactured or produced by using such technology (including any process) or other know-how developed in such laboratory or is an article or thing invented in such laboratory ; and
(iii) the machinery or plant is not used for the purpose of business of manufacture or production of any article or thing specified in the list in the Eleventh Schedule.
Explanation.—For the purposes of this sub-section,—
(a) “laboratory financed by the Government” means a laboratory owned by any body [including a society registered under the Societies Registration Act, 1860 (21 of 1860)] and financed wholly or mainly by the Government;
(b) 21[***]
(c) “University” means a University established or incorporated by or under a Central, State or Provincial Act and includes an institution declared under section 3 of the University Grants Commission Act, 1956 (3 of 1956) to be a University for the purposes of that Act.]
22[(2C) Where any new machinery or plant, being machinery or plant which would assist in control of pollution or protection of environment and which has been notified23 in this behalf by the Central Government in the Official Gazette, is installed after the 31st day of May, 1983 24[but before the 1st day of April, 1987], in any industrial undertaking referred to in sub-clause (i) or sub-clause (ii) or sub-clause (iii) of clause (b) of sub-section (2), the provisions of subsection (1) shall have effect in relation to such machinery or plant as if for the words “twenty-five per cent”, the words “thirty-five per cent” had been substituted.]
(3) Where the total income of the assessee assessable for the assessment year relevant to the previous year in which the ship or aircraft was acquired or the machinery or plant was installed, or, as the case may be, the immediately succeeding previous year (the total income for this purpose being computed after deduction of the allowances under section 33 and section 33A, but without making any deduction under sub-section (1) of this section or any deduction under Chapter VI-A) is nil or is less than the full amount of the investment allowance,—
(i) the sum to be allowed by way of investment allowance for that assessment year under sub-section (1) shall be only such amount as is sufficient to reduce the said total income to nil ; and
(ii) the amount of the investment allowance, to the extent to which it has not been allowed as aforesaid, shall be carried forward to the following assessment year, and the investment allowance to be allowed for the following assessment year shall be such amount as is sufficient to reduce the total income of the assessee assessable for that assessment year, computed in the manner aforesaid, to nil, and the balance of the investment allowance, if any, still outstanding shall be carried forward to the following assessment year and so on, so, however, that no portion of the investment allowance shall be carried forward for more than eight assessment years immediately succeeding the assessment year relevant to the previous year in which the ship or aircraft was acquired or the machinery or plant was installed or, as the case may be, the immediately succeeding previous year.
Explanation.—Where for any assessment year, investment allowance is to be allowed in accordance with the provisions of this sub-section in respect of any ship or aircraft acquired or any machinery or plant installed in more than one previous year, and the total income of the assessee assessable for that assessment year (the total income for this purpose being computed after deduction of the allowances under section 33 and section 33A, but without making any deduction under sub-section (1) of this section or any deduction under Chapter VI-A) is less than the aggregate of the amounts due to be allowed in respect of the assets aforesaid for that assessment year, the following procedure shall be followed, namely :—
(a) the allowance under clause (ii) shall be made before any allowance under clause (i) is made; and
(b) where an allowance has to be made under clause (ii) in respect of amounts carried forward from more than one assessment year, the amount carried forward from an earlier assessment year shall be allowed before any amount carried forward from a later assessment year.
(4) The deduction under sub-section (1) shall be allowed only if the following conditions are fulfilled, namely :—
(i) the particulars prescribed in this behalf have been furnished by the assessee in respect of the ship or aircraft or machinery or plant;
(ii) an amount equal to seventy-five per cent of the investment allowance to be actually allowed is debited to the profit and loss account of 25[any previous year in respect of which the deduction is to be allowed under sub-section (3) or any earlier previous year (being a previous year not earlier than the year in which the ship or aircraft was acquired or the machinery or plant was installed or the ship, aircraft, machinery or plant was first put to use)] and credited to a reserve account (to be called the “Investment Allowance Reserve Account” ) to be utilised—
(a) for the purposes of acquiring, before the expiry of a period of ten years next following the previous year in which the ship or aircraft was acquired or the machinery or plant was installed, a new ship or a new aircraft or new machinery or plant [other than machinery or plant of the nature referred to in clauses (a), (b) and (d) of the 26[second] proviso to sub-section (1)] for the purposes of the business of the undertaking; and
(b) until the acquisition of a new ship or a new aircraft or new machinery or plant as aforesaid, for the purposes of the business of the undertaking other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India:
Provided that this clause shall have effect in respect of a ship as if for the word “seventy-five”, the word “fifty” had been substituted.
Explanation.—Where the amount debited to the profit and loss account and credited to the Investment Allowance Reserve Account under this sub-section is not less than the amount required to be so credited on the basis of the amount of deduction in respect of investment allowance claimed in the return made by the assessee under section 139, but a higher deduction in respect of the investment allowance is admissible on the basis of the total income as proposed to be computed by the 27[Assessing] Officer under section 143, the 27[Assessing] Officer shall, by notice in writing in this behalf, allow the assessee an opportunity to credit within the time specified in the notice or within such further time as the 27[Assessing] Officer may allow, a further amount to the Investment Allowance Reserve Account out of the profits and gains of the previous year in which such notice is served on the assessee or of the immediately preceding previous year, if the accounts for that year have not been made up; and, if the assessee credits any further amount to such account within the time aforesaid, the amount so credited shall be deemed to have been credited to the Investment Allowance Reserve Account of the previous year in which the deduction is admissible and such amount shall not be taken into account in determining the adequacy of the reserve required to be created by the assessee in respect of the previous year in which such further credit is made:
Provided that such opportunity shall not be allowed by the 27[Assessing] Officer in a case where the difference in the total income as proposed to be computed by him and the total income as returned by the assessee arises out of the application of the proviso to sub-section (1) of section 145 or sub-section (2) of that section or the omission by the assessee to disclose his income fully and truly.
(5) Any allowance made under this section in respect of any ship, aircraft, machinery or plant shall be deemed to have been wrongly made for the purposes of this Act—
(a) if the ship, aircraft, machinery or plant is sold or otherwise transferred28 by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired or installed; or
(b) if at any time before the expiry of ten years from the end of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed, the assessee does not utilise the amount credited to the reserve account under sub-section (4) for the purposes of acquiring a new ship or a new aircraft or new machinery or plant [other than machinery or plant of the nature referred to in clauses (a), (b) and (d) of the 29[second] proviso to sub-section (1)] for the purposes of the business of the undertaking; or
(c) if at any time before the expiry of the ten years aforesaid, the assessee utilises the amount credited to the reserve account under sub-section (4) for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any assets outside India or for any other purpose which is not a purpose of the business of the undertaking,
and the provisions of sub-section (4A) of section 155 shall apply accordingly:
Provided that nothing in clause (a) shall apply—
(i) where the ship, aircraft, machinery or plant is sold or otherwise transferred by the assessee to the Government, a local authority, a corporation established by a Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 195630 (1 of 1956); or
(ii) where the sale or transfer of the ship, aircraft, machinery or plant is made in connection with the amalgamation or succession, referred to in sub-section (6) or sub-section (7).
(6) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers to the amalgamated company any ship, aircraft, machinery or plant, in respect of which investment allowance has been allowed to the amalgamating company under sub-section (1),—
(a) the amalgamated company shall continue to fulfil the conditions mentioned in sub-section (4) in respect of the reserve created by the amalgamating company and in respect of the period within which such ship, aircraft, machinery or plant shall not be sold or otherwise transferred and in default of any of these conditions, the provisions of sub-section (4A) of section 155 shall apply to the amalgamated company as they would have applied to the amalgamating company had it committed the default; and
(b) the balance of investment allowance, if any, still outstanding to the amalgamating company in respect of such ship, aircraft, machinery or plant, shall be allowed to the amalgamated company in accordance with the provisions of sub-section (3), so, however, that the total period for which the balance of investment allowance shall be carried forward in the assessments of the amalgamating company and the amalgamated company shall not exceed the period of eight years specified in sub-section (3) and the amalgamated company shall be treated as the assessee in respect of such ship, aircraft, machinery or plant for the purposes of this section.
(7) Where a firm is succeeded to by a company in the business carried on by it as a result of which the firm sells or otherwise transfers to the company any ship, aircraft, machinery or plant, the provisions of clauses (a) and (b) of sub-section (6) shall, so far as may be, apply to the firm and the company.
(i) all the property of the firm relating to the business immediately before the succession becomes the property of the company;
(ii) all the liabilities of the firm relating to the business immediately before the succession become the liabilities of the company; and
(iii) all the shareholders of the company were partners of the firm immediately before the succession.
(8) The Central Government, if it considers necessary or expedient so to do, may, by notification in the Official Gazette, direct that the deduction allowable under this section shall not be allowed in respect of any ship or aircraft acquired or any machinery or plant installed after such date 31[***] as may be specified therein.
32[(8A) The Central Government, if it considers necessary or expedient so to do, may, by notification in the Official Gazette, omit any article or thing from the list of articles or things specified in the Eleventh Schedule.]
33[(8B) Notwithstanding anything contained in sub-section (8) or the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. GSR 870(E), dated the 12th June, 1986, issued thereunder, the provisions of this section shall apply in respect of,—
(a) (i) a new ship or new aircraft acquired after the 31st day of March, 1987 but before the 1st day of April, 1988, if the assessee furnishes evidence to the satisfaction of the Assessing Officer that he had, before the 12th day of June, 1986, entered into a contract for the purchase of such ship or aircraft with the builder or manu-facturer or owner thereof, as the case may be;
(ii) any new machinery or plant installed after the 31st day of March, 1987 but before the 1st day of April, 1988, if the assessee furnishes evidence to the satisfaction of the Assessing Officer that before the 12th day of June, 1986, he had purchased such machinery or plant or had entered into a contract for the purchase of such machinery or plant with the manufacturer or owner of, or a dealer in, such machinery or plant, or had, where such machinery or plant has been manufactured in an undertaking owned by the assessee, taken steps for the manufacture of such machinery or plant:
Provided that nothing contained in sub-section (1) shall entitle the assessee to claim deduction in respect of a ship or aircraft or machinery or plant referred to in this clause in any previous year except the previous year relevant to the assessment year commencing on the 1st day of April, 1989;
(b) a new ship or new aircraft acquired or any new machinery or plant installed after the 31st day of March, 1988, but before such date as the Central Government, if it considers necessary or expedient so to do, may, by notification in the Official Gazette34, specify in this behalf.
(8C) Subject to the provisions of clause (ii) of sub-section (3), where a deduction has been allowed to an assessee under sub-section (1) in any assessment year, no deduction shall be allowed to the assessee under section 32AB in the said assessment year (hereinafter referred to as the initial assessment year) and a block of further period of four years beginning with the assessment year immediately succeeding the initial assessment year.]
(9) [Omitted by the Finance Act, 1990, w.r.e.f. 1-4-1976.]
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(a) deposited any amount in an account (hereafter in this section referred to as deposit account) maintained by him with the Development Bank before the expiry of six months from the end of the previous year or before furnishing the return of his income, which-ever is earlier; or
(b) utilised any amount during the previous year for the purchase of any new ship, new aircraft, new machinery or plant, without depositing any amount in the deposit account under clause (a),
in accordance with, and for the purposes specified in, a scheme36 (hereafter in this section referred to as the scheme) to be framed by the Central Government, or if the assessee is carrying on the business of growing and manufacturing tea in India, to be approved in this behalf by the Tea Board, the assessee shall be allowed a deduction 37[(such deduction being allowed before the loss, if any, brought forward from earlier years is set off under section 72)] of—
(i) a sum equal to the amount, or the aggregate of the amounts, so deposited and any amount so utilised; or
(ii) a sum equal to twenty per cent of the profits of 38[***] business or profession as computed in the accounts of the assessee audited in accordance with sub-section (5),
whichever is less :
39[Provided that where such assessee is a firm, or any association of persons or any body of individuals, the deduction under this section shall not be allowed in the computation of the income of any partner, or as the case may be, any member of such firm, association of persons or body of individuals:]
40[Provided further that no such deduction shall be allowed in relation to the assessment year commencing on the 1st day of April, 1991, or any subsequent assessment year.]
(2) For the purposes of this section,—
(i) 41[***]
42[(ii) “new ship” or “new aircraft” includes a ship or aircraft which before the date of acquisition by the assessee was used by any other person, if it was not at any time previous to the date of such acquisition owned by any person resident in India;
(iii) “new machinery or plant” includes machinery or plant which before its installation by the assessee was used outside India by any other person, if the following conditions are fulfilled, namely :—
(a) such machinery or plant was not, at any time previous to the date of such installation by the assessee, used in India;
(b) such machinery or plant is imported into India from any country outside India; and
(c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee;
(iv) “Tea Board” means the Tea Board established under section 4 of the Tea Act, 1953 (29 of 1953).]
(3) 43[The profits of business or profession of an assessee for the purposes of sub-section (1) shall] be an amount arrived at after deducting an amount equal to the depreciation computed in accordance with the provisions of sub-section (1) of section 32 from the amounts of profits computed in accordance with the requirements of Parts II and III of the 44[Schedule VI] to the Companies Act, 195645 (1 of 1956), 46[as increased by the aggregate of—
(i) the amount of depreciation;
(ii) the amount of income-tax paid or payable, and provision therefor;
(iii) the amount of surtax paid or payable under the Companies (Profits) Surtax Act, 1964 (7 of 1964);
(iv) the amounts carried to any reserves, by whatever name called;
(v) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities;
(vi) the amount by way of provision for losses of subsidiary companies; and
(vii) the amount or amounts of dividends paid or proposed,
if any debited to the profit and loss account; and as reduced by any amount or amounts withdrawn from reserves or provisions, if such amounts are credited to the profit and loss account 47[***].]
48[***]
(4) No deduction under sub-section (1) shall be allowed in respect of any amount utilised for the purchase of—
(a) any machinery or plant to be installed in any office premises or residential accommodation, including any accommodation in the nature of a guest-house;
(b) any office appliances (not being computers);
(c) any road transport vehicles;
(d) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any one previous year;
49[(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.]
(5) The deduction under sub-section (1) shall not be admissible50 unless the accounts of the business or profession of the assessee for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form51 duly signed and verified by such accountant :
Provided that in a case where the assessee is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this sub-section if such assessee gets the accounts of such business or profession audited under such law and furnishes the report of the audit as required under such other law and a further report in the form prescribed under this sub-section.
52[(5A) Any amount standing to the credit of the assessee in the deposit account shall not be allowed to be withdrawn before the expiry of a period of five years from the date of deposit except for the purposes specified in the scheme 53[or] in the circumstances specified below :—
(a) closure of business;
(b) death of an assessee;
(c) partition of a Hindu undivided family;
(d) dissolution of a firm;
(e) liquidation of a company.]
54[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 relation to any withdrawals made from the deposit account either before or after the expiry of a period of five years from the date of deposit.]
54[(5AA) Where any amount, standing to the credit of the assessee in the deposit account, is withdrawn during any previous year by the assessee in the circumstance specified in clause (a) or clause (d) of sub-section (5A), the whole of such amount shall be deemed to be the profits and gains of business or profession of that previous year and shall accordingly be chargeable to income-tax as the income of that previous year, as if the business had not closed or, as the case may be, the firm had not been dissolved.]
55[(5B) Where any amount standing to the credit of the assessee in the deposit account is utilised by the assessee for the purposes of any expenditure in connection with the 56[***] business or profession in accordance with the scheme, such expenditure shall not be allowed in computing the income chargeable under the head “Profits and gains of business or profession” .]
(6) Where any amount, standing to the credit of the assessee in the deposit account, released during any previous year by the Development Bank for being utilised by the assessee for the purposes specified in the scheme or at the closure of the account 57[[in circumstances other than the circumstances specified in clauses (b), (c) and (e) of sub-section (5A)]], is not utilised in accordance with 58[, and within the time specified in,] the scheme, either wholly or in part, 59[***] the whole of such amount or, as the case may be, part thereof which is not so utilised shall be deemed to be the profits and gains of business or profession of that previous year and shall accordingly be chargeable to income-tax as the income of that previous year.
(7) Where any asset acquired in accordance with the scheme is sold or otherwise transferred in any previous year by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired, such part of the cost of such asset as is relatable to the deductions allowed under sub-section (1) shall be deemed to be the profits and gains of business or profession of the previous year in which the asset is sold or otherwise transferred and shall accordingly be chargeable to income-tax as the income of that previous year:
Provided that nothing in this sub-section shall apply—
(i) where the asset is sold or otherwise transferred by the assessee to Government, a local authority, a corporation established by or under a Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 195660 (1 of 1956); or
(ii) where the sale or transfer of the asset is made in connection with the succession of a firm by a company in the business or profession carried on by the firm as a result of which the firm sells or otherwise transfers to the company any asset and the scheme continues to apply to the company in the manner applicable to the firm.
Explanation.—The provisions of clause (ii) of the proviso shall apply only where—
(i) all the properties of the firm relating to the business or profession immediately before the succession become the properties of the company;
(ii) all the liabilities of the firm relating to the business or profession immediately before the succession become the liabilities of the company; and
(iii) all the shareholders of the company were partners of the firm immediately before the succession.
(8) The Central Government may, if it considers it necessary or expedient so to do, by notification in the Official Gazette, omit any article or thing from the list of articles or things specified in the Eleventh Schedule.
(9) The Central Government may, after making such inquiry as it may think fit, direct, by notification in the Official Gazette, that the provisions of this section shall not apply to any class of assessees, with effect from such date as it may specify in the notification.
61[(10) Where a deduction has been allowed to an assessee under this section in any assessment year, no deduction shall be allowed to the assessee under sub-section (1) of section 32A in the said assessment year (hereinafter referred to as the initial assessment year) and a block of further period of four years beginning with the assessment year immediately succeeding the initial assessment year].
(a) “computers” does not include calculating machines and calculating devices;
(b) “Development Bank” means—
(i) in the case of an assessee carrying on business of growing and manufacturing tea in India, the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981);
(ii) in the case of other assessees, the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964) and includes such bank or institution as may be specified in the scheme in this behalf.]
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(a) for the assessment year commencing on the 1st day of April, 2014, of a sum equal to fifteen per cent of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but before the 1st day of April, 2014, if the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees; and
(b) for the assessment year commencing on the 1st day of April, 2015, of a sum equal to fifteen per cent of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but before the 1st day of April, 2015, as reduced by the amount of deduction allowed, if any, under clause (a).
The following sub-sections (1A) and (1B) shall be inserted after sub-section (1) of section 32AC by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
(1A) Where an assessee, being a company, engaged in the business of manufacture or production of any article or thing, acquires and installs new assets and the amount of actual cost of such new assets acquired and installed during any previous year exceeds twenty-five crore rupees, then, there shall be allowed a deduction of a sum equal to fifteen per cent of the actual cost of such new assets for the assessment year relevant to that previous year:
Provided that no deduction under this sub-section shall be allowed for the assessment year commencing on the 1st day of April, 2015 to the assessee, which is eligible to claim deduction under sub-section (1) for the said assessment year.
(1B) No deduction under sub-section (1A) shall be allowed for any assessment year commencing on or after the 1st day of April, 2018.
(2) If any new asset acquired and installed by the assessee is sold or otherwise transferred, except in connection with the amalgamation or demerger, within a period of five years from the date of its installation, the amount of deduction allowed under sub-section (1) 62a[or sub-section (1A)] in respect of such new asset shall be deemed to be the income of the assessee chargeable under the head “Profits and gains of business or profession” of the previous year in which such new asset is sold or otherwise transferred, in addition to taxability of gains, arising on account of transfer of such new asset.
(3) Where the new asset is sold or otherwise transferred in connection with the amalgamation or demerger within a period of five years from the date of its installation, the provisions of sub-section (2) shall apply to the amalgamated company or the resulting company, as the case may be, as they would have applied to the amalgamating company or the demerged company.
(4) For the purposes of this section, “new asset” means any new plant or machinery (other than ship or aircraft) but does not include—
(i) any plant or machinery which before its installation by the assessee was used either within or outside India by any other person;
(ii) any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house;
(iii) any office appliances including computers or computer software;
(iv) any vehicle; or
(v) any plant or machinery, the whole of the actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any previous year.]
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(b) The sum referred to in clause (a) shall be—
(A) in the case of a ship, forty per cent of the actual cost thereof to the assessee;
(B) in the case of machinery or plant,—
(i) where the machinery or plant is installed for the purposes of business of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule,—
(a) thirty-five per cent of the actual cost of the machinery or plant to the assessee, where it is installed before the 1st day of April, 1970, and
(b) twenty-five per cent of such cost, where it is installed after the 31st day of March, 1970;
(ii) where the machinery or plant is installed after the 31st day of March, 1967, by an assessee being an Indian company in premises used by it as a hotel and such hotel is for the time being approved in this behalf by the Central Government,—
(a) thirty-five per cent of the actual cost of the machinery or plant to the assessee, where it is installed before the 1st day of April, 1970, and
(b) twenty-five per cent of such cost, where it is installed after the 31st day of March, 1970;
(iii) where the machinery or plant is installed after the 31st day of March, 1967, being an asset representing expenditure of a capital nature on scientific research related to the business carried on by the assessee,—
(a) thirty-five per cent of the actual cost of the machinery or plant to the assessee, where it is installed before the 1st day of April, 1970, and
(b) twenty-five per cent of such cost, where it is installed after the 31st day of March, 1970;
(iv) in any other case,—
(a) twenty per cent of the actual cost of the machinery or plant to the assessee, where it is installed before the 1st day of April, 1970, and
(b) fifteen per cent of such cost, where it is installed after the 31st day of March, 1970.]
65[66(1A)(a) An assessee who, after the 31st day of March, 1964, acquires any ship which before the date of acquisition by him was used by any other person shall, subject to the provisions of section 34, also be allowed as a deduction a sum by way of development rebate at such rate or rates as may be prescribed, provided that the following conditions are fulfilled, namely :—
(i) such ship was not previous to the date of such acquisition owned at any time by any person resident in India;
(ii) such ship is wholly used for the purposes of the business carried on by the assessee; and
(iii) such other conditions as may be prescribed.
(b) An assessee who installs any machinery or plant (other than office appliances or road transport vehicles) which before such installation by the assessee was used outside India by any other person shall, subject to the provisions of section 34, also be allowed as a deduction a sum by way of development rebate at such rate or rates as may be prescribed, provided that the following conditions are fulfilled, namely :—
(i) such machinery or plant was not used in India at any time previous to the date of such installation by the assessee;
(ii) it is imported in India by the assessee from any country outside India;
(iii) no deduction on account of depreciation or development rebate in respect of such machinery or plant has been allowed or is allowable under the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee;
(iv) such machinery or plant is wholly used for the purposes of the business carried on by the assessee; and
(v) such other conditions as may be prescribed.
(c) The development rebate under this sub-section shall be allowed as a deduction in respect of the previous year in which the ship was acquired or the machinery or plant was installed or, if the ship, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year.]
(2) In the case of a ship acquired or machinery or plant installed after the 31st day of December, 1957, where the total income of the assessee assessable for the assessment year relevant to the previous year in which the ship was acquired or the machinery or plant installed or the immediately succeeding previous year, as the case may be (the total income for this purpose being computed without making any allowance under sub-section (1) 67[or sub-section (1A)] 68[of this section or sub-section (1) of section 33A] 69[or any deduction under Chapter VI-A 70[***]]) is nil or is less than the full amount of the development rebate calculated at the rate applicable thereto under 71[sub-section (1) or sub-section (1A), as the case may be],—
(i) the sum to be allowed by way of development rebate for that assessment year under sub-section (1) 72[or sub-section (1A)] shall be only such amount as is sufficient to reduce the said total income to nil ; and
(ii) the amount of the development rebate, to the extent to which it has not been allowed as aforesaid, shall be carried forward to the following assessment year, and the development rebate to be allowed for the following assessment year shall be such amount as is sufficient to reduce the total income of the assessee assessable for that assessment year, computed in the manner aforesaid, to nil, and the balance of the development rebate, if any, still outstanding shall be carried forward to the following assessment year and so on, so however, that no portion of the development rebate shall be carried forward for more than eight assessment years immediately succeeding the assessment year relevant to the previous year in which the ship was acquired or the machinery or plant installed or the immediately succeeding previous year, as the case may be.
Explanation.—Where for any assessment year development rebate is to be allowed in accordance with the provisions of sub-section (2) in respect of ships acquired or machinery or plant installed in more than one previous year, and the total income of the assessee assessable for that assessment year (the total income for this purpose being computed without making any allowance under sub-section (1) 73[or sub-section (1A)] 74[of this section or sub-section (1) of section 33A] 75[or any deduction under Chapter VI-A 76[***]]) is less than the aggregate of the amounts due to be allowed in respect of the assets aforesaid for that assessment year, the following procedure shall be followed, namely :—
(i) the allowance under clause (ii) of sub-section (2) shall be made before any allowance under clause (i) of that sub-section is made; and
(ii) where an allowance has to be made under clause (ii) of sub-section (2) in respect of amounts carried forward from more than one assessment year, the amount carried forward from an earlier assessment year shall be allowed before any amount carried forward from a later assessment year.
77[(3) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers to the amalgamated company any ship, machinery or plant in respect of which development rebate has been allowed to the amalgamating company under sub-section (1) or sub-section (1A),—
(a) the amalgamated company shall continue to fulfil the conditions mentioned in sub-section (3) of section 34 in respect of the reserve created by the amalgamating company and in respect of the period within which such ship, machinery or plant shall not be sold or otherwise transferred and in default of any of these conditions, the provisions of sub-section (5) of section 155 shall apply to the amalgamated company as they would have applied to the amalgamating company had it committed the default; and
(b) the balance of development rebate, if any, still outstanding to the amalgamating company in respect of such ship, machinery or plant shall be allowed to the amalgamated company in accordance with the provisions of sub-section (2), so, however, that the total period for which the balance of development rebate shall be carried forward in the assessments of the amalgamating company and the amalgamated company shall not exceed the period of eight years specified in sub-section (2) and the amalgamated company shall be treated as the assessee in respect of such ship, machinery or plant for the purposes of this section and section 34.]
(4) Where a firm is succeeded to by a company in the business carried on by it as a result of which the firm sells or otherwise transfers to the company any ship, machinery or plant, the provisions of clauses (a) and (b) of sub-section (3) shall, so far as may be, apply to the firm and the company.
Explanation.—The provisions of this clause shall apply only where—
(i) all the property of the firm relating to the business immediately before the succession becomes the property of the company;
(ii) all the liabilities of the firm relating to the business immediately before the succession become the liabilities of the company; and
(iii) all the shareholders of the company were partners of the firm immediately before the succession.
78[(5) The Central Government, if it considers it necessary or expedient so to do, may, by notification79 in the Official Gazette, direct that the deduction allowable under this section shall not be allowed in respect of a ship acquired or machinery or plant installed after such date, not being earlier than three years from the date of such notification, as may be specified therein.]
80[(6) Notwithstanding anything contained in the foregoing provisions of this section, no deduction by way of development rebate shall be allowed in respect of any machinery or plant installed after the 31st day of March, 1965, in any office premises or any residential accommodation, including any accommodation in the nature of a guest-house:]
81[Provided that the provisions of this sub-section shall not apply in the case of an assessee being an Indian company, in respect of any machinery or plant installed by it in premises used by it as a hotel, where the hotel is for the time being approved in this behalf by the Central Government.]
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8333A. (1) In respect of planting of tea bushes on any land in India owned by an assessee who carries on business of growing and manufacturing tea in India, a sum by way of development allowance equivalent to—
(i) where tea bushes have been planted on any land not planted at any time with tea bushes or on any land which had been previously abandoned, 84[fifty] per cent of the actual cost of planting; and
(ii) where tea bushes are planted in replacement of tea bushes that have died or have become permanently useless on any land already planted, 85[thirty] per cent of the actual cost of planting,
shall, subject to the provisions of this section, be allowed as a deduction 86[in the manner specified hereunder, namely :—
(a) the amount of the development allowance shall, in the first instance, be computed with reference to that portion of the actual cost of planting which is incurred during the previous year in which the land is prepared for planting or replanting, as the case may be, and in the previous year next following, and the amount so computed shall be allowed as a deduction in respect of such previous year next following; and
(b) thereafter, the development allowance shall again be computed with reference to the actual cost of planting, and if the sum so computed exceeds the amount allowed as a deduction under clause (a), the amount of the excess shall be allowed as a deduction in respect of the third succeeding previous year next following the previous year in which the land has been prepared for planting or replanting, as the case may be :]
87[Provided that no deduction under clause (i) shall be allowed unless the planting has commenced after the 31st day of March, 1965, and been completed before the 1st day of April, 1990 :
Provided further that no deduction shall be allowed under clause (ii) unless the planting has commenced after the 31st day of March, 1965, and been completed before the 1st day of April, 1970.]
(2) Where the total income of the assessee assessable for the assessment year relevant to 88[the previous year in respect of which the deduction is required to be allowed under sub-section (1)] 89[(the total income for this purpose being computed after deduction of the allowance under sub-section (1) or sub-section (1A) or clause (ii) of sub-section (2) of section 33, but without making any deduction under sub-section (1) of this section or any deduction under Chapter VI-A 90[***])] is nil or is less than the full amount of the development allowance calculated at the rates 91[and in the manner] specified in sub-section (1)—
(i) the sum to be allowed by way of development allowance for that assessment year under sub-section (1) shall be only such amount as is sufficient to reduce the said total income to nil ; and
(ii) the amount of the development allowance, to the extent to which it has not been allowed as aforesaid, shall be carried forward to the following assessment year, and the development allowance to be allowed for the following assessment year shall be such amount as is sufficient to reduce the total income of the assessee assessable for that assessment year, computed in the manner aforesaid, to nil, and the balance of the development allowance, if any, still outstanding shall be carried forward to the following assessment year and so on, so, however, that no portion of the development allowance shall be carried forward for more than eight assessment years immediately succeeding the assessment year in which the deduction was first allowable.
Explanation.—Where for any assessment year development allowance is to be allowed in accordance with the provisions of sub-section (2) in respect of more than one previous year, and the total income of the assessee assessable for that assessment year 92[(the total income for this purpose being computed after deduction of the allowance under sub-section (1) or sub-section (1A) or clause (ii) of sub-section (2) of section 33, but without making any deduction under sub-section (1) of this section or any deduction under Chapter VI-A 93[***])] is less than the amount of the development allowance due to be made in respect of that assessment year, the following procedure shall be followed, namely :—
(i) the allowance under clause (ii) of sub-section (2) of this section shall be made before any allowance under clause (i) of that sub-section is made; and
(ii) where an allowance has to be made under clause (ii) of sub-section (2) of this section in respect of amounts carried forward from more than one assessment year, the amount carried forward from an earlier assessment year shall be allowed before any amount carried forward from a later assessment year.
(3) The deduction under sub-section (1) shall be allowed only if the following conditions are fulfilled, namely :—
(i) the particulars prescribed94 in this behalf have been furnished by the assessee;
(ii) an amount equal to seventy-five per cent of the development allowance to be actually allowed is debited to the profit and loss account of the relevant previous year and credited to a reserve account to be utilised by the assessee during a period of eight years next following for the purposes of the business of the undertaking, other than—
(a) for distribution by way of dividends or profits; or
(b) for remittance outside India as profits or for the creation of any asset outside India; and
(iii) such other conditions as may be prescribed.
(4) If any such land is sold or otherwise transferred by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which the deduction under sub-section (1) was allowed, any allowance under this section shall be deemed to have been wrongly made for the purposes of this Act, and the provisions of sub-section (5A) of section 155 shall apply accordingly :
Provided that this sub-section shall not apply—
(i) where the land is sold or otherwise transferred by the assessee to the Government, a local authority, a corporation established by a Central, State or Provincial Act, or a Government company as defined in section 617 of the Companies Act, 195695 (1 of 1956); or
(ii) where the sale or transfer of the land is made in connection with the amalgamation or succession referred to in sub-section (5) or sub-section (6).
96[(5) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers to the amalgamated company any land in respect of which development allowance has been allowed to the amalgamating company under sub-section (1),—
(a) the amalgamated company shall continue to fulfil the conditions mentioned in sub-section (3) in respect of the reserve created by the amalgamating company and in respect of the period within which such land shall not be sold or otherwise transferred and in default of any of these conditions, the provisions of sub-section (5A) of section 155 shall apply to the amalgamated company as they would have applied to the amalgamating company had it committed the default; and
(b) the balance of development allowance, if any, still outstanding to the amalgamating company in respect of such land shall be allowed to the amalgamated company in accordance with the provisions of sub-section (2), so, however, that the total period for which the balance of development allowance shall be carried forward in the assessments of the amalgamating company and the amalgamated company shall not exceed the period of eight years specified in sub-section (2) and the amalgamated company shall be treated as the assessee in respect of such land for the purposes of this section.]
(6) Where a firm is succeeded to by a company in the business carried on by it as a result of which the firm sells or otherwise transfers to the company any land on which development allowance has been allowed, the provisions of clauses (a) and (b) of sub-section (5) shall, so far as may be, apply to the firm and the company.
Explanation.—The provisions of this sub-section shall apply if the conditions laid down in the Explanation to sub-section (4) of section 33 are fulfilled.
(7) For the purposes of this section, “actual cost of planting” means the aggregate of—
(i) the cost of preparing the land;
(ii) the cost of seeds, cutting and nurseries;
(iii) the cost of planting and replanting; and
(iv) the cost of upkeep thereof for the previous year in which the land has been prepared and the three successive previous years next following such previous year,
reduced by that portion of the cost, if any, as has been met directly or indirectly by any other person or authority:
97[Provided that where such cost exceeds—
(i) forty thousand rupees per hectare in respect of land situate in a hilly area comprised in the district of Darjeeling; or
(ii) thirty-five thousand rupees per hectare in respect of land situate in a hilly area comprised in an area other than the district of Darjeeling; or
(iii) thirty thousand rupees per hectare in any other area,
then, the excess shall be ignored.
Explanation.—For the purposes of this proviso, “district of Darjeeling” means the district of Darjeeling as on the 28th day of February, 1981, being the date of introduction of the Finance Bill, 1981, in the House of the People.]
(8) The Board may, having regard to the elevation and topography, by general or special order, declare any areas to be 98hilly areas for the purposes of this section and such order shall not be questioned before any court of law or any other authority.
99[Explanation.—For the purposes of this section, an assessee having a leasehold or other right of occupancy in any land shall be deemed to own such land and where the assessee transfers such right, he shall be deemed to have sold or otherwise transferred such land.]
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(a) deposited with the National Bank any amount or amounts in an account (hereafter in this section referred to as the special account) maintained by the assessee with that Bank in accordance with, and for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) approved in this behalf by the Tea Board 4[or the Coffee Board or the Rubber Board] ; or
(b) 5[deposited any amount in an account (hereafter in this section referred to as the Deposit Account) opened by the assessee in accordance with, and for the purposes specified in, a scheme framed by the Tea Board or the Coffee Board or the Rubber Board, as the case may be (hereafter in this section referred to as the deposit scheme), with the previous approval of the Central Government,]
the assessee shall, subject to the provisions of this section,] be allowed a deduction (such deduction being allowed before the loss, if any, brought forward from earlier years is set off under section 72) of—
(a) a sum equal to the amount or the aggregate of the amounts so deposited ; or
(b) a sum equal to 6[forty] per cent of the profits of such business (computed under the head “Profits and gains of business or profession” before making any deduction under this section),
whichever is less :
Provided that where such assessee is a firm, or any association of persons or any body of individuals, the deduction under this section shall not be allowed in the computation of the income of any partner, or as the case may be, any member of such firm, association of persons or body of individuals :
Provided further that where any deduction, in respect of any amount deposited in the special account 7[, or in the 8[***] Deposit Account], has been allowed under this sub-section in any previous year, no deduction shall be allowed in respect of such amount in any other previous year.
(2) The deduction under sub-section (1) shall not be admissible unless the accounts of such business of the assessee for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form9 duly signed and verified by such accountant :
Provided that in a case where the assessee is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this sub-section if such assessee gets the accounts of such business audited under such law and furnishes the report of the audit as required under such other law and a further report in the form prescribed under this sub-section.
(3) Any amount standing to the credit of the assessee in 10[the special account or the 11[***] Deposit Account shall not be allowed to be withdrawn except for the purposes specified in the scheme or, as the case may be, in the deposit scheme] or in the circumstances specified below :—
(a) closure of business ;
(b) death of an assessee ;
(c) partition of a Hindu undivided family ;
(d) dissolution of a firm ;
(e) liquidation of a company.
12[(4) Notwithstanding anything contained in sub-section (3), where any amount standing to the credit of the assessee in the special account or in the Deposit Account is released during any previous year by the National Bank or withdrawn by the assessee from the Deposit Account, and such amount is utilised for the purchase of—
(a) any machinery or plant to be installed in any office premises or residential accommodation, including any accommodation in the nature of a guest-house;
(b) any office appliances (not being computers);
(c) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any one previous year;
(d) any new machinery or plant to be installed in an industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing specified in the list in the Eleventh Schedule,
the whole of such amount so utilised shall be deemed to be the profits and gains of business of that previous year and shall accordingly be chargeable to income-tax as the income of that previous year.]
(5) Where any amount, standing to the credit of the assessee in the special account 13[or in the 14[***] Deposit Account], is withdrawn during any previous year by the assessee in the circumstance specified in clause (a) or clause (d) of sub-section (3), the whole of such amount shall be deemed to be the profits and gains of business or profession of that previous year and shall accordingly be chargeable to income-tax as the income of that previous year, as if the business had not closed or, as the case may be, the firm had not been dissolved.
(6) Where any amount standing to the credit of the assessee in the special account 15[or in the 14[***] Deposit Account] is utilised by the assessee for the purposes of any expenditure in connection with such business in accordance with the scheme 15[or the deposit scheme], such expenditure shall not be allowed in computing the income chargeable under the head “Profits and gains of business or profession” .
(7) Where any amount, standing to the credit of the assessee in the special account 16[or in the 17[***] Deposit Account], which is released during any previous year by the National Bank 16[or which is withdrawn by the assessee from the 17[***] Deposit Account] for being utilised by the assessee for the purposes of such business in accordance with the scheme 16[or the deposit scheme] is not so utilised, either wholly or in part, within that previous year, the whole of such amount or, as the case may be, part thereof which is not so utilised shall be deemed to be profits and gains of business and accordingly chargeable to income-tax as the income of that previous year :
Provided that this sub-section shall not apply in a case where such amount is released during any previous year at the closure of the account in circumstances specified in clauses (b), (c) and (e) of sub-section (3).
(8) Where any asset acquired in accordance with the scheme 16[or the deposit scheme] is sold or otherwise transferred in any previous year by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired, such part of the cost of such asset as is relatable to the deduction allowed under sub-section (1) shall be deemed to be the profits and gains of business or profession of the previous year in which the asset is sold or otherwise transferred and shall accordingly be chargeable to income-tax as the income of that previous year :
Provided that nothing in this sub-section shall apply—
(i) where the asset is sold or otherwise transferred by the assessee to Government, a local authority, a corporation established by or under a Central, State or Provincial Act or a Government company18 as defined in section 617 of the Companies Act, 1956 (1 of 1956) ; or
(ii) where the sale or transfer of the asset is made in connection with the succession of a firm by a company in the business or profession carried on by the firm as a result of which the firm sells or otherwise transfers to the company any asset and the scheme 19[or the deposit scheme] continues to apply to the company in the manner applicable to the firm.
(i) all the properties of the firm relating to the business or profession immediately before the succession become the properties of the company ;
(ii) all the liabilities of the firm relating to the business or profession immediately before the succession become the liabilities of the company ; and
(iii) all the shareholders of the company were partners of the firm immediately before the succession.
(9) The Central Government, if it considers necessary or expedient so to do, may, by notification in the Official Gazette, direct that the deduction allowable under this section shall not be allowed after such date as may be specified therein.
20[(a) “Coffee Board” means the Coffee Board constituted under section 4 of the Coffee Act, 1942 (7 of 1942);
(aa) “National Bank” means the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981);
(ab) “Rubber Board” means the Rubber Board constituted under sub-section (1) of section 4 of the Rubber Act, 1947 (24 of 1947);]
(b) “Tea Board” means the Tea Board established under section 4 of the Tea Act, 1953 (29 of 1953).]
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(a) deposited with the State Bank of India any amount or amounts in an account (hereafter in this section referred to as the special account) maintained by the assessee with that Bank in accordance with, and for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) approved in this behalf by the Government of India in the Ministry of Petroleum and Natural Gas; or
(b) deposited any amount in an account (hereafter in this section referred to as the Site Restoration Account) opened by the assessee in accordance with, and for the purposes specified in, a scheme framed by the Ministry referred to in clause (a) (hereafter in this section referred to as the deposit scheme),
the assessee shall, subject to the provisions of this section, be allowed a deduction (such deduction being allowed before the loss, if any, brought forward from earlier years is set off under section 72) of—
(i) a sum equal to the amount or the aggregate of the amounts so deposited; or
(ii) a sum equal to twenty per cent of the profits of such business (computed under the head “Profits and gains of business or profession” before making any deduction under this section),
whichever is less :
Provided that where such assessee is a firm, or any association of persons or any body of individuals, the deduction under this section shall not be allowed in the computation of the income of any partner or, as the case may be, any member of such firm, association of persons or body of individuals :
Provided further that where any deduction, in respect of any amount deposited in the special account, or in the Site Restoration Account, has been allowed under this sub-section in any previous year, no deduction shall be allowed in respect of such amount in any other previous year :
Provided also that any amount credited in the special account or the Site Restoration Account by way of interest shall be deemed to be a deposit.
(2) The deduction under sub-section (1) shall not be admissible unless the accounts of such business of the assessee for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form23 duly signed and verified by such accountant :
Provided that in a case where the assessee is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this sub-section if such assessee gets the accounts of such business audited under such law and furnishes the report of the audit as required under such other law and a further report in the form prescribed under this sub-section.
(3) Any amount standing to the credit of the assessee in the special account or the Site Restoration Account shall not be allowed to be withdrawn except for the purposes specified in the scheme or, as the case may be, in the deposit scheme.
(4) Notwithstanding anything contained in sub-section (3), no deduction under sub-section (1) shall be allowed in respect of any amount utilised for the purchase of—
(a) any machinery or plant to be installed in any office premises or residential accommodation, including any accommodation in the nature of a guest-house;
(b) any office appliances (not being computers);
(c) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any one previous year;
(d) any new machinery or plant to be installed in an industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing specified in the list in the Eleventh Schedule.
(5) Where any amount standing to the credit of the assessee in the special account or in the Site Restoration Account is withdrawn on closure of the account during any previous year by the assessee, the amount so withdrawn from the account, as reduced by the amount, if any, payable to the Central Government by way of profit or production share as provided in the agreement referred to in section 42, shall be deemed to be the profits and gains of business or profession of that previous year and shall accordingly be chargeable to income-tax as the income of that previous year.
Explanation.—Where any amount is withdrawn on closure of the account in a previous year in which the business carried on by the assessee is no longer in existence, the provisions of this sub-section shall apply as if the business is in existence in that previous year.
(6) Where any amount standing to the credit of the assessee in the special account or in the Site Restoration Account is utilised by the assessee for the purposes of any expenditure in connection with such business in accordance with the scheme or the deposit scheme, such expenditure shall not be allowed in computing the income chargeable under the head “Profits and gains of business or profession” .
(7) Where any amount, standing to the credit of the assessee in the special account or in the Site Restoration Account, which is released during any previous year by the State Bank of India or which is withdrawn by the assessee from the Site Restoration Account for being utilised by the assessee for the purposes of such business in accordance with the scheme or the deposit scheme is not so utilised, either wholly or in part, within that previous year, the whole of such amount or, as the case may be, part thereof which is not so utilised shall be deemed to be profits and gains of business and accordingly chargeable to income-tax as the income of that previous year.
24[***]
(8) Where any asset acquired in accordance with the scheme or the deposit scheme is sold or otherwise transferred in any previous year by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired, such part of the cost of such asset as is relatable to the deduction allowed under sub-section (1) shall be deemed to be the profits and gains of business or profession of the previous year in which the asset is sold or otherwise transferred and shall accordingly be chargeable to income-tax as the income of that previous year :
Provided that nothing in this sub-section shall apply—
(i) where the asset is sold or otherwise transferred by the assessee to Government, a local authority, a corporation established by or under a Central, State or Provincial Act or a Government company25 as defined in section 617 of the Companies Act, 1956 (1 of 1956); or
(ii) where the sale or transfer of the asset is made in connection with the succession of a firm by a company in the business or profession carried on by the firm as a result of which the firm sells or otherwise transfers to the company any asset and the scheme or the deposit scheme continues to apply to the company in the manner applicable to the firm.
Explanation.—The provisions of clause (ii) of the proviso shall apply only where—
(i) all the properties of the firm relating to the business or profession immediately before the succession become the properties of the company;
(ii) all the liabilities of the firm relating to the business or profession immediately before the succession become the liabilities of the company; and
(iii) all the shareholders of the company were partners of the firm immediately before the succession.
(9) The Central Government may, if it considers necessary or expedient so to do, by notification in the Official Gazette, direct that the deduction allowable under this section shall not be allowed after such date as may be specified therein.
Explanation.—For the purposes of this section,—
(a) “State Bank of India” means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955);
(b) the expression “amount standing to the credit of the assessee in the special account or the Site Restoration Account” includes interest accrued to such accounts.]
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28[Provided that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the aggregate of the amounts of the paid-up share capital, the general reserves and amount credited to the share premium account of the assessee, no allowance under this sub-section shall be made in respect of such excess :]
29[Provided further that for five assessment years commencing on or after the 1st day of April, 2001 and ending before the 1st day of April, 2006, the provisions of this sub-section shall have effect as if for the words “an amount not exceeding fifty per cent of profits”, the words “an amount not exceeding the profits” had been substituted:]
30[Provided also that no deduction shall be allowed under this section for any assessment year commencing on or after the 1st day of April, 2005.]
(2) The amount credited to the reserve account under sub-section (1) shall be utilised by the assessee before the expiry of a period of eight years next following the previous year in which the amount was credited—
(a) for acquiring a new ship for the purposes of the business of the assessee ; and
(b) until the acquisition of a new ship, for the purposes of the business of the assessee other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India.
(3) Where any amount credited to the reserve account under sub-section (1),—
(a) has been utilised for any purpose other than that referred to in clause (a) or clause (b) of sub-section (2), the amount so utilised ; or
(b) has not been utilised for the purpose specified in clause (a) of sub-section (2), the amount not so utilised ; or
(c) has been utilised for the purpose of acquiring a new ship as specified in clause (a) of sub-section (2), but such ship is sold or otherwise transferred 31[, other than in any scheme of demerger] by the asses-see to any person at any time before the expiry of 32[three] years from the end of the previous year in which it was acquired, the amount so utilised in acquiring the ship,
shall be deemed to be the profits,—
(i) in a case referred to in clause (a), in the year in which the amount was so utilised ; or
(ii) in a case referred to in clause (b), in the year immediately following the period of eight years specified in sub-section (2) ; or
(iii) in a case referred to in clause (c), in the year in which the sale or transfer took place,
and shall be charged to tax accordingly.
33[(4) Where the ship is sold or otherwise transferred (other than in any scheme of demerger) after the expiry of the period specified in clause (c) of sub-section (3) and the sale proceeds are not utilised for the purpose of acquiring a new ship within a period of one year from the end of the previous year in which such sale or transfer took place, 34[so much of such sale proceeds which represent the amount credited to the reserve account and utilised for the purposes mentioned in clause (c) of sub-section (3)] shall be deemed to be the profits of the assessment year immediately following the previous year in which the ship is sold or transferred.]
(a) 35“public company” shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956) ;
36[(aa) 37“Government company” shall have the meaning assigned to it in section 617 of the Companies Act, 1956 (1 of 1956) ;]
(b) “new ship” shall have the same meaning as in clause (ii) of sub-section (2) of section 32AB.]
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(i) flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature ; or
(ii) riot or civil disturbance ; or
(iii) accidental fire or explosion ; or
(iv) action by an enemy or action taken in combating an enemy (whether with or without a declaration of war),
and, thereafter, at any time before the expiry of three years from the end of such previous year, the business is re-established, reconstructed or revived by the assessee, he shall, in respect of the previous year in which the business is so re-established, reconstructed or revived, be allowed a deduction of a sum by way of rehabilitation allowance equivalent to sixty per cent of the amount of the deduction allowable to him under clause (iii) of sub-section (1) of section 32 in respect of the building, machinery, plant or furniture so damaged or destroyed :
39[Provided that no deduction under this section shall be allowed in relation to the assessment year commencing on the 1st day of April, 1985, or any subsequent assessment year.]
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(2) 41[***]
(3)(a) The deduction referred to in section 33 shall not be allowed unless an amount equal to seventy-five per cent of the development rebate to be actually allowed is debited to the profit and loss account of 42[any previous year in respect of which the deduction is to be allowed under sub-section (2) of that section or any earlier previous year (being a previous year not earlier than the year in which the ship was acquired or the machinery or plant was installed or the ship, machinery or plant was first put to use)] and credited to a reserve account to be utilised by the assessee during a period of eight years next following for the purposes of the business of the undertaking, other than—
(i) for distribution by way of dividends or profits ; or
(ii) for remittance outside India as profits or for the creation of any asset outside India :
Provided that this clause shall not apply where the assessee is a company, being a licensee within the meaning of the Electricity (Supply) Act, 1948 (54 of 1948)43, or where the ship has been acquired or the machinery or plant has been installed before the 1st day of January, 1958 :
44[Provided further that where a ship has been acquired after the 28th day of February, 1966, this clause shall have effect in respect of such ship as if for the words “seventy-five”, the word “fifty” had been substituted.]
(b) If any ship, machinery or plant is sold or otherwise transferred by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired or installed, any allowance made under section 33 or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922), in respect of that ship, machinery or plant shall be deemed to have been wrongly made for the purposes of this Act, and the provisions of sub-section (5) of section 155 shall apply accordingly :
Provided that this clause shall not apply—
(i) where the ship has been acquired or the machinery or plant has been installed before the 1st day of January, 1958 ; or
(ii) where the ship, machinery or plant is sold or otherwise transferred by the assessee to the Government, a local authority, a corporation established by a Central, State or Provincial Act or a 45Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) ; or
(iii) where the sale or transfer of the ship, machinery or plant is made in connection with the amalgamation or succession, referred to in sub-section (3) or sub-section (4) of section 33.
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(a) where it relates to depreciation allowance, be added to the depreciation allowance for the previous year relevant to the assessment year commencing on the 1st day of April, 1993 and be deemed to be part of that allowance or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year and so on for the succeeding previous years ;
(b) where it relates to investment allowance, be carried forward to the assessment year commencing on the 1st day of April, 1993 and the balance of the investment allowance, if any, still outstanding shall be carried forward to the following assessment year and where the period of eight years has expired before the portion of such balance is adjusted, the said period shall be extended beyond eight years till such time the portion of the said balance is absorbed in the profits and gains of the business of the domestic company.
(2) For the assessment year commencing on the 1st day of April, 1992, the provisions of sub-section (2) of section 32 and sub-section (3) of section 32A shall apply to the extent such provisions are not inconsistent with the provisions of sub-section (1) of this section.
(3) Nothing contained in sub-section (1) shall apply where the amount of unabsorbed depreciation allowance or of the unabsorbed investment allowance, as the case may be, or the aggregate amount of such allowances in the case of a domestic company is less than one lakh rupees.
(4) Nothing contained in sections 234B and 234C shall apply to any shortfall in the payment of any tax due on the assessed tax or, as the case may be, returned income where such shortfall is on account of restricting the amount of depreciation allowance or investment allowance under this section and the assessee has paid the amount of shortfall before furnishing the return of income under sub-section (1) of section 139.]
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(i) any expenditure (not being in the nature of capital expenditure) laid out or expended on scientific research related to the 49business.
50[Explanation.—Where any such expenditure has been laid out or expended before the commencement of the business (not being expenditure laid out or expended before the 1st day of April, 1973) on payment of any salary [as defined in Explanation 251 below sub-section (5) of section 40A] to an employee engaged in such scientific research or on the purchase of materials used in such scientific research, the aggregate of the expenditure so laid out or expended within the three years immediately preceding the commencement of the business shall, to the extent it is certified by the prescribed authority52 to have been laid out or expended on such scientific research, be deemed to have been laid out or expended in the previous year in which the business is commenced ;]
53(ii) 54[an amount equal to 55[one and three-fourth] times of any sum paid] to a 56[research association] which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research :
57[Provided that such association, university, college or other institution for the purposes of this clause—
(A) is for the time being approved, in accordance with the guidelines, in the manner and subject to such conditions as may be pres-cribed; and
(B) such association, university, college or other institution is specified as such, by notification58 in the Official Gazette, by the Central Government;]
59[(iia) an amount equal to one and one-fourth times of any sum paid to a company to be used by it for scientific research:
Provided that such company—
(A) is registered in India,
(B) has as its main object the scientific research and development,
(C) is, for the purposes of this clause, for the time being approved by the prescribed authority in the prescribed manner, and
(D) fulfils such other conditions as may be prescribed60;]
61[62(iii) 63[an amount equal to one and one-fourth times of 64[any sum paid to a research association which has as its object the undertaking of research in social science or statistical research or to a university]], college or other institution to be used for research in social science or statistical research :
65[Provided that 66[such association, university], college or other institution for the purposes of this clause—
(A) is for the time being approved, in accordance with the guidelines, in the manner and subject to such conditions as may be pres-cribed; and
(B) 66[such association, university], college or other institution is specified as such, by notification67 in the Official Gazette, by the Central Government.]
68[Explanation.—The deduction, to which the assessee is entitled in respect of any sum paid to a 69[research association], university, college or other institution to which clause (ii) or clause (iii) applies, shall not be denied merely on the ground that, subsequent to the payment of such sum by the assessee, the approval granted to the association, university, college or other institution referred to in clause (ii) or clause (iii) has been withdrawn;]
(iv) in respect of any expenditure of a capital nature on scientific research related to the business carried on by the assessee, such deduction as may be admissible under the provisions of sub-section (2) :
70[Provided that the 69[research association], university, college or other institution referred to in clause (ii) or clause (iii) shall make an application in the prescribed form and manner to the 71[Central Government] for the purpose of grant of approval, or continuance thereof, under clause (ii) or, as the case may be, clause (iii) :
Provided further that the 71[Central Government] may, before granting approval under clause (ii) or clause (iii), call for such documents (including audited annual accounts) or information from the 69[research association], university, college or other institution as it thinks necessary in order to satisfy itself about the genuineness of the activities of the 69[research association], university, college or other institution and that 72[Government] may also make such inquiries as it may deem necessary in this behalf :
Provided also that any 73[notification issued, by the Central Government under clause (ii) or clause (iii), before the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President†, shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years] (including an assessment year or years commencing before the date on which such notification is issued) as may be specified in the notification:]
74[Provided also that where an application under the first proviso is made on or after the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President†, every notification under clause (ii) or clause (iii) shall be issued or an order rejecting the application shall be passed within the period of twelve months from the end of the month in which such application was received by the Central Government.]
(2) For the purposes of clause (iv) of sub-section (1),—
75[(i) in a case where such capital expenditure is incurred before the 1st day of April, 1967, one-fifth of the capital expenditure incurred in any previous year shall be deducted for that previous year; and the balance of the expenditure shall be deducted in equal instalments for each of the four immediately succeeding previous years ;
(ia) in a case where such capital expenditure is incurred after the 31st day of March, 1967, the whole of such capital expenditure incurred in any previous year76 shall be deducted for that previous year :]
77[Provided that no deduction shall be admissible under this clause in respect of any expenditure incurred on the acquisition of any land, whether the land is acquired as such or as part of any property, after the 29th day of February, 1984.]
78[Explanation 1].—Where any capital expenditure has been incurred before the commencement of the business, the aggregate of the expenditure so incurred within the three years immediately preceding the commencement of the business shall be deemed to have been incurred in the previous year in which the business is commenced.
77[Explanation 2.—For the purposes of this clause,—
(a) “land” includes any interest in land ; and
(b) the acquisition of any land shall be deemed to have been made by the assessee on the date on which the instrument of transfer of such land to him has been registered under the Registration Act, 1908 (16 of 1908), or where he has taken or retained the possession of such land or any part thereof in part performance of a contract of the nature referred to in section 53A79 of the Transfer of Property Act, 1882 (4 of 1882), the date on which he has so taken or retained possession of such land or part ;]
(ii) notwithstanding anything contained in clause (i), where an asset representing expenditure of a capital nature 80[incurred before the 1st day of April, 1967,] ceases to be used in a previous year for scientific research related to the business and the value of the asset at the time of the cessation, together with the aggregate of deductions already allowed under clause (i) falls short of the said expenditure, then—
(a) there shall be allowed a deduction for that previous year of an amount equal to such deficiency, and
(b) no deduction shall be allowed under that clause for that previous year or for any subsequent previous year ;
(iii) if the asset mentioned in clause (ii) is sold, without having been used for other purposes, in the year of cessation, the sale price shall be taken to be the value of the asset at the time of the cessation ; and if the asset is sold, without having been used for other purposes, in a previous year subsequent to the year of cessation, and the sale price falls short of the value of the asset taken into account at the time of cessation, an amount equal to the deficiency shall be allowed as a deduction for the previous year in which the sale took place ;
(iv) where a deduction is allowed for any previous year under this section in respect of expenditure represented wholly or partly by an asset, no deduction shall be allowed under 81[clause (ii) of sub-section (1)] of section 32 for the same 82[or any other] previous year in respect of that asset ;
(v) where the asset 83[mentioned in clause (ii)] is used in the business after it ceases to be used for scientific research related to that business, depreciation shall be admissible under 84[clause (ii) of sub-section (1)] of section 32.
85[(2A) 86Where 87[, before the 1st day of March, 1984,] the assessee pays any sum 88[(being any sum paid with a specific direction that the sum shall not be used for the acquisition of any land or building or construction of any building)] to a scientific research association or university or college or other institution referred to in clause (ii) of sub-section (1) 89[or to a public sector company] to be used for scientific research undertaken under a programme approved in this behalf by the prescribed authority90 having regard to the social, economic and industrial needs of India, then,—
(a) there shall be allowed a deduction of a sum equal to one and one-third times the sum so paid ; and
(b) no deduction in respect of such sum shall be allowed under clause (ii) of sub-section (1) for the same or any other assessment year.]
91[Explanation.—For the purposes of this sub-section, “public sector company” shall have the same meaning as in clause (b) of the Explanation below sub-section (2B) of section 32A.]
92[(2AA) 93Where the assessee pays any sum to a National Laboratory 94[or a 95[University or an Indian Institute of Technology or a specified person] with a specific direction that the said sum shall be used for scientific research undertaken under a programme approved in this behalf by the prescribed authority96, then—
(a) there shall be allowed a deduction of a sum equal to 97[two] times the sum so paid ; and
(b) no deduction in respect of such sum shall be allowed under any other provision of this Act :
98[Provided that the prescribed authority shall, before granting approval, satisfy itself about the feasibility of carrying out the scientific research and shall submit its report to the 98a[Principal Director General or] Director General in such form as may be prescribed.99]
1[Explanation 1.—The deduction, to which the assessee is entitled in respect of any sum paid to a National Laboratory, University, Indian Institute of Technology or a specified person for the approved programme referred to in this sub-section, shall not be denied merely on the ground that, subsequent to the payment of such sum by the assessee, the approval granted to,—
(a) such Laboratory, or specified person has been withdrawn; or
(b) the programme, undertaken by the National Laboratory, University, Indian Institute of Technology or specified person, has been withdrawn.]
2[Explanation 3[2].—For the purposes of this section,—
(a) “National Laboratory” means a scientific laboratory functioning at the national level under the aegis of the Indian Council of Agricultural Research, the Indian Council of Medical Research, the Council of Scientific and Industrial Research, the Defence Research and Development Organisation, the Department of Electronics, the Department of Bio-Technology or the Department of Atomic Energy and which is approved as a National Laboratory by the prescribed authority in such manner as may be prescribed ;
(b) “University” shall have the same meaning as in Explanation to clause (ix) of section 47 ;
(c) “Indian Institute of Technology” shall have the same meaning as that of “Institute” in clause (g) of section 34 of the Institutes of Technology Act, 1961 (59 of 1961)];
5[(d) “specified person” means such person as is approved by the pres-cribed authority.]
6[(2AB)(1) Where a company engaged in the business of 7[bio-technology or in 8[any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule]] incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority9, then, there shall be allowed a deduction of 10[a sum equal to 11[two] times of the expenditure] so incurred.
12[Explanation.—For the purposes of this clause, “expenditure on scientific research”, in relation to drugs and pharmaceuticals, shall include expenditure incurred on clinical drug trial, obtaining approval from any regulatory authority under any Central, State or Provincial Act and filing an application for a patent under the Patents Act, 1970 (39 of 1970).]
(2) No deduction shall be allowed in respect of the expenditure mentioned in clause (1) under any other provision of this Act.
(3) No company shall be entitled for deduction under clause (1) unless it enters into an agreement with the prescribed authority for co-operation in such research and development facility and for audit of the accounts maintained for that facility.
(4) The prescribed authority shall submit its report in relation to the approval of the said facility to the 12a[Principal Director General or] Director General in such form and within such time as may be prescribed.]
13[(5) No deduction shall be allowed in respect of the expenditure referred to in clause (1) which is incurred after the 31st day of March, 14[2017].
15[(6) No deduction shall be allowed to a company approved under sub-clause (C) of clause (iia) of sub-section (1) in respect of the expenditure referred to in clause (1) which is incurred after the 31st day of March, 2008.]
16[(2B)(a) Where 17[, before the 1st day of March, 1984,] an assessee has incurred any expenditure (not being in the nature of capital expenditure incurred on the acquisition of any land or building or construction of any building) on scientific research undertaken under a programme approved in this behalf by the prescribed authority having regard to the social, economic and industrial needs of India, he shall, subject to the provisions of this sub-section, be allowed a deduction of a sum equal to one and one-fourth times the amount of the expenditure certified by the prescribed authority to have been so incurred during the previous year.
(b) Where a deduction has been allowed under clause (a) for any previous year in respect of any expenditure, no deduction in respect of such expenditure shall be allowed under clause (i) of sub-section (1) or clause (ia) of sub-section (2) for the same or any other previous year.
(c) Where a deduction is allowed for any previous year under this sub-section in respect of expenditure represented wholly or partly by an asset, no deduction shall be allowed in respect of that asset under 18[clause (ii) of sub-section (1)] of section 32 for the same or any subsequent previous year.
(d) Any deduction made under this sub-section in respect of any expenditure on scientific research in excess of the expenditure actually incurred shall be deemed to have been wrongly made for the purposes of this Act if the assessee fails to furnish within one year of the period allowed by the prescribed authority for completion of the programme, a certificate of its completion obtained from that authority, and the provisions of sub-section (5B) of section 155 shall apply accordingly.]
19[(3) If any question arises under this section as to whether, and if so, to what extent, any activity constitutes or constituted, or any asset is or was being used for, scientific research, the Board shall refer the question to—
(a) the Central Government, when such question relates to any activity under clauses (ii) and (iii) of sub-section (1), and its decision shall be final;
(b) the prescribed authority20, when such question relates to any activity other than the activity specified in clause (a), whose decision shall be final.]
(4) The provisions of sub-section (2) of section 32 shall apply in relation to deductions allowable under clause (iv) of sub-section (1) as they apply in relation to deductions allowable in respect of depreciation.
21[(5) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers to the amalgamated company (being an Indian company) any asset representing expenditure of a capital nature on scientific research,—
(i) the amalgamating company shall not be allowed the deduction under clause (ii) or clause (iii) of sub-section (2); and
(ii) the provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalga-mating company if the latter had not so sold or otherwise transferred the asset.]]
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(i) “relevant previous years” means the fourteen previous years beginning with the previous year in which such expenditure is incurred or, where such expenditure is incurred before the commencement of the business, the fourteen previous years beginning with the previous year in which the business commenced :
Provided that where the rights commenced, that is to say, became effective, in any year prior to the previous year in which expenditure on the acquisition thereof was incurred by the assessee, this clause shall have effect with the substitution for the reference to fourteen years of a reference to fourteen years less the number of complete years which, when the rights are acquired by the assessee, have elapsed since the commencement thereof, and if fourteen years have elapsed as aforesaid, of a reference to one year;
(ii) “appropriate fraction” means the fraction the numerator of which is one and the denominator of which is the number of the relevant previous years.
(2) Where the rights come to an end without being subsequently revived or where the whole or any part of the rights is sold and the proceeds of the sale (so far as they consist of capital sums) are not less than the cost of acquisition thereof remaining unallowed, no deduction under sub-section (1) shall be allowed in respect of the previous year in which the rights come to an end or, as the case may be, the whole or any part of the rights is sold or in respect of any subsequent previous year.
(3) Where the rights either come to an end without being subsequently revived or are sold in their entirety and the proceeds of the sale (so far as they consist of capital sums) are less than the cost of acquisition thereof remaining unallowed, a deduction equal to such cost remaining unallowed or, as the case may be, such cost remaining unallowed as reduced by the proceeds of the sale, shall be allowed in respect of the previous year in which the rights come to an end, or, as the case may be, are sold.
(4) Where the whole or any part of the rights is sold and the proceeds of the sale (so far as they consist of capital sums) exceed the amount of the cost of acquisition thereof remaining unallowed, so much of the excess as does not exceed the difference between the cost of acquisition of the rights and the amount of such cost remaining unallowed shall be chargeable to income-tax as income of the business of the previous year in which the whole or any part of the rights is sold.
(5) Where a part of the rights is sold and sub-section (4) does not apply, the amount of the deduction to be allowed under sub-section (1) shall be arrived at by—
(a) subtracting the proceeds of the sale (so far as they consist of capital sums) from the amount of the cost of acquisition of the rights remaining unallowed; and
(b) dividing the remainder by the number of relevant previous years which have not expired at the beginning of the previous year during which the rights are sold.]
24[(6) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers the rights to the amalgamated company (being an Indian company),—
(i) the provisions of sub-sections (3) and (4) shall not apply in the case of the amalgamating company; and
(ii) the provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalga-mating company if the latter had not so sold or otherwise transferred the rights.]
25[(7) Where in a scheme of demerger, the demerged company sells or otherwise transfers the rights to the resulting company (being an Indian company),—
(i) the provisions of sub-sections (3) and (4) shall not apply in the case of the demerged company; and
(ii) the provisions of this section shall, as far as may be, apply to the resulting company as they would have applied to the demerged company, if the latter had not sold or otherwise transferred the rights.]
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(2) Where the know-how referred to in sub-section (1) is developed in a laboratory, university or institution referred to in sub-section (2B) of section 32A, one-third of the said lump sum consideration paid in the previous year by the assessee shall be deducted in computing the profits and gains of the business for that year, and the balance amount shall be deducted in equal instalments for each of the two immediately succeeding previous years.
29[(3) Where there is a transfer of an undertaking under a scheme of amalgamation or demerger and the amalgamating or the demerged company is entitled to a deduction under this section, then, the amalgamated company or the resulting company, as the case may be, shall be entitled to claim deduction under this section in respect of such undertaking to the same extent and in respect of the residual period as it would have been allowable to the amalgamating company or the demerged company, as the case may be, had such amalgamation or demerger not taken place.]
Explanation.—For the purposes of this section, “know-how” means any industrial information or technique likely to assist in the manufacture or processing of goods or in the working of a mine, oil well or other sources of mineral deposits (including the searching for, discovery or testing of deposits or the winning of access thereto).]
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Explanation.—For the purposes of this section,—
32[(i) “relevant previous years” means,—
(A) in a case where the licence fee is actually paid before the commencement of the business to operate telecommunication services, the previous years beginning with the previous year in which such business commenced;
(B) in any other case, the previous years beginning with the previous year in which the licence fee is actually paid,
and the subsequent previous year or years during which the licence, for which the fee is paid, shall be in force;]
(ii) “appropriate fraction” means the fraction the numerator of which is one and the denominator of which is the total number of the relevant previous years;
(iii) “payment has actually been made” means the actual payment of expenditure irrespective of the previous year in which the liability for the expenditure was incurred according to the method of accounting regularly employed by the assessee.
(2) Where the licence is transferred and the proceeds of the transfer (so far as they consist of capital sums) are less than the expenditure incurred remaining unallowed, a deduction equal to such expenditure remaining unallowed, as reduced by the proceeds of the transfer, shall be allowed in respect of the previous year in which the licence is transferred.
(3) Where the whole or any part of the licence is transferred and the proceeds of the transfer (so far as they consist of capital sums) exceed the amount of the expenditure incurred remaining unallowed, so much of the excess as does not exceed the difference between the expenditure incurred to obtain the licence and the amount of such expenditure remaining unallowed shall be chargeable to income-tax as profits and gains of the business in the previous year in which the licence has been transferred.
Explanation.—Where the licence is transferred in a previous year in which the business is no longer in existence, the provisions of this sub-section shall apply as if the business is in existence in that previous year.
(4) Where the whole or any part of the licence is transferred and the proceeds of the transfer (so far as they consist of capital sums) are not less than the amount of expenditure incurred remaining unallowed, no deduction for such expenditure shall be allowed under sub-section (1) in respect of the previous year in which the licence is transferred or in respect of any subsequent previous year or years.
(5) Where a part of the licence is transferred in a previous year and sub-section (3) does not apply, the deduction to be allowed under sub-section (1) for expenditure incurred remaining unallowed shall be arrived at by—
(a) subtracting the proceeds of transfer (so far as they consist of capital sums) from the expenditure remaining unallowed; and
(b) dividing the remainder by the number of relevant previous years which have not expired at the beginning of the previous year during which the licence is transferred.
(6) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers the licence to the amalgamated company (being an Indian company),—
(i) the provisions of sub-sections (2), (3) and (4) shall not apply in the case of the amalgamating company; and
(ii) the provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalga-mating company if the latter had not transferred the licence.]
33[(7) Where, in a scheme of demerger, the demerged company sells or otherwise transfers the licence to the resulting company (being an Indian company),—
(i) the provisions of sub-sections (2), (3) and (4) shall not apply in the case of the demerged company; and
(ii) the provisions of this section shall, as far as may be, apply to the resulting company as they would have applied to the demerged company if the latter had not transferred the licence.]
34[(8) Where a deduction for any previous year under sub-section (1) is claimed and allowed in respect of any expenditure referred to in that sub-section, no deduction shall be allowed under sub-section (1) of section 32 for the same previous year or any subsequent previous year.]
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Provided that a company may, for claiming the deduction under this sub-section, incur expenditure either by way of payment of any sum as aforesaid or directly on the eligible project or scheme.
(2) The deduction under sub-section (1) shall not be allowed unless the assessee furnishes along with his return of income a certificate—
39(a) where the payment is to a public sector company or a local authority or an association or institution referred to in sub-section (1), from such public sector company or local authority or, as the case may be, association or institution;
40(b) in any other case, from an accountant, as defined in the Explanation below sub-section (2) of section 288,
in such form, manner and containing such particulars (including particulars relating to the progress in the work relating to the eligible project or scheme during the previous year) as may be prescribed.
41[Explanation.—The deduction, to which the assessee is entitled in respect of any sum paid to a public sector company or a local authority or to an association or institution for carrying out the eligible project or scheme referred to in this section applies, shall not be denied merely on the ground that subsequent to the payment of such sum by the assessee,—
(a) the approval granted to such association or institution has been withdrawn; or
(b) the notification notifying the eligible project or scheme carried out by the public sector company or local authority or association or institution has been withdrawn.]
(3) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure referred to in sub-section (1), deduction shall not be allowed in respect of such expenditure under any other provision of this Act for the same or any other assessment year.
42[(4) Where an association or institution is approved by the National Committee under sub-section (1), and subsequently—
(i) that Committee is satisfied that the project or the scheme is not being carried on in accordance with all or any of the conditions subject to which approval was granted; or
(ii) such association or institution, to which approval has been granted, has not furnished to the National Committee, after the end of each financial year, a report in such form and setting forth such particulars and within such time as may be prescribed43,
the National Committee may, at any time, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned association or institution, withdraw the approval:
Provided that a copy of the order withdrawing the approval shall be forwarded by the National Committee to the Assessing Officer having jurisdiction over the concerned association or institution.
(5) Where any project or scheme has been notified as an eligible project or scheme under clause (b) of the Explanation, and subsequently—
(i) the National Committee is satisfied that the project or the scheme is not being carried on in accordance with all or any of the conditions subject to which such project or scheme was notified; or
(ii) a report in respect of such eligible project or scheme has not been furnished after the end of each financial year, in such form and setting forth such particulars and within such time as may be prescribed44,
such notification may be withdrawn in the same manner in which it was issued:
Provided that a reasonable opportunity of showing cause against the proposed withdrawal shall be given by the National Committee to the concerned association, institution, public sector company or local authority, as the case may be:
Provided further that a copy of the notification by which the notification of the eligible project or scheme is withdrawn shall be forwarded to the Assessing Officer having jurisdiction over the concerned association, institution, public sector company or local authority, as the case may be, carrying on such eligible project or scheme.]
45[(6) Notwithstanding anything contained in any other provision of this Act, where—
(i) the approval of the National Committee, granted to an association or institution, is withdrawn under sub-section (4) or the notification in respect of eligible project or scheme is withdrawn in the case of a public sector company or local authority or an association or institution under sub-section (5); or
(ii) a company has claimed deduction under the proviso to sub-section (1) in respect of any expenditure incurred directly on the eligible project or scheme and the approval for such project or scheme is withdrawn by the National Committee under sub-section (5),
the total amount of the payment received by the public sector company or the local authority or the association or the institution, as the case may be, in respect of which such company or authority or association or institution has furnished a certificate referred to in clause (a) of sub-section (2) or the deduction claimed by a company under the proviso to sub-section (1) shall be deemed to be the income of such company or authority or association or institution, as the case may be, for the previous year in which such approval or notification is withdrawn and tax shall be charged on such income at the maximum marginal rate in force for that year.]
(a) “National Committee” means the Committee constituted by the Central Government, from amongst persons of eminence in public life, in accordance with the rules made under this Act;
(b) “eligible project or scheme” means such project or scheme for promoting the social and economic welfare of, or the uplift of, the public as the Central Government may, by notification in the Official Gazette, specify46 in this behalf on the recommendations of the National Committee.]
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Provided that the expenditure incurred, wholly and exclusively, for the purposes of any specified business, shall be allowed as deduction during the previous year in which he commences operations of his specified business, if—
(a) the expenditure is incurred prior to the commencement of its operations; and
(b) the amount is capitalised in the books of account of the assessee on the date of commencement of its operations.
48[(1A) Where the specified business is of the nature referred to in sub-clause (i) or sub-clause (ii) or sub-clause (v) or sub-clause (vii) or sub-clause (viii) of clause (c) of sub-section (8) and has commenced its operations on or after the 1st day of April, 2012, the deduction under sub-section (1) shall be allowed of an amount equal to one and one-half times of the expenditure referred to therein.]
(2) This section applies to the specified business which fulfils all the following conditions, namely :—
(i) it is not set up by splitting up, or the reconstruction, of a business already in existence;
(ii) it is not set up by the transfer to the specified business of machinery or plant previously used for any purpose;
(iii) where the business is of the nature referred to in sub-clause (iii) of clause (c) of sub-section (8), such business,—
(a) is owned by a company formed and registered in India under the Companies Act, 1956 (1 of 1956)48a or by a consortium of such companies or by an authority or a board or a corporation established or constituted under any Central or State Act;
(b) has been approved by the Petroleum and Natural Gas Regulatory Board established under sub-section (1) of section 3 of the Petroleum and Natural Gas Regulatory Board Act, 2006 (19 of 2006) and notified by the Central Government in the Official Gazette in this behalf;
(c) has made not less than 49[such proportion of its total pipeline capacity as specified by regulations made by the Petroleum and Natural Gas Regulatory Board established under sub-section (1) of section 3 of the Petroleum and Natural Gas Regulatory Board Act, 2006 (19 of 2006)] available for use on common carrier basis by any person other than the assessee or an associated person; and
(d) fulfils any other condition as may be prescribed.
50[(3) Where a deduction under this section is claimed and allowed in respect of the specified business for any assessment year, no deduction shall be allowed under the provisions of 50a[section 10AA and] Chapter VI-A under the heading “C.—Deductions in respect of certain incomes” in relation to such specified business for the same or any other assessment year.]
(4) No deduction in respect of the expenditure referred to in sub-section (1) shall be allowed to the assessee under any other section in any previous year or under this section in any other previous year.
(5) The provisions of this section shall apply to the specified business referred to in sub-section (2) if it commences its operations,—
(a) on or after the 1st day of April, 2007, where the specified business is in the nature of laying and operating a cross-country natural gas pipeline network for distribution, including storage facilities being an integral part of such network; 51[***]
52[(aa) on or after the 1st day of April, 2010, where the specified business is in the nature of building and operating a new hotel of two-star or above category as classified by the Central Government;
(ab) on or after the 1st day of April, 2010, where the specified business is in the nature of building and operating a new hospital with at least one hundred beds for patients;
(ac) on or after the 1st day of April, 2010, where the specified business is in the nature of developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Government or a State Government, as the case may be, and which is notified by the Board in this behalf in accordance with the guidelines as may be prescribed; 53[***]]
54[(ad) on or after the 1st day of April, 2011, where the specified business is in the nature of developing and building a housing project under a scheme for affordable housing framed by the Central Government or a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed;
(ae) on or after the 1st day of April, 2011, in a new plant or in a newly installed capacity in an existing plant for production of fertilizer; 55[***]]
56[(af) on or after the 1st day of April, 2012, where the specified business is in the nature of setting up and operating an inland container depot or a container freight station notified or approved under the Customs Act, 1962 (52 of 1962);
(ag) on or after the 1st day of April, 2012, where the specified business is in the nature of bee-keeping and production of honey and beeswax;
(ah) on or after the 1st day of April, 2012, where the specified business is in the nature of setting up and operating a warehousing facility for storage of sugar; 56a[and]]
The following clauses (ai) and (aj) shall be inserted after clause (ah) of sub-section (5) of section 35AD by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
(ai) on or after the 1st day of April, 2014, where the specified business is in the nature of laying and operating a slurry pipeline for the transportation of iron ore;
(aj) on or after the 1st day of April, 2014, where the specified business is in the nature of setting up and operating a semi-conductor wafer fabrication manufacturing unit, and which is notified by the Board in accordance with such guidelines as may be prescribed; and
(b) on or after the 1st day of April, 2009, in all other cases not falling under 57[any of the above clauses].
(6) The assessee carrying on the business of the nature referred to in clause (a) of sub-section (5) shall be allowed, in addition to deduction under sub-section (1), a further deduction in the previous year relevant to the assessment year beginning on the 1st day of April, 2010, of an amount in respect of expenditure of capital nature incurred during any earlier previous year, if—
(a) the business referred to in clause (a) of sub-section (5) has commenced its operation at any time during the period beginning on or after the 1st day of April, 2007 and ending on the 31st day of March, 2009; and
(b) no deduction for such amount has been allowed or is allowable to the assessee in any earlier previous year.
58[(6A) Where the assessee builds a hotel of two-star or above category as classified by the Central Government and subsequently, while continuing to own the hotel, transfers the operation thereof to another person, the assessee shall be deemed to be carrying on the specified business referred to in sub-clause (iv) of clause (c) of sub-section (8).]
(7) The provisions contained in sub-section (6) of section 80A and the provisions of sub-sections (7) and (10) of section 80-IA shall, so far as may be, apply to this section in respect of goods or services or assets held for the purposes of the specified business.
The following sub-sections (7A), (7B) and (7C) shall be inserted after sub-section (7) of section 35AD by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
(7A) Any asset in respect of which a deduction is claimed and allowed under this section shall be used only for the specified business, for a period of eight years beginning with the previous year in which such asset is acquired or constructed.
(7B) Where any asset, in respect of which a deduction is claimed and allowed under this section, is used for a purpose other than the specified business during the period specified in sub-section (7A), otherwise than by way of a mode referred to in clause (vii) of section 28, the total amount of deduction so claimed and allowed in one or more previous years, as reduced by the amount of depreciation allowable in accordance with the provisions of section 32, as if no deduction under this section was allowed, shall be deemed to be the income of the assessee chargeable under the head “Profits and gains of business or profession” of the previous year in which the asset is so used.
(7C) Nothing contained in sub-section (7B) shall apply to a company which has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986)58a, during the period specified in sub-section (7A).
(8) For the purposes of this section,—
(a) an “associated person”, in relation to the assessee, means a person,—
(i) who participates, directly or indirectly, or through one or more intermediaries in the management or control or capital of the assessee;
(ii) who holds, directly or indirectly, shares carrying not less than twenty-six per cent of the voting power in the capital of the assessee;
(iii) who appoints more than half of the Board of directors or members of the governing board, or one or more executive directors or executive members of the governing board of the assessee; or
(iv) who guarantees not less than ten per cent of the total borrowings of the assessee;
(b) “cold chain facility” means a chain of facilities for storage or transportation of agricultural and forest produce, meat and meat products, poultry, marine and dairy products, products of horticulture, floriculture and apiculture and processed food items under scientifically controlled conditions including refrigeration and other facilities necessary for the preservation of such produce;
(c) “specified business” means any one or more of the following business, namely :—
(i) setting up and operating a cold chain facility;
(ii) setting up and operating a warehousing facility for storage of agricultural produce;
(iii) laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including storage facilities being an integral part of such network;
59[(iv) building and operating, anywhere in India, a 60[hotel] of two-star or above category as classified by the Central Government;
(v) building and operating, anywhere in India, a 61[hospital] with at least one hundred beds for patients;
(vi) developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Government or a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed;]
62[(vii) developing and building a housing project under a scheme for affordable housing framed by the Central Government or a State Government, as the case may be, and notified by the Board in this behalf in accordance with the guidelines as may be prescribed63;
(viii) production of fertilizer in India;]
64[(ix) setting up and operating an inland container depot or a container freight station notified or approved under the Customs Act, 1962 (52 of 1962);
(x) bee-keeping and production of honey and beeswax;
(xi) setting up and operating a warehousing facility for storage of sugar;]
The following sub-clauses (xii) and (xiii) shall be inserted after sub-clause (xi) of clause (c) of sub-section (8) of section 35AD by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
(xii) laying and operating a slurry pipeline for the transportation of iron ore;
(xiii) setting up and operating a semi-conductor wafer fabrication manufacturing unit notified by the Board in accordance with such guidelines as may be prescribed;
(d) any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if—
(i) such machinery or plant was not, at any time prior to the date of the installation by the assessee, used in India;
(ii) such machinery or plant is imported into India from any country outside India; and
(iii) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of installation of the machinery or plant by the assessee;
(e) where in the case of a specified business, any machinery or plant or any part thereof previously used for any purpose is transferred to the specified business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in such business, then, for the purposes of clause (ii) of sub-section (2), the condition specified therein shall be deemed to have been complied with;
(f) any expenditure of capital nature shall not include any expenditure incurred on the acquisition of any land or goodwill or financial instrument.]
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6935CCA. 70[(1) Where an assessee incurs any expenditure by way of payment of any sum—
(a) to an association or institution, which has as its object the undertaking of any programme of rural development, to be used for carrying out any programme of rural development approved by the prescribed authority71; or
(b) to an association or institution, which has as its object the training of persons for implementing programmes of rural development; 72[or]
72[(c) to a rural development fund set up and notified73 by the Central Government in this 74[behalf; or]
75[(d) to the National Urban Poverty Eradication Fund set up and notified by the Central Government in this behalf,]
the assessee shall, subject to the provisions of sub-section (2), be allowed a deduction of the amount of such expenditure incurred during the previous year.]
76[(2) The deduction under clause (a) of sub-section (1) shall not be allowed in respect of expenditure by way of payment of any sum to any association or institution referred to in the said clause unless the assessee furnishes a certificate from such association or institution to the effect that—
(a) the programme of rural development had been approved by the prescribed authority before the 1st day of March, 1983; and
(b) where such payment is made after the 28th day of February, 1983, such programme involves work by way of construction of any building or other structure (whether for use as a dispensary, school, training or welfare centre, workshop or for any other purpose) or the laying of any road or the construction or boring of a well or tube-well or the installation of any plant or machinery, and such work has commenced before the 1st day of March, 1983.]
77[(2A) The deduction under clause (b) of sub-section (1) shall not be allowed in respect of expenditure by way of payment of any sum to any association or institution unless the assessee furnishes a certificate from such association or institution to the effect that—
(a) the prescribed authority had approved the association or institution before the 1st day of March, 1983; and
(b) the training of persons for implementing any programme of rural development had been started by the association or institution before the 1st day of March, 1983.]
78[Explanation.—The deduction, to which the assessee is entitled in respect of any sum paid to an association or institution for carrying out the programme of rural development referred to in sub-section (1), shall not be denied merely on the ground that subsequent to the payment of such sum by the assessee, the approval granted to such programme of rural development, or as the case may be, to the association or institution has been withdrawn.]
79[(2B) No certificate of the nature referred to in sub-section (2) or sub-section (2A) shall be issued by any association or institution unless such association or institution has obtained from the prescribed authority authorisation in writing to issue certificates of such nature.]
(3) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure referred to in sub-section (1), deduction shall not be allowed in respect of such expenditure under section 35C80 or section 35CC80 or section 80G or any other provision of this Act for the same or any other assessment year.]
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(a) to an association or institution, which has as its object the undertaking of any programme of conservation of natural resources or of affore-station, to be used for carrying out any programme of conservation of natural resources or afforestation approved84 by the prescribed authority85; or
(b) to such fund for afforestation as may be notified by the Central Government,
the assessee shall, subject to the provisions of sub-section (2), be allowed a deduction of the amount of such expenditure incurred during the previous year.]
(2) The deduction under 86[clause (a) of] sub-section (1) shall not be allowed with respect to expenditure by way of payment of any sum to any association or institution, unless such association or institution is for the time being approved in this behalf by the prescribed authority87 :
Provided that the prescribed authority shall not grant such approval for more than three years at a time.
(3) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure referred to in sub-section (1), deduction shall not be allowed in respect of such expenditure under any other provision of this Act for the same or any other assessment year.]
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(2) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure referred to in sub-section (1), deduction shall not be allowed in respect of such expenditure under any other provisions of this Act for the same or any other assessment year.]
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(2) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure referred to in sub-section (1), deduction shall not be allowed in respect of such expenditure under any other provisions of this Act for the same or any other assessment year.]
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9135D. (1) Where an assessee, being an Indian company or a person (other than a company) who is resident in India, incurs, after the 31st day of March, 1970, any expenditure specified in sub-section (2),—
(i) before the commencement of his business, or
(ii) after the commencement of his business, in connection with the extension of his 92[***] undertaking or in connection with his setting up a new 92[***] unit,
the assessee shall, in accordance with and subject to the provisions of this section, be allowed a deduction of an amount equal to one-tenth of such expenditure for each of the ten successive previous 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 92[***] undertaking is completed or the new 92[***] unit commences production or operation :
93[Provided that where an assessee incurs after the 31st day of March, 1998, any expenditure specified in sub-section (2), the provisions of this sub-section shall have effect as if for the words “an amount equal to one-tenth of such expenditure for each of the ten successive previous years”, the words “an amount equal to one-fifth of such expenditure for each of the five successive previous years” had been substituted.]
(2) The expenditure referred to in sub-section (1) shall be the expenditure specified in any one or more of the following clauses, namely :—
(a) 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;
(iv) engineering services relating to the business of the assessee :
Provided that the work in connection with the preparation of the feasibility report or the project report or the conducting of market survey or of any other survey or the engineering services referred to in this clause is carried out by the assessee himself or by a concern which is for the time being approved94 in this behalf by the Board;
(b) 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;
(c) where the assessee is a company, also expenditure—
(i) by way of legal charges for drafting the Memorandum and Articles of Association of the company;
(ii) on printing of the Memorandum and Articles of Association;
(iii) by way of fees for registering the company under the provisions of the Companies Act, 1956 (1 of 1956)94a;
(iv) in connection with the issue, for public subscription, of shares in or debentures of the company, being underwriting commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus;
(d) such other items of expenditure (not being expenditure eligible for any allowance or deduction under any other provision of this Act) as may be prescribed.
(3) Where the aggregate amount of the expenditure referred to in sub-section (2) exceeds an amount calculated at two and one-half per cent—
(a) of the cost of the project, or
(b) where the assessee is an Indian company, at the option of the company, of the capital employed in the business of the company,
the excess shall be ignored for the purpose of computing the deduction allowable under sub-section (1) :
95[Provided that where the aggregate amount of expenditure referred to in sub-section (2) is incurred after the 31st day of March, 1998, the provisions of this sub-section shall have effect as if for the words “two and one-half per cent”, the words “five per cent” had been substituted.]
(a) “cost of the project” means—
(i) in a case referred to in clause (i) of sub-section (1), the actual cost of the fixed assets, being 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;
(ii) in a case referred to in clause (ii) of sub-section (1), the actual cost of the fixed assets, being 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 extension of the 96[***] undertaking is completed or, as the case may be, the new 96[***] unit commences production or operation, in so far as such fixed assets have been acquired or developed in connection with the extension of the 96[***] undertaking or the setting up of the new 96[***] unit of the assessee;
(b) “capital employed in the business of the company” means—
(i) in a case referred to in clause (i) of sub-section (1), 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;
(ii) in a case referred to in clause (ii) of sub-section (1), the aggregate of the issued share capital, debentures and long-term borrowings as on the last day of the previous year in which the extension of the 97[***] undertaking is completed or, as the case may be, the new 97[***] unit commences production or operation, in so far as such capital, debentures and long-term borrowings have been issued or obtained in connection with the extension of the 97[***] undertaking or the setting up of the new 97[***] unit of the company;
(c) “long-term borrowings” means—
(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 98[which is eligible for deduction under clause (viii) of sub-section (1) of section 36] or any banking institution (not being a financial institution referred to above), or
(ii) any moneys borrowed or debt incurred by it in a foreign country in respect of the purchase outside India of capital plant and machinery, where the terms under which such moneys are borrowed or the debt is incurred provide for the repayment thereof during a period of not less than seven years.
(4) Where the assessee is a person other than a company or a co-operative society, no deduction shall be admissible under sub-section (1) unless the accounts of the assessee for the year or years in which the expenditure specified in sub-section (2) is incurred have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288, and the assessee furnishes, along with his return of income for the first year in which the deduction under this section is claimed, the report of such audit in the prescribed form99 duly signed and verified by such accountant and setting forth such particulars as may be prescribed.
(5) Where the undertaking of an Indian company which is entitled to the deduction under sub-section (1) is transferred, before the expiry of the period of ten years specified in sub-section (1), to another Indian company in a scheme of amalgamation,—
(i) no deduction shall be admissible under sub-section (1) in the case of the amalgamating company for the previous year in which the amalgamation takes place; and
(ii) the provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalga-mating company if the amalgamation had not taken place.
1[(5A) Where the undertaking of an Indian company which is entitled to the deduction under sub-section (1) is transferred, before the expiry of the period specified in sub-section (1), to another company in a scheme of demerger,—
(i) no deduction shall be admissible under sub-section (1) in the case of the demerged company for the previous year in which the demerger takes place; and
(ii) the provisions of this section shall, as far as may be, apply to the resulting company, as they would have applied to the demerged company, if the demerger had not taken place.]
(6) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure specified in sub-section (2), the expenditure in respect of which deduction is so allowed shall not qualify for deduction under any other provision of this Act for the same or any other assessment year.]
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(2) No deduction shall be allowed in respect of the expenditure mentioned in sub-section (1) under any other provision of this Act.]
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4[(2) Where the assessee, being an Indian company, is entitled to the deduction under sub-section (1) and the undertaking of such Indian company entitled to the deduction under sub-section (1) is transferred, before the expiry of the period specified in that sub-section, to another Indian company in a scheme of amalgamation, the provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalgamating company if the amalgamation had not taken place.
(3) Where the undertaking of an Indian company entitled to the deduction under sub-section (1) is transferred, before the expiry of the period specified in that sub-section, to another company in a scheme of demerger, the provisions of this section shall, as far as may be, apply to the resulting company, as they would have applied to the demerged company, if the demerger had not taken place.
(4) Where there has been reorganisation of business, whereby a firm is succeeded by a company fulfilling the conditions laid down in clause (xiii) of section 47 or a proprietary concern is succeeded by a company fulfilling the conditions laid down in clause (xiv) of section 47, the provisions of this section shall, as far as may be, apply to the successor company, as they would have applied to the firm or the proprietary concern, if reorganisation of business had not taken place.
5[(4A) Where there has been reorganisation of business, whereby a private company or unlisted public company is succeeded by a limited liability partnership fulfilling the conditions laid down in the proviso to clause (xiiib) of section 47, the provisions of this section shall, as far as may be, apply to the successor limited liability partnership, as they would have applied to the said company, if reorganisation of business had not taken place.]
(5) No deduction shall be allowed in respect of the expenditure mentioned in sub-section (1) in the case of the amalgamating company referred to in sub-section (2), in the case of demerged company referred to in 6[sub-section (3), in the case of a firm or proprietary concern referred to in sub-section (4) and in the case of a company referred to in sub-section (4A)] of this section, for the previous year in which amalgamation, demerger or succession, as the case may be, takes place.
(6) No deduction shall be allowed in respect of the expenditure mentioned in sub-section (1) under any other provision of this Act.]]
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(2) The expenditure referred to in sub-section (1) is that incurred by the assessee after the date specified in that sub-section at any time during the year of commercial production and any one or more of the four years immediately preceding that year, wholly and exclusively on any operations relating to prospecting for any mineral or group of associated minerals specified in Part A or Part B, respectively, of the Seventh Schedule or on the development of a mine or other natural deposit of any such mineral or group of associated minerals :
Provided that there shall be excluded from such expenditure any portion thereof which is met directly or indirectly by any other person or authority and any sale, salvage, compensation or insurance moneys realised by the assessee in respect of any property or rights brought into existence as a result of the expenditure.
(3) Any expenditure—
(i) on the acquisition of the site of the source of any mineral or group of associated minerals referred to in sub-section (2) or of any rights in or over such site;
(ii) on the acquisition of the deposits of such mineral or group of associated minerals or of any rights in or over such deposits; or
(iii) 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,
shall not be deemed to be expenditure incurred by the assessee for any of the purposes specified in sub-section (2).
(4) The deduction to be allowed under sub-section (1) for any relevant previous year shall be—
(a) an amount equal to one-tenth of the expenditure specified in sub-section (2) (such one-tenth being hereafter in this sub-section referred to as the instalment); or
(b) such amount as is sufficient to reduce to nil the income (as computed before making the deduction under this section) of that previous year arising from the commercial exploitation [whether or not such commercial exploitation is as a result of the operations or development referred to in sub-section (2)] of any mine or other natural deposit of the mineral or any one or more of the minerals in a group of associated minerals as aforesaid in respect of which the expenditure was incurred,
whichever amount is less :
Provided that the amount of the instalment relating to any relevant previous year, to the extent to which it remains unallowed, shall be carried forward and added to the instalment relating to the previous year next following and deemed to be part of that instalment, and so on, for succeeding previous years, so, however, that no part of any instalment shall be carried forward beyond the tenth previous year as reckoned from the year of commercial production.
(5) For the purposes of this section,—
(a) “operation relating to prospecting” means any operation undertaken for the purposes of exploring, locating or proving deposits of any mineral, and includes any such operation which proves to be infructuous or abortive;
(b) “year of commercial production” means the previous year in which as a result of any operation relating to prospecting, commercial production of any mineral or any one or more of the minerals in a group of associated minerals specified in Part A or Part B, respectively, of the Seventh Schedule, commences;
(c) “relevant previous years” means the ten previous years beginning with the year of commercial production.
(6) Where the assessee is a person other than a company or a co-operative society, no deduction shall be admissible under sub-section (1) unless the accounts of the assessee for the year or years in which the expenditure specified in sub-section (2) is incurred have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288, and the assessee furnishes, along with his return of income for the first year in which the deduction under this section is claimed, the report of such audit in the prescribed form8 duly signed and verified by such accountant and setting forth such particulars as may be prescribed.
(7) Where the undertaking of an Indian company which is entitled to the deduction under sub-section (1) is transferred, before the expiry of the period of ten years specified in sub-section (1), to another Indian company in a scheme of amalgamation—
(i) no deduction shall be admissible under sub-section (1) in the case of the amalgamating company for the previous year in which the amalgamation takes place; and
(ii) the provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalga-mating company if the amalgamation had not taken place.
9[(7A) Where the undertaking of an Indian company which is entitled to the deduction under sub-section (1) is transferred, before the expiry of the period of ten years specified in sub-section (1), to another Indian company in a scheme of demerger,—
(i) no deduction shall be admissible under sub-section (1) in the case of the demerged company for the previous year in which the demerger takes place; and
(ii) the provisions of this section shall, as far as may be, apply to the resulting company as they would have applied to the demerged company, if the demerger had not taken place.]
(8) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure specified in sub-section (2), the expenditure in respect of which deduction is so allowed shall not qualify for deduction under any other provision of this Act for the same or any other assessment year.]
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11(i) the amount of any premium paid in respect of insurance against risk of damage12 or destruction12 of stocks or stores12 used for the purposes of the business or profession;
13[(ia) the amount of any premium paid by a federal milk co-operative society to effect or to keep in force an insurance on the life of the cattle owned by a member of a co-operative society, being a primary society engaged in supplying milk raised by its members to such federal milk co-operative society;]
14[(ib) the amount of any premium 15[paid by any mode of payment other than cash] by the assessee as an employer to effect or to keep in force an insurance on the health of his employees under a scheme framed in this behalf by—
(A) the General Insurance Corporation of India formed under section 9 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972) and approved by the Central Government; or
(B) any other insurer and approved by the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);]
16(ii) any sum paid to an employee as bonus or commission17 for services rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission;
18[* * *]
19[* * *]
(iia) 20[Omitted by the Finance Act, 1999, w.e.f. 1-4-2000.]
21(iii) the amount of the interest22 paid in respect of capital22 borrowed22 for the purposes of the business22 or profession :
23[Provided that any amount of the interest paid, in respect of capital borrowed for acquisition of an asset for extension of existing business or profession (whether capitalised in the books of account or not); for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use, shall not be allowed as deduction.]
24[(iiia) the pro rata amount of discount on a zero coupon bond having regard to the period of life of such bond calculated in the manner as may be prescribed25.
Explanation.—For the purposes of this clause, the expressions—
(i) “discount” means the difference between the amount received or receivable by the infrastructure capital company or infrastructure capital fund or public sector company 26[or scheduled bank] issuing the bond and the amount payable by such company or fund or public sector company 26[or scheduled bank] on maturity or redemption of such bond;
(ii) “period of life of the bond” means the period commencing from the date of issue of the bond and ending on the date of the maturity or redemption of such bond;
(iii) 27[***]]
28(iv) 29any sum paid30 by the assessee as an employer by way of contribution towards a recognised provident fund or an approved superannuation fund, subject to such limits as may be prescribed for the purpose of recognising the provident fund or approving the super-annuation fund, as the case may be; and subject to such 31conditions as the Board may think fit to specify in cases where the contributions are not in the nature of annual contributions of fixed amounts or annual contributions fixed on some definite basis by reference to the income chargeable under the head “Salaries” or to the contributions or to the number of members of the fund;
32[(iva) any sum paid by the assessee as an employer by way of contribution towards a pension scheme, as referred to in section 80CCD, on account of an employee to the extent it does not exceed ten per cent of the salary of the employee in the previous year.
Explanation.—For the purposes of this clause, “salary” includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites;]
33(v) 34any sum paid35 by the assessee as an employer by way of contribution towards an approved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust;
36[(va) any sum received by the assessee from any of his employees to which the provisions of sub-clause (x) of clause (24) of section 2 apply, if such sum is credited by the assessee to the employee’s account in the relevant fund or funds on or before the due date.
37(vi) in respect of animals which have been used for the purposes of the business or profession otherwise than as stock-in-trade and have died or become permanently useless for such purposes, the difference between the actual cost to the assessee of the animals and the amount, if any, realised in respect of the carcasses or animals;
37(vii) subject to the provisions of sub-section (2), the amount of 38[any 39bad debt or part thereof39 which is written off as irrecoverable in the accounts of the assessee for the previous year]:
40[Provided that in the case of 41[an assessee] to which clause (viia) applies, the amount of the deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account made under that clause.]
42[43[Explanation 1].—For the purposes of this clause, any bad debt or part thereof written off as irrecoverable in the accounts of the assessee shall not include any provision for bad and doubtful debts made in the accounts of the assessee;]
44[Explanation 2.—For the removal of doubts, it is hereby clarified that for the purposes of the proviso to clause (vii) of this sub-section and clause (v) of sub-section (2), the account referred to therein shall be only one account in respect of provision for bad and doubtful debts under clause (viia) and such account shall relate to all types of advances, including advances made by rural branches;]
45[(viia) 46[47 in respect of any provision for bad and doubtful debts made by—
(a) a scheduled bank [not being 48[* * *] a bank incorporated by or under the laws of a country outside India] or a non-scheduled bank 49[or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank], an amount 50[not exceeding seven and one-half per cent] of the total income (computed before making any deduction under this clause and Chapter VIA) and an amount not exceeding 51[ten] per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner :
52[Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed in any of the relevant assessment years, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five per cent of the amount of such assets shown in the books of account of the bank on the last day of the previous year:]
53[Provided further that for the relevant assessment years com-mencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, the provisions of the first proviso shall have effect as if for the words “five per cent”, the words “ten per cent” had been substituted :]
54[Provided also that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed a further deduction in excess of the limits specified in the foregoing provisions, for an amount not exceeding the income derived from redemption of securities in accordance with a scheme framed by the Central Government:
Provided also that no deduction shall be allowed under the third proviso unless such income has been disclosed in the return of income under the head “Profits and gains of business or profession.” ]
55[Explanation.—For the purposes of this sub-clause, “relevant assessment years” means the five consecutive assessment years commencing on or after the 1st day of April, 2000 and ending before the 1st day of April, 2005;]
(b) a bank, being a bank incorporated by or under the laws of a country outside India, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A);]
56[(c) a public financial institution or a State financial corporation or a State industrial investment corporation, an amount not exceeding five per cent of the total income (computed before making any deduction under this clause and Chapter VI-A) :]
57[Provided that a public financial institution or a State financial corporation or a State industrial investment corporation referred to in this sub-clause shall, at its option, be allowed in any of the two consecutive assessment years commencing on or after the 1st day of April, 2003 and ending before the 1st day of April, 2005, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, of an amount not exceeding ten per cent of the amount of such assets shown in the books of account of such institution or corporation, as the case may be, on the last day of the previous year.]
58[(i) “non-scheduled bank” means a 59banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled bank;]
60[(ia)] “rural branch” means a branch of a scheduled bank 61[or a non-scheduled bank] situated in a place62 which has a population of not more than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year;
63[(ii) “scheduled bank” means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934) 64[***];]
65[(iii) “public financial institution” shall have the meaning assigned to it in section 4A66 of the Companies Act, 1956 (1 of 1956);
(iv) “State financial corporation” means a financial corporation established under section 3 or section 3A or an institution notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951);
(v) “State industrial investment corporation” means a Government company67 within the meaning of section 617 of the Companies Act, 1956 (1 of 1956), engaged in the business of providing long-term finance for industrial projects and 68[eligible for deduction under clause (viii) of this sub-section];]
69[(vi) “co-operative bank”, “primary agricultural credit society” and “primary co-operative agricultural and rural development bank” shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P;]
70[(viii) in respect of any special reserve created and maintained by a specified entity, an amount not exceeding twenty per cent of the profits derived from eligible business computed under the head “Profits and gains of business or profession” (before making any deduction under this clause) carried to such reserve account:
Provided that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid up share capital and of the general reserves of the specified entity, no allowance under this clause shall be made in respect of such excess.
Explanation.—In this clause,—
(a) “specified entity” means,—
(i) a financial corporation specified in section 4A of the Companies Act, 1956 (1 of 1956)71;
(ii) a financial corporation which is a public sector company;
(iii) a banking company;
(iv) a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank;
(v) a housing finance company; and
(vi) any other financial corporation including a public company;
(b) “eligible business” means,—
72[(i) in respect of the specified entity referred to in sub-clause (i) or sub-clause (ii) or sub-clause (iii) or sub-clause (iv) of clause (a), the business of providing long-term finance for—
(A) industrial or agricultural development;
(B) development of infrastructure facility in India; or
(C) development of housing in India;]
(ii) in respect of the specified entity referred to in sub-clause (v) of clause (a), the business of providing long-term finance for the construction or purchase of houses in India for residential purposes; and
(iii) in respect of the specified entity referred to in sub-clause (vi) of clause (a), the business of providing long-term finance for development of infrastructure facility in India;
(c) “banking company” means a company to which the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act;
(d) “co-operative bank”, “primary agricultural credit society” and “primary co-operative agricultural and rural development bank” shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P;
(e) “housing finance company” means a public company formed or registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes;
(f) 73“public company” shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956);
(g) “infrastructure facility” means—
(i) an infrastructure facility as defined in the Explanation to clause (i) of sub-section (4) of section 80-IA, or any other public facility of a similar nature as may be notified74 by the Board in this behalf in the Official Gazette and which fulfils the conditions as may be prescribed75;
(ii) an undertaking referred to in clause (ii) or clause (iii) or clause (iv) or clause (vi) of sub-section (4) of section 80-IA; and
(iii) an undertaking referred to in sub-section (10) of section 80-IB;
(h) “long-term finance” 75a means any loan or advance where the terms under which moneys are loaned or advanced provide for repayment along with interest thereof during a period of not less than five years;]
(viiia) 76[* * *]
77[(ix) any expenditure bona fide incurred by a company for the purpose of promoting family planning amongst its employees :
Provided that where such expenditure or any part thereof is of a capital nature, one-fifth of such expenditure shall be deducted for the previous year in which it was incurred; and the balance thereof shall be deducted in equal instalments for each of the four immediately succeeding previous years :
Provided further that the provisions of sub-section (2) of section 32 and of sub-section (2) of section 72 shall apply in relation to deductions allowable under this clause as they apply in relation to deductions allowable in respect of depreciation :
Provided further that the provisions of clauses (ii), (iii), (iv) and (v) of sub-section (2) 78[and sub-section (5)] of section 35, of sub-section (3) of section 41 and of Explanation 1 to clause (1) of section 43 shall, so far as may be, apply in relation to an asset representing expenditure of a capital nature for the purposes of promoting family planning as they apply in relation to an asset representing expenditure of a capital nature on scientific research;]
(x) 79[***]
80[(xi) any expenditure incurred by the assessee, on or after the 1st day of April, 1999 but before the 1st day of April, 2000, wholly and exclusively in respect of a non-Y2K compliant computer system, owned by the assessee and used for the purposes of his business or profession, so as to make such computer system Y2K compliant computer system :
Provided that no such deduction shall be allowed in respect of such expenditure under any other provisions of this Act :
Provided further that no such deduction shall be admissible unless the assessee furnishes in the prescribed form81, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this clause.
Explanation.—For the purposes of this clause,—
(a) “computer system” means a device or collection of devices including input and output support devices and excluding calculators which are not programmable and capable of being used in conjunction with external files, or more of which contain computer programmes, electronic instructions, input data and output data, that performs functions including, but not limited to, logic, arithmetic, data storage and retrieval, communication and control;
(b) “Y2K compliant computer system” means a computer system capable of correctly processing, providing or receiving data relating to date within and between the twentieth and twenty-first century;]
82[(xii) any expenditure (not being in the nature of capital expenditure) incurred by a corporation or a body corporate, by whatever name called, if,—
(a) it is constituted or established by a Central, State or Provincial Act;
(b) such corporation or body corporate, having regard to the objects and purposes of the Act referred to in sub-clause (a), is notified83 by the Central Government in the Official Gazette for the purposes of this clause; and
(c) the expenditure is incurred for the objects and purposes authorised by the Act under which it is constituted or established;]
84[(xiii) any amount of banking cash transaction tax paid by the assessee during the previous year on the taxable banking transactions entered into by him.
Explanation.—For the purposes of this clause, the expressions “banking cash transaction tax” and “taxable banking transaction” shall have the same meanings respectively assigned to them under Chapter VII of the Finance Act, 2005;]
85[(xiv) any sum paid by a public financial institution by way of contribution to such credit guarantee fund trust for small industries as the Central Government may, by notification in the Official Gazette86, specify in this behalf.
Explanation.—For the purposes of this clause, “public financial institution” shall have the meaning assigned to it in section 4A87 of the Companies Act, 1956 (1 of 1956);]
88[(xv) an amount equal to the securities transaction tax paid by the assessee in respect of the taxable securities transactions entered into in the course of his business during the previous year, if the income arising from such taxable securities transactions is included in the income computed under the head “Profits and gains of business or profession” .
Explanation.—For the purposes of this clause, the expressions “securities transaction tax” and “taxable securities transaction” shall have the meanings respectively assigned to them under Chapter VII of the Finance (No. 2) Act, 2004 (23 of 2004);
89[(xvi) an amount equal to the commodities transaction tax paid by the assessee in respect of the taxable commodities transactions entered into in the course of his business during the previous year, if the income arising from such taxable commodities transactions is included in the income computed under the head “Profits and gains of business or profession” .
90(2) In making any deduction for a bad debt or part thereof, the following provisions shall apply—
91[(i) no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of the business of banking or money-lending which is carried on by the assessee;]
(ii) if the amount ultimately recovered on any such debt or part of debt is less than the difference between the debt or part and the amount so deducted, the deficiency shall be deductible in the previous year in which the ultimate recovery is made;
(iii) any such debt or part of debt may be deducted if it has already been written off as irrecoverable92 in the accounts of an earlier previous year 93[(being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year)], but the 94[Assessing] Officer had not allowed it to be deducted on the ground that it had not been established to have become a bad debt in that year;
(iv) where any such debt or part of debt is written off as irrecoverable in the accounts of the previous year 95[(being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year)] and the 94[Assessing] Officer is satisfied that such debt or part became a bad debt in any earlier previous year not falling beyond a period of four previous years immediately preceding the previous year in which such debt or part is written off, the provisions of sub-section (6) of section 155 shall apply;
96[(v) where such debt or part of debt relates to advances made by an assessee to which clause (viia) of sub-section (1) applies, no such deduction shall be allowed unless the assessee has debited the amount of such debt or part of debt in that previous year to the provision for bad and doubtful debts account made under that clause.]
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4[4a[Explanation.]—For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law5 shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure.]
The following Explanation 2 shall be inserted after renumbered Explanation 1 to sub-section (1) of section 37 by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
Explanation 2.—For the removal of doubts, it is hereby declared that for the purposes of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013)5a shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession.
(2) 6[* * *]
7[8(2B) Notwithstanding anything contained in sub-section (1), no allowance shall be made in respect of expenditure incurred by an assessee on advertisement in any souvenir, brochure, tract, pamphlet or the like published by a political party.]
(3) 9[* * *]
(3A) 10[* * *]
(3B) 11[* * *]
(3C) 12[* * *]
(3D) 13[* * *]
(4) 14[* * *]
(5) 15[* * *]
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(a) the deduction under sub-clause (i) of clause (a) of section 30, in the case of rent, shall be such amount as the 17[Assessing] Officer may determine having regard to the proportionate annual value of the part used for the purpose of the business or profession, and in the case of any sum paid for repairs, such sum as is proportionate to the part of the premises used for the purpose of the business or profession;
(b) the deduction under clause (b) of section 30 shall be such sum as the 17[Assessing] Officer may determine having regard to the part so used.
(2) Where any building, machinery, plant or furniture is not exclusively used for the purposes of the business or profession, the deductions under sub-clause (ii) of clause (a) and clause (c) of section 30, clauses (i) and (ii) of section 31 and 18[clause (ii) of sub-section (1)] of section 32 shall be restricted to a fair proportionate part thereof which the 17[Assessing] Officer may determine, having regard to the user of such building, machinery, plant or furniture for the purposes of the business or profession.
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20(a) in the case of any assessee—
21[(i) any interest (not being interest on a loan issued for public subscription before the 1st day of April, 1938), royalty, fees for technical services or other sum chargeable under this Act, which is payable,—
(A) outside India; or
(B) in India to a non-resident, not being a company or to a foreign company,
on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid 22[during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-section (1) of section 200] :
Provided that where in respect of any such sum, tax has been deducted in any subsequent year or, has been deducted in the previous year but paid in any subsequent year after the expiry of the time prescribed under sub-section (1) of section 200, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.
The following proviso shall be substituted for the existing proviso to sub-clause (i) of clause (a) of section 40 by the Finance (No. 2) Act, 2014, w.e.f 1-4-2015 :
Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.
Explanation.—For the purposes of this sub-clause,—
(A) “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;
(B) “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9;
22a(ia) 22b[any interest, commission or brokerage, 23[rent, royalty,] fees for professional services or fees for technical services payable23a to a resident, or amounts payable23a to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work)], on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, 24[has not been paid23a on or before the due date23a specified in sub-section (1) of section 139 :]
25[Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, 25a[thirty per cent of] such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid :]
26[Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso.]
Explanation.—For the purposes of this sub-clause,—
(i) “commission or brokerage” shall have the same meaning as in clause (i) of the Explanation to section 194H;
(ii) “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9;
(iii) “professional services” shall have the same meaning as in clause (a) of the Explanation to section 194J;
(iv) “work” shall have the same meaning as in Explanation III to section 194C;
27[(v) “rent” shall have the same meaning as in clause (i) to the Explanation to section 194-I;
(vi) “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;]
(ib) 28[***]]
29[(ic) any sum paid on account of fringe benefit tax under Chapter XIIH;]
30(ii) any sum paid on account of any rate or tax levied31 on the profits or gains of any business or profession31 or assessed at a proportion of, or otherwise on the basis of, any such profits or gains.
32[Explanation 1.—For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, any sum paid on account of any rate or tax levied includes and shall be deemed always to have included any sum eligible for relief of tax under section 90 or, as the case may be, deduction from the Indian income-tax payable under section 91.]
33[Explanation 2.—For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, any sum paid on account of any rate or tax levied includes any sum eligible for relief of tax under section 90A;]
34[35(iia) any sum paid on account of wealth-tax.
36[(iib) any amount—
(A) paid by way of royalty, licence fee, service fee, privilege fee, service charge or any other fee or charge, by whatever name called, which is levied exclusively on; or
(B) which is appropriated, directly or indirectly, from,
a State Government undertaking by the State Government.
(i) a corporation established by or under any Act of the State Government;
(ii) a company in which more than fifty per cent of the paid-up equity share capital is held by the State Government;
(iii) a company in which more than fifty per cent of the paid-up equity share capital is held by the entity referred to in clause (i) or clause (ii) (whether singly or taken together);
(iv) a company or corporation in which the State Government has the right to appoint the majority of the directors or to control the management or policy decisions, directly or indirectly, including by virtue of its shareholding or management rights or shareholders agreements or voting agreements or in any other manner;
(v) an authority, a board or an institution or a body established or constituted by or under any Act of the State Government or owned or controlled by the State Government;]
37[(iii) any payment which is chargeable under the head “Salaries”, if it is payable—
(A) outside India; or
(B) to a non-resident,
and if the tax has not been paid thereon nor deducted therefrom under Chapter XVII-B;]
(iv) any payment to a provident or other fund established for the benefit of employees of the assessee, unless the assessee has made effective arrangements to secure that tax shall be deducted at source from any payments made from the fund which are chargeable to tax under the head “Salaries” ;
38[(v) any tax actually paid by an employer referred to in clause (10CC) of section 10;]
39[(b) in the case of any firm assessable as such,—
(i) any payment of salary, bonus, commission or remuneration, by whatever name called (hereinafter referred to as “remuneration” ) to any partner who is not a working partner; or
(ii) any payment of remuneration to any partner who is a working partner, or of interest to any partner, which, in either case, is not authorised by, or is not in accordance with, the terms of the partnership deed; or
(iii) any payment of remuneration to any partner who is a working partner, or of interest to any partner, which, in either case, is authorised by, and is in accordance with, the terms of the partnership deed, but which relates to any period (falling prior to the date of such partnership deed) for which such payment was not authorised by, or is not in accordance with, any earlier partnership deed, so, however, that the period of authorisation for such payment by any earlier partnership deed does not cover any period prior to the date of such earlier partnership deed; or
(iv) any payment of interest to any partner which is authorised by, and is in accordance with, the terms of the partnership deed and relates to any period falling after the date of such partnership deed in so far as such amount exceeds the amount calculated at the rate of 40[twelve] per cent simple interest per annum; or
41(v) any payment of remuneration to any partner who is a working partner, which is authorised by, and is in accordance with, the terms of the partnership deed and relates to any period falling after the date of such partnership deed in so far as the amount of such payment to all the partners during the previous year exceeds the aggregate amount computed as hereunder :—
| 42[(a) on the first Rs. 3,00,000 of the book-profit or in case of a loss | Rs. 1,50,000 or at the rate of 90 per cent of the book-profit, whichever is more; |
| (b) on the balance of the book-profit | at the rate of 60 per cent :] |
Provided that in relation to any payment under this clause to the partner during the previous year relevant to the assessment year commencing on the 1st day of April, 1993, the terms of the partnership deed may, at any time during the said previous year, provide for such payment.
Explanation 1.—Where an individual is a partner in a firm on behalf, or for the benefit, of any other person (such partner and the other person being hereinafter referred to as “partner in a representative capacity” and “person so represented”, respectively),—
(i) interest paid by the firm to such individual otherwise than as partner in a representative capacity, shall not be taken into account for the purposes of this clause;
(ii) interest paid by the firm to such individual as partner in a representative capacity and interest paid by the firm to the person so represented shall be taken into account for the purposes of this clause.
Explanation 2.—Where an individual is a partner in a firm otherwise than as partner in a representative capacity, interest paid by the firm to such individual shall not be taken into account for the purposes of this clause, if such interest is received by him on behalf, or for the benefit, of any other person.
Explanation 3.—For the purposes of this clause, “book-profit” means the net profit, as shown in the profit and loss account for the relevant previous year, computed in the manner laid down in Chapter IV-D as increased by the aggregate amount of the remuneration paid or payable to all the partners of the firm if such amount has been deducted while computing the net profit.
Explanation 4.—For the purposes of this clause, “working partner” means an individual who is actively engaged in conducting the affairs of the business or profession of the firm of which he is a partner;]
43[(ba) in the case of an association of persons or body of individuals [other than a company or a co-operative society or a society registered under the Societies Registration Act, 1860 (21 of 1860), or under any law corresponding to that Act in force in any part of India], any payment of interest, salary, bonus, commission or remuneration, by whatever name called, made by such association or body to a member of such association or body.
Explanation 1.—Where interest is paid by an association or body to any member thereof who has also paid interest to the association or body, the amount of interest to be disallowed under this clause shall be limited to the amount by which the payment of interest by the association or body to the member exceeds the payment of interest by the member to the association or body.
Explanation 2.—Where an individual is a member of an association or body on behalf, or for the benefit, of any other person (such member and the other person being hereinafter referred to as “member in a representative capacity” and “person so represented”, respectively),—
(i) interest paid by the association or body to such individual or by such individual to the association or body otherwise than as member in a representative capacity, shall not be taken into account for the purposes of this clause;
(ii) interest paid by the association or body to such individual or by such individual to the association or body as member in a representative capacity and interest paid by the association or body to the person so represented or by the person so represented to the association or body, shall be taken into account for the purposes of this clause.
Explanation 3.—Where an individual is a member of an association or body otherwise than as member in a representative capacity, interest paid by the association or body to such individual shall not be taken into account for the purposes of this clause, if such interest is received by him on behalf, or for the benefit, of any other person.]
(c) [Omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Earlier, it was amended by the Finance Act, 1963, w.e.f. 1-4-1963, Finance Act, 1964, w.e.f. 1-4-1964, Finance Act, 1965, w.e.f. 1-4-1965, Finance Act, 1968, w.e.f. 1-4-1969, Finance (No. 2) Act, 1971, w.e.f. 1-4-1972, Finance Act, 1984, w.e.f. 1-4-1985 and Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.]
(d) [Omitted by the Finance Act, 1988, w.e.f. 1-4-1989.]
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4540A. (1) The provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provision of this Act relating to the computation of income under the head “Profits and gains of business or profession” .
46(2)(a) Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person47 referred to in clause (b) of this sub-section, and the 48[Assessing] Officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by or accruing to him therefrom, so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction :
49[Provided that no disallowance, on account of any expenditure being excessive or unreasonable having regard to the fair market value, shall be made in respect of a specified domestic transaction referred to in section 92BA, if such transaction is at arm’s length price as defined in clause (ii) of section 92F.]
(b) The persons referred to in clause (a) are the following, namely :—
| (i) where the assessee is an individual | any relative of the assessee; | |
| (ii) where the assessee is a company, firm, association of persons or Hindu undivided family | any director of the company, partner of the firm, or member of the association or family, or any relative of such director, partner or member; |
(iii) any individual who has a substantial interest in the business or profession of the assessee, or any relative of such individual;
(iv) a company, firm, association of persons or Hindu undivided family having a substantial interest in the business or profession of the assessee or any director, partner or member of such company, firm, association or family, or any relative of such director, partner or member 50[or any other company carrying on business or profession in which the first mentioned company has substantial interest];
(v) a company, firm, association of persons or Hindu undivided family of which a director, partner or member, as the case may be, has a substantial interest in the business or profession of the assessee; or any director, partner or member of such company, firm, association or family or any relative of such director, partner or member;
(vi) any person who carries on a business or profession,—
(A) where the assessee being an individual, or any relative of such assessee, has a substantial interest in the business or profession of that person; or
(B) where the assessee being a company, firm, association of persons or Hindu undivided family, or any director of such company, partner of such firm or member of the association or family, or any relative of such director, partner or member, has a substantial interest in the business or profession of that person.
(a) in a case where the business or profession is carried on by a company, such person is, at any time during the previous year, the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) carrying not less than twenty per cent of the voting power; and
(b) in any other case, such person is, at any time during the previous year, beneficially entitled to not less than twenty per cent of the profits of such business or profession.
51[52(3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure.53
(3A) Where an allowance has been made in the assessment for any year in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year (hereinafter referred to as subsequent year) the assessee makes payment in respect thereof, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, the payment so made shall be deemed to be the profits and gains of business or profession and accordingly chargeable to income-tax as income of the subsequent year if the payment or aggregate of payments made to a person in a day, exceeds twenty thousand rupees:
Provided that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3) and this sub-section where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, in such cases and under such circumstances as may be prescribed54, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors :]
55[Provided further that in the case of payment made for plying, hiring or leasing goods carriages, the provisions of sub-sections (3) and (3A) shall have effect as if for the words “twenty thousand rupees”, the words “thirty-five thousand rupees” had been substituted.]
56[(4) Notwithstanding anything contained in any other law for the time being in force or in any contract, where any payment in respect of any expenditure has to be made by 57[an account payee cheque drawn on a bank or account payee bank draft] in order that such expenditure may not be disallowed as a deduction under sub-section (3), then the payment may be made by such cheque or draft; and where the payment is so made or tendered, no person shall be allowed to raise, in any suit or other proceeding, a plea based on the ground that the payment was not made or tendered in cash or in any other manner.]
(5) 58[Omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Original sub-section (5) was inserted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972.]
(6) 59[Omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Original sub-section (6) was inserted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972.]
60[61(7) (a) Subject to the provisions of clause (b), no deduction shall be allowed in respect of any provision62 (whether called as such or by any other name) made by the assessee for the payment of gratuity to his employees on their retirement or on termination of their employment for any reason.
(b) Nothing in clause (a) shall apply in relation to any provision made by the assessee for the purpose of payment of a sum by way of any contribution towards an approved gratuity fund, or for the purpose of payment of any gratuity, that has become payable during the previous year63.
Explanation.—For the removal of doubts, it is hereby declared that where any provision made by the assessee for the payment of gratuity to his employees on their retirement or termination of their employment for any reason has been allowed as a deduction in computing the income of the assessee for any assessment year, any sum paid out of such provision by way of contribution towards an approved gratuity fund or by way of gratuity to any employee shall not be allowed as a deduction in computing the income of the assessee of the previous year in which the sum is so paid.]
(8) 64[* * *]
65[(9) No deduction shall be allowed in respect of any sum paid by the assessee as an employer towards the setting up or formation of, or as contribution to, any fund, trust, company, association of persons, body of individuals, society registered under the Societies Registration Act, 1860 (21 of 1860), or other institution for any purpose, except where such sum is so paid, for the purposes and to the extent provided by or under clause (iv) 66[or clause (iva)] or clause (v) of sub-section (1) of section 36, or as required by or under any other law for the time being in force.
(10) Notwithstanding anything contained in sub-section (9), where the 67[Assessing] Officer is satisfied that the fund, trust, company, association of persons, body of individuals, society or other institution referred to in that sub-section has, before the 1st day of March, 1984, bona fide laid out or expended any expenditure (not being in the nature of capital expenditure) wholly and exclusively for the welfare of the employees of the assessee referred to in sub-section (9) out of the sum referred to in that sub-section, the amount of such expenditure shall, in case no deduction has been allowed to the assessee in respect of such sum and subject to the other provisions of this Act, be deducted in computing the income referred to in section 28 of the assessee of the previous year in which such expenditure is so laid out or expended, as if such expenditure had been laid out or expended by the assessee.]
68[(11) Where the assessee has, before the 1st day of March, 1984, paid any sum to any fund, trust, company, association of persons, body of individuals, society or other institution referred to in sub-section (9), then, notwithstanding anything contained in any other law or in any instrument, he shall be entitled—
(i) to claim that so much of the amount paid by him as has not been laid out or expended by such fund, trust, company, association of persons, body of individuals, society or other institution (such amount being hereinafter referred to as the unutilised amount) be repaid to him, and where any claim is so made, the unutilised amount shall be repaid, as soon as may be, to him;
(ii) to claim that any asset, being land, building, machinery, plant or furniture acquired or constructed by the fund, trust, company, association of persons, body of individuals, society or other institution out of the sum paid by the assessee, be transferred to him, and where any claim is so made, such asset shall be transferred, as soon as may be, to him.]
(12) 69[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
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(a) the first-mentioned person has obtained72, whether in cash or in any other manner whatsoever, any amount in respect of such72 loss or expenditure72 or some benefit in respect of such trading liability72 by way of remission or cessation thereof72, the amount obtained by such person or the value of benefit accruing to him shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that previous year, whether the business or profession in respect of which the allowance or deduction has been made is in existence in that year or not; or
(b) the successor in business has obtained72, whether in cash or in any other manner whatsoever, any amount in respect of which loss or expenditure was incurred by the first-mentioned person or some benefit in respect of the trading liability referred to in clause (a) by way of remission or cessation thereof72, the amount obtained72 by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to income-tax as the income of that previous year.
73[Explanation 1.—For the purposes of this sub-section, the expression “loss or expenditure or some benefit in respect of any such trading liability by way of remission or cessation thereof” shall include the remission or cessation of any liability by a unilateral act by the first mentioned person under clause (a) or the successor in business under clause (b) of that sub-section by way of writing off such liability in his accounts.]
74[Explanation 2].—For the purposes of this sub-section, “successor in business” means,—
(i) where there has been an amalgamation of a company with another company, the amalgamated company;
(ii) where the first-mentioned person is succeeded by any other person in that business or profession, the other person;
(iii) where a firm carrying on a business or profession is succeeded by another firm, the other firm;]
75[(iv) where there has been a demerger, the resulting company.]
76[(2) Where any building, machinery, plant or furniture,—
(a) which is owned by the assessee;
(b) in respect of which depreciation is claimed under clause (i) of sub-section (1) of section 32; and
(c) which was or has been used for the purposes of business,
is sold77, discarded, demolished or destroyed77 and the moneys payable77 in respect of such building, machinery, plant or furniture, as the case may be, together with the amount of scrap value, if any, exceeds the written down value, so much of the excess as does not exceed the difference between the actual cost and the written down value shall be chargeable to income-tax as income of the business of the previous year in which the moneys payable for the building, machinery, plant or furniture became due77.
Explanation.—Where the moneys payable in respect of the building, machinery, plant or furniture referred to in this sub-section become due in a previous year in which the business for the purpose of which the building, machinery, plant or furniture was being used is no longer in existence, the provision of this sub-section shall apply as if the business is in existence in that previous year.]
(2A) 78[***]
(3) Where an asset representing expenditure of a capital nature on scientific research within the meaning of clause (iv) of sub-section (1), 79[or clause (c) of sub-section (2B),] of section 35, read with clause (4) of section 43, is sold, without having been used for other purposes, and the proceeds of the sale together with the total amount of the deductions made under clause (i) 80[or, as the case may be, the amount of the deduction under clause (ia)] of sub-section (2), 81[or clause (c) of sub-section (2B),] of section 35 exceed the amount of the capital expenditure, the excess or the amount of the deductions so made, whichever is the less, shall be chargeable to income-tax as income of the business or profession of the previous year in which the sale took place.
82(4) Where a deduction has been allowed in respect of a bad debt or part of debt under the provisions of clause (vii) of sub-section (1) of section 36, then, if the amount subsequently recovered on any such debt or part is greater than the difference between the debt or part of debt and the amount so allowed, the excess shall be deemed to be profits and gains of business or profession, and accordingly chargeable to income-tax as the income of the previous year in which it is recovered, whether the business or profession in respect of which the deduction has been allowed is in existence in that year or not.
83[Explanation.—For the purposes of sub-section (3),—
(1) “moneys payable” in respect of any building, machinery, plant or furniture includes—
(a) any insurance, salvage or compensation moneys payable in respect thereof;
(b) where the building, machinery, plant or furniture is sold, the price for which it is sold,
so, however, that where the actual cost of a motor car is, in accordance with the proviso to clause (1) of section 43, taken to be twenty-five thousand rupees, the moneys payable in respect of such motor car shall be taken to be a sum which bears to the amount for which the motor car is sold or, as the case may be, the amount of any insurance, salvage or compensation moneys payable in respect thereof (including the amount of scrap value, if any) the same proportion as the amount of twenty-five thousand rupees bears to the actual cost of the motor car to the assessee as it would have been computed before applying the said proviso;
(2) “sold” includes a transfer by way of exchange or a compulsory acquisition under any law for the time being in force but does not include a transfer, in a scheme of amalgamation, of any asset by the amalgamating company to the amalgamated company where the amalgamated company is an Indian company.]
84[(4A) Where a deduction has been allowed in respect of any special reserve created and maintained under clause (viii) of sub-section (1) of section 36, any amount subsequently withdrawn from such special reserve shall be deemed to be the profits and gains of business or profession and accordingly be chargeable to income-tax as the income of the previous year in which such amount is withdrawn.
Explanation.—Where any amount is withdrawn from the special reserve in a previous year in which the business is no longer in existence, the provisions of this sub-section shall apply as if the business is in existence in that previous year.]
(5) Where the business or profession referred to in this section is no longer in existence and there is income chargeable to tax under sub-section (1), 85[***] sub-section (3) 86[, sub-section (4) or sub-section (4A)] in respect of that business or profession, any loss, not being a loss sustained in speculation business 87[***], which arose in that business or profession during the previous year in which it ceased to exist and which could not be set off against any other income of that previous year shall, so far as may be, be set off against the income chargeable to tax under the sub-sections aforesaid.
88[(6) References in sub-section (3) to any other provision of this Act which has been amended or omitted by the Direct Tax Laws (Amendment) Act, 1987 shall, notwithstanding such amendment or omission, be construed, for the purposes of that sub-section, as if such amendment or omission had not been made.]
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(a) to expenditure by way of infructuous or abortive exploration expen-ses in respect of any area surrendered prior to the beginning of commercial production by the assessee ;
(b) after the beginning of commercial production, to expenditure incurred by the assessee, whether before or after such commercial production, in respect of drilling or exploration activities or services or in respect of physical assets used in that connection, except assets on which allowance for depreciation is admissible under section 32 :
91[***]
92[Provided that in relation to any agreement entered into after the 31st day of March, 1981, this clause shall have effect subject to the modification that the words and figures “except assets on which allowance for depreciation is admissible under section 32″ had been omitted; and]
(c) to the depletion of mineral oil in the mining area in respect of the assessment year relevant to the previous year in which commercial production is begun and for such succeeding year or years as may be specified in the agreement;
and such allowances shall be computed and made in the manner specified in the agreement, the other provisions of this Act being deemed for this purpose to have been modified to the extent necessary to give effect to the terms of the agreement.
93[(2) Where the business of the assessee consisting of the prospecting for or extraction or production of petroleum and natural gas is transferred wholly or partly or any interest in such business is transferred in accordance with the agreement referred to in sub-section (1), subject to the provisions of the said agreement and where the proceeds of the transfer (so far as they consist of capital sums)—
(a) are less than the expenditure incurred remaining unallowed, a deduction equal to such expenditure remaining unallowed, as reduced by the proceeds of transfer, shall be allowed in respect of the previous year in which such business or interest, as the case may be, is transferred;
(b) exceed the amount of the expenditure incurred remaining unallowed, so much of the excess as does not exceed the difference between the expenditure incurred in connection with the business or to obtain interest therein and the amount of such expenditure remaining unallowed, shall be chargeable to income-tax as profits and gains of the business in the previous year in which the business or interest therein, whether wholly or partly, had been transferred :
Provided that in a case where the provisions of this clause do not apply, the deduction to be allowed for expenditure incurred remaining unallowed shall be arrived at by subtracting the proceeds of transfer (so far as they consist of capital sums) from the expenditure remaining unallowed.
Explanation.—Where the business or interest in such business is transferred in a previous year in which such business carried on by the assessee is no longer in existence, the provisions of this clause shall apply as if the business is in existence in that previous year;
(c) are not less than the amount of the expenditure incurred remaining unallowed, no deduction for such expenditure shall be allowed in respect of the previous year in which the business or interest in such business is transferred or in respect of any subsequent year or years:
94[Provided that where in a scheme of amalgamation or demerger, the amalga-mating or the demerged company sells or otherwise transfers the business to the amalgamated or the resulting company (being an Indian company), the provisions of this sub-section—
(i) shall not apply in the case of the amalgamating or the demerged company; and
(ii) shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the latter had not transferred the business or interest in the business.]]
95[Explanation.—For the purposes of this section, “mineral oil” includes petroleum and natural gas.]
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97(1) “actual cost” means the actual cost96 of the assets to the assessee, reduced by that portion of the cost thereof, if any, as has been met96 directly or indirectly by any other person or authority:
98[Provided that where the actual cost of an asset, being a motor car which is acquired by the assessee after the 31st day of March, 1967, 99[but before the 1st day of March, 1975,] and is used otherwise than in a business of running it on hire for tourists, exceeds twenty-five thousand rupees, the excess of the actual cost over such amount shall be ignored, and the actual cost thereof shall be taken to be twenty-five thousand rupees.]
Explanation 1.—Where an asset is used in the business after it ceases to be used for scientific research related to that business and a deduction has to be made under 1[clause (ii) of sub-section (1)] of section 32 in respect of that asset, the actual cost of the asset to the assessee shall be the actual cost to the assessee as reduced by the amount of any deduction allowed under clause (iv) of sub-section (1) of section 35 or under any corresponding provision of the Indian Income-tax Act, 1922 (11 of 1922).
2[Explanation 2.—Where an asset is acquired by the assessee by way of gift or inheritance, the actual cost of the asset to the assessee shall be the actual cost to the previous owner, as reduced by—
(a) the amount of depreciation actually allowed under this Act and the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922), in respect of any previous year relevant to the assessment year commencing before the 1st day of April, 1988; and
(b) the amount of depreciation that would have been allowable to the assessee for any assessment year commencing on or after the 1st day of April, 1988, as if the asset was the only asset in the relevant block of assets.]
Explanation 3.—Where, before the date of acquisition by the assessee, the assets were at any time used by any other person for the purposes of his business or profession and the 3[Assessing] Officer is satisfied that the main purpose of the transfer of such assets, directly or indirectly to the assessee, was the reduction of a liability to income-tax (by claiming depreciation with reference to an enhanced cost), the actual cost to the assessee shall be such an amount as the 3[Assessing] Officer may, with the previous approval of the 4[Joint Commissioner], determine having regard to all the circumstances of the case.
5[Explanation 4.—Where any asset which had once belonged to the assessee and had been used by him for the purposes of his business or profession and thereafter ceased to be his property by reason of transfer or otherwise, is re-acquired by him, the actual cost to the assessee shall be—
(i) the actual cost to him when he first acquired the asset as reduced by—
(a) the amount of depreciation actually allowed to him under this Act or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922), in respect of any previous year relevant to the assessment year commencing before the 1st day of April, 1988; and
(b) the amount of depreciation that would have been allowable to the assessee for any assessment year commencing on or after the 1st day of April, 1988, as if the asset was the only asset in the relevant block of assets; or
(ii) the actual price for which the asset is re-acquired by him,
whichever is less.]
6[Explanation 4A.—Where before the date of acquisition by the assessee (hereinafter referred to as the first mentioned person), the assets were at any time used by any other person (hereinafter referred to as the second mentioned person) for the purposes of his business or profession and depreciation allowance has been claimed in respect of such assets in the case of the second mentioned person and such person acquires on lease, hire or otherwise assets from the first mentioned person, then, notwithstanding anything contained in Explanation 3, the actual cost of the transferred assets, in the case of first mentioned person, shall be the same as the written down value of the said assets at the time of transfer thereof by the second mentioned person.]
Explanation 5.—Where a building previously the property of the assessee is brought into use for the purpose of the business or profession after the 28th day of February, 1946, the actual cost to the assessee shall be the actual cost of the building to the assessee, as reduced by an amount equal to the depreciation calculated at the rate in force on that date that would have been allowable had the building been used for the aforesaid purposes since the date of its acquisition by the assessee.
7[Explanation 6.—When any capital asset is transferred by a holding company to its subsidiary company or by a subsidiary company to its holding company, then, if the conditions of clause (iv) or, as the case may be, of clause (v) of section 47 are satisfied, the actual cost of the transferred capital asset to the transferee-company shall be taken to be the same as it would have been if the transferor-company had continued to hold the capital asset for the purposes of its business.]
8[Explanation 7.—Where, in a scheme of amalgamation, any capital asset is transferred by the amalgamating company to the amalga-mated company and the amalgamated company is an Indian com-pany, the actual cost of the transferred capital asset to the amalga-mated company shall be taken to be the same as it would have been if the amalgamating company had continued to hold the capital asset for the purposes of its own business.]
9[Explanation 7A.—Where, in a demerger, any capital asset is transferred by the demerged company to the resulting company and the resulting company is an Indian company, the actual cost of the transferred capital asset to the resulting company shall be taken to be the same as it would have been if the demerged company had continued to hold the capital asset for the purpose of its own business :
Provided that such actual cost shall not exceed the written down value of such capital asset in the hands of the demerged company.]
10[Explanation 8.—For the removal of doubts, it is hereby declared that where any amount is paid or is payable as interest in connection with the acquisition of an asset, so much of such amount as is relatable to any period after such asset is first put to use shall not be included, and shall be deemed never to have been included, in the actual cost of such asset.]
11[Explanation 9.—For the removal of doubts, it is hereby declared that where an asset is or has been acquired on or after the 1st day of March, 1994 by an assessee, the actual cost of asset shall be reduced by the amount of duty of excise or the additional duty leviable under section 3 of the Customs Tariff Act, 1975 (51 of 1975) in respect of which a claim of credit has been made and allowed under the Central Excise Rules, 1944.]
12[Explanation 10.—Where a portion of the cost of an asset acquired by the assessee has been met directly or indirectly by the Central Government or a State Government or any authority established under any law or by any other person, in the form of a subsidy or grant or reimbursement (by whatever name called), then, so much of the cost as is relatable to such subsidy or grant or reimbursement shall not be included in the actual cost of the asset to the assessee :
Provided that where such subsidy or grant or reimbursement is of such nature that it cannot be directly relatable to the asset acquired, so much of the amount which bears to the total subsidy or reimbursement or grant the same proportion as such asset bears to all the assets in respect of or with reference to which the subsidy or grant or reimbursement is so received, shall not be included in the actual cost of the asset to the assessee.]
13[Explanation 11.—Where an asset which was acquired outside India by an assessee, being a non-resident, is brought by him to India and used for the purposes of his business or profession, the actual cost of the asset to the assessee shall be the actual cost to the assessee, as reduced by an amount equal to the amount of depreciation calculated at the rate in force that would have been allowable had the asset been used in India for the said purposes since the date of its acquisition by the assessee.]
14[Explanation 12.—Where any capital asset is acquired by the assessee under a scheme for corporatisation of a recognised stock exchange in India, approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the actual cost of the asset shall be deemed to be the amount which would have been regarded as actual cost had there been no such corporatisation;]
15[Explanation 13.—The actual cost of any capital asset on which deduction has been allowed or is allowable to the assessee under section 35AD, shall be treated as “nil,—
(a) in the case of such assessee; and
(b) in any other case if the capital asset is acquired or received,—
(i) by way of gift or will or an irrevocable trust;
(ii) on any distribution on liquidation of the company; and
(iii) by such mode of transfer as is referred to in clauses (i), (iv), (v), (vi), (vib), 16[(xiii), (xiiib) and (xiv)] of section 47;]
(2) “paid” means actually paid17 or incurred according to the method of accounting upon the basis of which the profits or gains are computed under the head “Profits and gains of business or profession” ;
18(3) “plant” 19 includes ships, vehicles, books19, scientific apparatus and surgical equipment used for the purposes of the business or profession 20[but does not include tea bushes or livestock] 21[or buildings or furniture and fittings];
(4) 22[(i) “scientific research” 19 means any activities for the extension of knowledge in the fields of natural or applied science including agriculture, animal husbandry or fisheries;]
(ii) references to expenditure incurred on scientific research include all expenditure incurred for the prosecution, or the provision of facilities for the prosecution, of scientific research, but do not include any expenditure incurred in the acquisition of rights in, or arising out of, scientific research;
(iii) references to scientific research related to a business or class of business include—
(a) any scientific research which may lead to or facilitate an extension of that business or, as the case may be, all businesses of that class;
(b) any scientific research of a medical nature which has a special relation to the welfare of workers employed in that business or, as the case may be, all businesses of that class;
23(5) 24“speculative transaction” 25 means a transaction in which a contract25 for the purchase or sale of any commodity25, including stocks and shares25, is periodically or ultimately25 settled25 otherwise than by the actual delivery25 or transfer of the commodity or scrips:
Provided that for the purposes of this clause—
(a) a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him; or
(b) a contract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations; or
(c) a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of his business as such member; 26[or]
26[(d) an eligible transaction in respect of trading in derivatives26a referred to in clause 27[(ac)] of section 228 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) carried out in a recognised stock exchange; 29[or]]
29[(e) an eligible transaction in respect of trading in commodity derivatives26a carried out in a recognised association 29a[, which is chargeable to commodities transaction tax under Chapter VII of the Finance Act, 2013 (17 of 2013),]]
shall not be deemed to be a speculative transaction.
30[31[Explanation 1].—For the purposes of 32[clause (d)], the expressions—
(i) “eligible transaction” means any transaction,—
(A) carried out electronically on screen-based systems through a stock broker or sub-broker or such other intermediary registered under section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) and the rules, regulations or bye-laws made or directions issued under those Acts or by banks or mutual funds on a recognised stock exchange; and
(B) which is supported by a time stamped contract note issued by such stock broker or sub-broker or such other intermediary to every client indicating in the contract note the unique client identity number allotted under any Act referred to in sub-clause (A) and permanent account number allotted under this Act;
(ii) “recognised stock exchange” means a recognised stock exchange as referred to in clause (f) of section 233 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and which fulfils such conditions as may be prescribed and notified34 by the Central Government for this purpose;]
35[Explanation 2.—For the purposes of clause (e), the expressions—
(i) “commodity derivative” shall have the meaning as assigned to it in Chapter VII of the Finance Act, 2013;
(ii) “eligible transaction” means any transaction,—
(A) carried out electronically on screen-based systems through member or an intermediary, registered under the bye-laws, rules and regulations of the recognised association for trading in commodity derivative in accordance with the provisions of the Forward Contracts (Regulation) Act, 1952 (74 of 1952) and the rules, regulations or bye-laws made or directions issued under that Act on a recognised association; and
(B) which is supported by a time stamped contract note issued by such member or intermediary to every client indicating in the contract note, the unique client identity number allotted under the Act, rules, regulations or bye-laws referred to in sub-clause (A), unique trade number and permanent account number allotted under this Act;
(iii) “recognised association” means a recognised association as referred to in clause (j) of section 236 of the Forward Contracts (Regulation) Act, 1952 (74 of 1952) and which fulfils such conditions as may be prescribed36a and is notified36b by the Central Government for this purpose;]
37(6) “written down value” means—
(a) in the case of assets acquired in the previous year, the actual cost to the assessee;
(b) in the case of assets acquired before the previous year, the actual cost to the assessee less all depreciation actually allowed38 to him under this Act, or under the Indian Income-tax Act, 1922 (11 of 1922), or any Act repealed by that Act, or under any executive orders issued when the Indian Income-tax Act, 1886 (2 of 1886), was in force:
39[Provided that in determining the written down value in respect of buildings, machinery or plant for the purposes of clause (ii) of sub-section (1) of section 32, “depreciation actually allowed” shall not include depreciation allowed under sub-clauses (a), (b) and (c) of clause (vi) of sub-section (2) of section 10 of the Indian Income-tax Act, 1922 (11 of 1922), where such depreciation was not deductible in determining the written down value for the pur-poses of the said clause (vi);]
40[(c) in the case of any block of assets,—
(i) in respect of any previous year relevant to the assessment year commencing on the 1st day of April, 1988, the aggregate of the written down values of all the assets falling within that block of assets at the beginning of the previous year and adjusted,—
(A) by the increase by the actual cost of any asset falling within that block, acquired during the previous year;
(B) by the reduction of the moneys payable in respect of any asset falling within that block, which is sold or discarded or demolished or destroyed during that previous year together with the amount of the scrap value, if any, so, however, that the amount of such reduction does not exceed the written down value as so increased; and
41[(C) in the case of a slump sale, decrease by the actual cost of the asset falling within that block as reduced—
(a) by the amount of depreciation actually allowed to him under this Act or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 of 1922) in respect of any previous year relevant to the assessment year commencing before the 1st day of April, 1988; and
(b) by the amount of depreciation that would have been allowable to the assessee for any assessment year commencing on or after the 1st day of April, 1988 as if the asset was the only asset in the relevant block of assets,
so, however, that the amount of such decrease does not exceed the written down value;]
(ii) in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 1989, the written down value of that block of assets in the immediately preceding previous year as reduced by the depreciation actually allowed in respect of that block of assets in relation to the said preceding previous year and as further adjusted by the increase or the reduction referred to in item (i).]
Explanation 1.—When in a case of succession in business or profession, an assessment is made on the successor under sub-section (2) of section 170 the written down value of 42[any asset or any block of assets] shall be the amount which would have been taken as its written down value if the assessment had been made directly on the person succeeded to.
43[Explanation 2.—Where in any previous year, any block of assets is transferred,—
(a) by a holding company to its subsidiary company or by a subsidiary company to its holding company and the conditions of clause (iv) or, as the case may be, of clause (v) of section 47 are satisfied; or
(b) by the amalgamating company to the amalgamated company in a scheme of amalgamation, and the amalgamated company is an Indian company,
then, notwithstanding anything contained in clause (1), the actual cost of the block of assets in the case of the transferee-company or the amalgamated company, as the case may be, shall be the written down value of the block of assets as in the case of the transferor-company or the amalgamating company for the immediately preceding previous year as reduced by the amount of depreciation actually allowed in relation to the said preceding previous year.]
44[Explanation 2A.—Where in any previous year, any asset forming part of a block of assets is transferred by a demerged company to the resulting company, then, notwithstanding anything contained in clause (1), the written down value of the block of assets of the demerged company for the immediately preceding previous year shall be reduced by the 45[written down value of the assets] trans-ferred to the resulting company pursuant to the demerger.
Explanation 2B.—Where in a previous year, any asset forming part of a block of assets is transferred by a demerged company to the resulting company, then, notwithstanding anything contained in clause (1), the written down value of the block of assets in the case of the resulting company shall be the 46[written down value of the transferred assets 47[***] of the demerged company immediately before the demerger.
48[Explanation 2C.—Where in any previous year, any block of assets is transferred by a private company or unlisted public company to a limited liability partnership and the conditions specified in the proviso to clause (xiiib) of section 47 are satisfied, then, notwithstanding anything contained in clause (1), the actual cost of the block of assets in the case of the limited liability partnership shall be the written down value of the block of assets as in the case of the said company on the date of conversion of the company into the limited liability partnership.]
49[***]]
Explanation 3.—Any allowance in respect of any depreciation carried forward under sub-section (2) of section 32 shall be deemed to be depreciation “actually allowed” .
50[Explanation 4.—For the purposes of this clause, the expressions “moneys payable” and “sold” shall have the same meanings as in the Explanation below sub-section (4) of section 41.]
51[Explanation 5.—Where in a previous year, any asset forming part of a block of assets is transferred by a recognised stock exchange in India to a company under a scheme for corporatisation approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the written down value of the block of assets in the case of such company shall be the written down value of the transferred assets immediately before such transfer.]
52[Explanation 6.—Where an assessee was not required to compute his total income for the purposes of this Act for any previous year or years preceding the previous year relevant to the assessment year under consideration,—
(a) the actual cost of an asset shall be adjusted by the amount attributable to the revaluation of such asset, if any, in the books of account;
(b) the total amount of depreciation on such asset, provided in the books of account of the assessee in respect of such previous year or years preceding the previous year relevant to the assessment year under consideration shall be deemed to be the depreciation actually allowed under this Act for the purposes of this clause; and
(c) the depreciation actually allowed under clause (b) shall be adjusted by the amount of depreciation attributable to such revaluation of the asset.]
53[Explanation 7.—For the purposes of this clause, where the income of an assessee is derived, in part from agriculture and in part from business chargeable to income-tax under the head “Profits and gains of business or profession”, for computing the written down value of assets acquired before the previous year, the total amount of depreciation shall be computed as if the entire income is derived from the business of the assessee under the head “Profits and gains of business or profession” and the depreciation so computed shall be deemed to be the depreciation actually allowed under this Act.]
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(a) towards the whole or a part of the cost of the asset; or
(b) towards repayment of the whole or a part of the moneys borrowed by him from any person, directly or indirectly, in any foreign currency specifically for the purpose of acquiring the asset along with interest, if any,
the amount by which the liability as aforesaid is so increased or reduced during such previous year and which is taken into account at the time of making the payment, irrespective of the method of accounting adopted by the assessee, shall be added to, or, as the case may be, deducted from—
(i) the actual cost of the asset as defined in clause (1) of section 43; or
(ii) the amount of expenditure of a capital nature referred to in clause (iv) of sub-section (1) of section 35; or
(iii) the amount of expenditure of a capital nature referred to in section 35A; or
(iv) the amount of expenditure of a capital nature referred to in clause (ix) of sub-section (1) of section 36; or
(v) the cost of acquisition of a capital asset (not being a capital asset referred to in section 50) for the purposes of section 48,
and the amount arrived at after such addition or deduction shall be taken to be the actual cost of the asset or the amount of expenditure of a capital nature or, as the case may be, the cost of acquisition of the capital asset as aforesaid:
Provided that where an addition to or deduction from the actual cost or expenditure or cost of acquisition has been made under this section, as it stood immediately before its substitution by the Finance Act, 2002, on account of an increase or reduction in the liability as aforesaid, the amount to be added to, or, as the case may be, deducted under this section from, the actual cost or expendi-ture or cost of acquisition at the time of making the payment shall be so adjusted that the total amount added to, or, as the case may be, deducted from, the actual cost or expenditure or cost of acquisition, is equal to the increase or reduction in the aforesaid liability taken into account at the time of making payment.
Explanation 1.—In this section, unless the context otherwise requires,—
(a) “rate of exchange” means the rate of exchange determined or recognised by the Central Government for the conversion of Indian currency into foreign currency or foreign currency into Indian currency;
(b) 55“foreign currency” and “Indian currency” have the meanings respectively assigned to them in section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999).
Explanation 2.—Where the whole or any part of the liability aforesaid is met, not by the assessee, but, directly or indirectly, by any other person or authority, the liability so met shall not be taken into account for the purposes of this section.
Explanation 3.—Where the assessee has entered into a contract with an authorised dealer56 as defined in section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999), for providing him with a specified sum in a foreign currency on or after a stipulated future date at the rate of exchange specified in the contract to enable him to meet the whole or any part of the liability aforesaid, the amount, if any, to be added to, or deducted from, the actual cost of the asset or the amount of expenditure of a capital nature or, as the case may be, the cost of acquisition of the capital asset under this section shall, in respect of so much of the sum specified in the contract as is available for discharging the liability aforesaid, be computed with reference to the rate of exchange specified therein.]
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5843B. 59Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of—
60[(a) any sum payable by the assessee by way of tax61, duty, cess or fee, by whatever name called, under any law for the time being in force, or]
(b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, 62[or]
62[(c) any sum referred to in clause (ii) of sub-section (1) of section 36,] 63[or]
63[(d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution 64[or a State financial corporation or a State industrial investment corporation], in accordance with the terms and conditions of the agreement governing such loan or borrowing 65[, or]
65[(e) any sum payable by the assessee as interest on any 66[loan or advances] from a scheduled bank in accordance with the terms and conditions of the agreement governing such loan 67[or advances],] 68[or]
68[(f) any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee,]
shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him :
69[Provided that nothing contained in this section shall apply in relation to any sum 70[***] which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return71.
72[***]]
Explanation 73[1].—For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (a) or clause (b) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commenc-ing on the 1st day of April, 1983, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.]
74[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.]
75[76[Explanation 3].—For the removal of doubts it is hereby declared that where a deduction in respect of any sum referred to in clause (c) 77[or clause (d)] of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.]
78[Explanation 3A.—For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (e) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1996, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.]
79[Explanation 3B.—For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (f) of this section is allowed in computing the income, referred to in section 28, of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 2001, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.]
80[Explanation 3C.—For the removal of doubts, it is hereby declared that a deduction of any sum, being interest payable under clause (d) of this section, shall be allowed if such interest has been actually paid and any interest referred to in that clause which has been converted into a loan or borrowing shall not be deemed to have been actually paid.]
81[Explanation 3D.—For the removal of doubts, it is hereby declared that a deduction of any sum, being interest payable under clause (e) of this section, shall be allowed if such interest has been actually paid and any interest referred to in that clause which has been converted into a loan or advance shall not be deemed to have been actually paid.]
82[Explanation 4.—For the purposes of this section,—
(a) “public financial institutions” shall have the meaning assigned to it in section 4A83 of the Companies Act, 1956 (1 of 1956);
84[(aa) “scheduled bank” shall have the meaning assigned to it in the Explanation to clause (iii) of sub-section (5) of section 11;]
(b) “State financial corporation” means a financial corporation established under section 3 or section 3A or an institution notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951);
(c) “State industrial investment corporation” means a Government company85 within the meaning of section 617 of the Companies Act, 1956 (1 of 1956), engaged in the business of providing long-term finance for industrial projects and 86[eligible for deduction under clause (viii) of sub-section (1) of section 36].]
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(2) Where an asset [not being an asset referred to in sub-section (2) of section 45] which becomes the property of the assessee on the total or partial partition of a Hindu undivided family or under a gift or will or an irrevocable trust, is sold after the 29th day of February, 1988, by the assessee as stock-in-trade of the business carried on by him, the cost of acquisition of the said asset to the assessee in computing the profits and gains from the sale of such asset shall be the cost of acquisition of the said asset to the transferor or the donor, as the case may be, as increased by the cost, if any, of any improvement made thereto, and the expenditure, if any, incurred, wholly and exclusively in connection with such transfer (by way of effecting the partition, acceptance of the gift, obtaining probate in respect of the will or the creation of the trust), including the payment of gift-tax, if any, incurred by the transferor or the donor, as the case may be.]
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(2) The provisions of sub-section (2) and sub-section (3) of section 50C shall, so far as may be, apply in relation to determination of the value adopted or assessed or assessable under sub-section (1).
(3) Where the date of agreement fixing the value of consideration for transfer of the asset and the date of registration of such transfer of asset are not the same, the value referred to in sub-section (1) may be taken as the value assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer on the date of the agreement.
(4) The provisions of sub-section (3) shall apply only in a case where the amount of consideration or a part thereof has been received by any mode other than cash on or before the date of agreement for transfer of the asset.]
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(a) in the case of a public financial institution or a scheduled bank or a State financial corporation or a State industrial investment corporation, the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed90 having regard to the guidelines issued by the Reserve Bank of India in relation to such debts;
(b) in the case of a public company, the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed91 having regard to the guidelines issued by the National Housing Bank in relation to such debts,
shall be chargeable to tax in the previous year in which it is credited by the public financial institution or the scheduled bank or the State financial corporation or the State industrial investment corporation or the public company to its profit and loss account for that year or, as the case may be, in which it is actually received by that institution or bank or corporation or company, whichever is earlier.
Explanation.—For the purposes of this section,—
(a) “National Housing Bank” means the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987);
(b) “public company” means a company,—
(i) which is a public company within the meaning of section 392 of the Companies Act, 1956 (1 of 1956);
(ii) whose main object is carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes; and
(iii) which is registered in accordance with the Housing Finance Companies (NHB) Directions, 1989 given under section 30 and section 31 of the National Housing Bank Act, 1987 (53 of 1987);
(c) “public financial institution” shall have the meaning assigned to it in section 4A93 of the Companies Act, 1956 (1 of 1956);
(d) “scheduled bank” shall have the meaning assigned to it in clause (ii) of the Explanation to clause (viia) of sub-section (1) of section 36;
(e) “State financial corporation” means a financial corporation established under section 3 or section 3A or an institution notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951);
(f) “State industrial investment corporation” means a Government company within the meaning of section 61794 of the Companies Act, 1956 (1 of 1956), engaged in the business of providing long-term finance for industrial projects.]
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9844A. (1) Notwithstanding anything to the contrary contained in this Act, where the amount received during a previous year by any trade, professional or 99similar association 1[(other than an association or institution referred to in clause (23A) of section 10)] from its members, whether by way of subscription or otherwise (not being remuneration received for rendering any specific services to such members) falls short of the expenditure incurred by such association during that previous year (not being expenditure deductible in computing the income under any other provision of this Act and not being in the nature of capital expenditure) solely for the purposes of protection or advancement of the common interests of its members, the amount so fallen short (hereinafter referred to as deficiency) shall, subject to the provisions of this section, be allowed as a deduction in computing the income of the association assessable for the relevant assessment year under the head “Profits and gains of business or profession” and if there is no income assessable under that head or the deficiency allowable exceeds such income, the whole or the balance of the deficiency, as the case may be, shall be allowed as a deduction in computing the income of the association assessable for the relevant assessment year under any other head.
(2) In computing the income of the association for the relevant assessment year under sub-section (1), effect shall first be given to any other provision of this Act under which any allowance or loss in respect of any earlier assessment year is carried forward and set off against the income for the relevant assessment year.
(3) The amount of deficiency to be allowed as a deduction under this section shall in no case exceed one-half of the total income of the association as computed before making any allowance under this section.
(4) This section applies only to that trade, professional or similar association the income of which or any part thereof is not distributed to its members except as grants to any association or institution affiliated to it.]
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344AA. (1) Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified4 by the Board in the Official Gazette shall keep and maintain such books of account and other documents as may enable the 5[Assessing] Officer to compute his total income in accordance with the provisions of this Act.
(2) Every person carrying on business or profession [not being a profession referred to in sub-section (1)] shall,—
(i) if his income from business or profession exceeds 6[one lakh twenty] thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession exceed or exceeds 7[ten lakh] rupees in any one of the three years immediately preceding the previous year; or
(ii) where the business or profession is newly set up in any previous year, if his income from business or profession is likely to exceed 8[one lakh twenty] thousand rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession are or is likely to exceed 9[ten lakh] rupees, 10[during such previous year; or
(iii) where the profits and gains from the business are deemed to be the profits and gains of the assessee under 11[section 44AE] 12[or section 44BB or section 44BBB], as the case may be, and the assessee has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, during such 13[previous year; or]]
14[(iv) where the profits and gains from the business are deemed to be the profits and gains of the assessee under section 44AD and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his business and his income exceeds the maximum amount which is not chargeable to income-tax during such previous year,]
keep and maintain such books of account and other documents as may enable the 15[Assessing] Officer to compute his total income in accordance with the provisions of this Act.
(3) The Board may, having regard to the nature of the business or profession carried on by any class of persons, prescribe16, by rules, the books of account and other documents (including inventories, wherever necessary) to be kept and maintained under sub-section (1) or sub-section (2), the particulars to be contained therein and the form and the manner in which and the place at which they shall be kept and maintained.
(4) Without prejudice to the provisions of sub-section (3), the Board may prescribe, by rules, the period for which the books of account and other documents to be kept and maintained under sub-section (1) or sub-section (2) shall be retained.]
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1844AB. 19Every person,—
(a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds 20[one crore rupees] in any previous year 21[***]; or
(b) carrying on profession shall, if his gross receipts in profession exceed 22[twenty-five lakh rupees] in any 23[previous year; or
(c) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under 24[section 44AE ] 25[or section 44BB or section 44BBB], as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any 26[previous year; or]] 27[***]
28[(d) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AD and he has claimed such income to be lower than the profits and gains so deemed to be the profits and gains of his business and his income exceeds the maximum amount which is not chargeable to income-tax in any previous year,]
get his accounts of such previous year 29[***] audited by an accountant before the specified date and 30[furnish by] that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed :
31[Provided that this section shall not apply to the person, who derives income of the nature referred to in 32[***] section 44B or 33[section 44BBA], on and from the 1st day of April, 1985 or, as the case may be, the date on which the relevant section came into force, whichever is later :
Provided further that] in a case where such person is required by or under any other law to get his accounts audited 34[***], it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and 35[furnishes by] that date the report of the audit as required under such other law and a further report 36[by an accountant] in the form prescribed under this section.
(i) “accountant” shall have the same meaning as in the Explanation below sub-section (2) of section 288;
37[(ii) “specified date”, in relation to the accounts of the assessee of the previous year relevant to an assessment year, means 38[the due date for furnishing the return of income under sub-section (1) of section 139].]]
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(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed :
Provided that where the eligible assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40.
(3) The written down value of any asset of an eligible business shall be deemed to have been calculated as if the eligible assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.
(4) The provisions of Chapter XVII-C shall not apply to an eligible assessee in so far as they relate to the eligible business.
(5) Notwithstanding anything contained in the foregoing provisions of this section, an eligible assessee who claims that his profits and gains from the eligible business are lower than the profits and gains specified in sub-section (1) and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.
42[(6) The provisions of this section, notwithstanding anything contained in the foregoing provisions, shall not apply to—
(i) a person carrying on profession as referred to in sub-section (1) of section 44AA;
(ii) a person earning income in the nature of commission or brokerage; or
(iii) a person carrying on any agency business.]
Explanation.—For the purposes of this section,—
(a) “eligible assessee” means,—
(i) an individual, Hindu undivided family or a partnership firm, who is a resident, but not a 43limited liability partnership firm as defined under clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009); and
(ii) who has not claimed deduction under any of the sections 10A, 10AA, 10B, 10BA or deduction under any provisions of Chapter VIA under the heading “C. – Deductions in respect of certain incomes” in the relevant assessment year;
(b) “eligible business” means,—
(i) any business except the business of plying, hiring or leasing goods carriages referred to in section 44AE; and
(ii) whose total turnover or gross receipts in the previous year does not exceed an amount of 44[one crore rupees].]
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48[(2) For the purposes of sub-section (1), the profits and gains from each goods carriage,—
(i) being a heavy goods vehicle, shall be an amount equal to five thousand rupees for every month or part of a month during which the heavy goods vehicle is owned by the assessee in the previous year or an amount claimed to have been actually earned from such vehicle, whichever is higher;
(ii) other than a heavy goods vehicle, shall be an amount equal to four thousand five hundred rupees for every month or part of a month during which the goods carriage is owned by the assessee in the previous year or an amount claimed to have been actually earned from such vehicle, whichever is higher.]
The following sub-section (2) shall be substituted for the existing sub-section (2) of section 44AE by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
(2) For the purpose of sub-section (1), the profits and gains from each goods carriage shall be an amount equal to seven thousand five hundred rupees for every month or part of a month during which the goods carriage is owned by the assessee in the previous year or an amount claimed to have been actually earned from the vehicle, whichever is higher.
(3) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed :
49[Provided that where the assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40.]
(4) The written down value of any asset used for the purpose of the business referred to in sub-section (1) shall be deemed to have been calculated as if the assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.
(5) The provisions of sections 44AA and 44AB shall not apply in so far as they relate to the business referred to in sub-section (1) and in computing the monetary limits under those sections, the gross receipts or, as the case may be, the income from the said business shall be excluded.
50[(6) Nothing contained in the foregoing provisions of this section shall apply, where the assessee claims and produces evidence to prove that the profits and gains from the aforesaid business during the previous year relevant to the assessment year commencing on the 1st day of April, 1997 or any earlier assessment year, are lower than the profits and gains specified in sub-sections (1) and (2), and thereupon the Assessing Officer shall proceed to make an assessment of the total income or loss of the assessee and determine the sum payable by the assessee on the basis of assessment made under sub-section (3) of section 143.]
51[(7) Notwithstanding anything contained in the foregoing provisions of this section, an assessee may claim lower profits and gains than the profits and gains specified in sub-sections (1) and (2), if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB.]
(a) the expressions “goods carriage” 52 and “heavy goods vehicle” 52 shall have the meanings respectively assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988);
The following clause (a) shall be substituted for the existing clause (a) in Explanation to section 44AE by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
(a) the expression “goods carriage” shall have the meaning assigned to it in section 2 of the Motor Vehicles Act, 1988 (59 of 1988);
(b) an assessee, who is in possession of a goods carriage, whether taken on hire purchase or on instalments and for which the whole or part of the amount payable is still due, shall be deemed to be the owner of such goods carriage.]
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Provided that nothing contained in this sub-section shall apply in respect of an assessee whose total turnover exceeds an amount of forty lakh rupees in the previous year.
(2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed :
Provided that where the assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40.
(3) The written down value of any asset used for the purpose of the business referred to in sub-section (1) shall be deemed to have been calculated as if the assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.
(4) The provisions of sections 44AA and 44AB shall not apply in so far as they relate to the business referred to in sub-section (1) and in computing the monetary limits under those sections, the total turnover or, as the case may be, the income from the said business shall be excluded.]
54[(5) Notwithstanding anything contained in the foregoing provisions of this section, an assessee may claim lower profits and gains than the profits and gains specified in sub-section (1), if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB.]
55[(6) Nothing contained in this section shall apply to any assessment year beginning on or after the 1st day of April, 2011.]
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5744B. (1) Notwithstanding anything to the contrary contained in sections 28 to 43A, in the case of an assessee, being a non-resident, engaged in the business of operation of ships, a sum equal to seven and a half per cent of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession” .
(2) The amounts referred to in sub-section (1) shall be the following, namely :—
(i) the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the carriage of passengers, livestock, mail or goods shipped at any port in India; and
(ii) the amount received or deemed to be received in India by or on behalf of the assessee on account of the carriage of passengers, livestock, mail or goods shipped at any port outside India.]
58[Explanation.—For the purposes of this sub-section, the amount referred to in clause (i) or clause (ii) shall include the amount paid or payable or received or deemed to be received, as the case may be, by way of demurrage charges or handling charges or any other amount of similar nature.]
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Provided that this sub-section shall not apply in a case where the provisions of section 42 or section 44D or 61[section 44DA or] section 115A or section 293A apply for the purposes of computing profits or gains or any other income referred to in those sections.
(2) The amounts referred to in sub-section (1) shall be the following, namely :—
(a) the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India; and
(b) the amount received or deemed to be received in India by or on behalf of the assessee on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils outside India.
62[(3) Notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and gains than the profits and gains specified in that sub-section, if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB, and thereupon the Assessing Officer shall proceed to make an assessment of the total income or loss of the assessee under sub-section (3) of section 143 and determine the sum payable by, or refundable to, the assessee.]
(i) “plant” includes ships, aircraft, vehicles, drilling units, scientific apparatus and equipment, used for the purposes of the said business;
(ii) “mineral oil” includes petroleum and natural gas.]
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(2) The amounts referred to in sub-section (1) shall be the following, namely :—
(a) the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the carriage of passengers, livestock, mail or goods from any place in India; and
(b) the amount received or deemed to be received in India by or on behalf of the assessee on account of the carriage of passengers, livestock, mail or goods from any place outside India.]
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6544BBB. 66[(1)] Notwithstanding anything to the contrary contained in 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 or machinery or testing or commissioning thereof, in connection with a turnkey power project approved by the Central Government in this behalf 67[***], a sum equal to ten per cent of the amount paid or payable (whether in or out of India) to the said assessee or to any person on his behalf on account of such civil construction, erection, testing or commissioning shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession” .]
68[(2) Notwithstanding anything contained in sub-section (1), an assessee may claim lower profits and gains than the profits and gains specified in that sub-section, if he keeps and maintains such books of account and other documents as required under sub-section (2) of section 44AA and gets his accounts audited and furnishes a report of such audit as required under section 44AB, and thereupon the Assessing Officer shall proceed to make an assessment of the total income or loss of the assessee under sub-section (3) of section 143 and determine the sum payable by, or refundable to, the assessee.]
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7144C. Notwithstanding anything to the contrary contained in sections 28 to 43A, in the case of an assessee, being a non-resident, no allowance shall be made, in computing the income chargeable under the head “Profits and gains of business or profession”, in respect of so much of the expenditure in the nature of head office expenditure as is in excess of the amount computed as hereunder, namely:—
(a) an amount equal to five per cent of the adjusted total income; or
(b) 72[***]
(c) the amount of so much of the expenditure in the nature of head office expenditure incurred by the assessee as is attributable to the business or profession of the assessee in India73,
whichever is the least :
Provided that in a case where the adjusted total income of the assessee is a loss, the amount under clause (a) shall be computed at the rate of five per cent of the average adjusted total income of the assessee.
(i) “adjusted total income” means the total income computed in accordance with the provisions of this Act, without giving effect to the allowance referred to in this section or in sub-section (2) of section 32 or the deduction referred to in section 32A or section 33 or section 33A or the first proviso to clause (ix) of sub-section (1) of section 36 or any loss carried forward under sub-section (1) of section 72 or sub-section (2) of section 73 or sub-section (1) 74[or sub-section (3)] of section 74 or sub-section (3) of section 74A or the deductions under Chapter VI-A;
(ii) “average adjusted total income” means,—
(a) in a case where the total income of the assessee is assessable for each of the three assessment years immediately preceding the relevant assessment year, one-third of the aggregate amount of the adjusted total income in respect of the previous years relevant to the aforesaid three assessment years;
(b) in a case where the total income of the assessee is assessable only for two of the aforesaid three assessment years, one-half of the aggregate amount of the adjusted total income in respect of the previous years relevant to the aforesaid two assessment years;
(c) in a case where the total income of the assessee is assessable only for one of the aforesaid three assessment years, the amount of the adjusted total income in respect of the previous year relevant to that assessment year;
(iii) 75[***]
(iv) “head office expenditure” means executive and general administration expenditure incurred by the assessee outside India, including expenditure incurred in respect of—
(a) rent, rates, taxes, repairs or insurance of any premises outside India used for the purposes of the business or profession;
(b) salary, wages, annuity, pension, fees, bonus, commission, gratuity, perquisites or profits in lieu of or in addition to salary, whether paid or allowed to any employee or other person employed in, or managing the affairs of, any office outside India;
(c) travelling by any employee or other person employed in, or managing the affairs of, any office outside India; and
(d) such other matters connected with executive and general administration as may be prescribed.]
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(a) the deductions admissible under the said sections in computing the income by way of royalty or fees for technical services received 77[from Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or with the Indian concern] before the 1st day of April, 1976, shall not exceed in the aggregate twenty per cent of the gross amount of such royalty or fees as reduced by so much of the gross amount of such royalty as consists of lump sum consideration for the transfer outside India of, or the imparting of information outside India in respect of, any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process or trade mark or similar property;
(b) no deduction in respect of any expenditure or allowance shall be allowed under any of the said sections in computing the income by way of royalty or fees for technical services received 77[from Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or with the Indian concern] after the 31st day of March, 1976 78[but before the 1st day of April, 2003];
(c) 79[***]
(d) 80[***]
(a) “fees for technical services” shall have the same meaning as in 81[Explanation 2] to clause (vii) of sub-section (1) of section 9;
(b) “foreign company” shall have the same meaning as in section 80B;
(c) “royalty” shall have the same meaning as in 82[Explanation 2] to clause (vi) of sub-section (1) of section 9;
(d) royalty received 83[from Government or an Indian concern in pursuance of an agreement made by a foreign company with Government or with the Indian concern] after the 31st day of March, 1976, shall be deemed to have been received in pursuance of an agreement made before the 1st day of April, 1976, if such agreement is deemed, for the purposes of the proviso to clause (vi) of sub-section (1) of section 9, to have been made before the 1st day of April, 1976.]
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Provided that no deduction shall be allowed,—
(i) in respect of any expenditure or allowance which is not wholly and exclusively incurred for the business of such permanent establishment or fixed place of profession in India; or
(ii) in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to its head office or to any of its other offices :
85[Provided further that the provisions of section 44BB shall not apply in respect of the income referred to in this section.]
(2) Every non-resident (not being a company) or a foreign company shall keep and maintain books of account and other documents in accordance with the provisions contained in section 44AA and get his accounts audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and furnish along with the return of income, the report of such audit in the prescribed form86 duly signed and verified by such accountant.
Explanation.—For the purposes of this section,—
(a) “fees for technical services” shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9;
(b) “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;
(c) “permanent establishment” shall have the same meaning as in clause (iiia) of section 92F.]
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(2) The amount of deduction allowable to the predecessor co-operative bank under section 32, section 35D, section 35DD or section 35DDA shall be determined in accordance with the formula—
| ´A | B | ||
| C |
where A = the amount of deduction allowable to the predecessor co-operative bank if the business reorganisation had not taken place;
B = the number of days comprised in the period beginning with the 1st day of the financial year and ending on the day immediately preceding the date of business reorganisation; and
C = the total number of days in the financial year in which the business reorganisation has taken place.
(3) The amount of deduction allowable to the successor co-operative bank under section 32, section 35D, section 35DD or section 35DDA shall be determined in accordance with the formula—
| ´A | B | ||
| C |
where A = the amount of deduction allowable to the predecessor co-operative bank if the business reorganisation had not taken place;
B = the number of days comprised in the period beginning with the date of business reorganisation and ending on the last day of the financial year; and
C = the total number of days in the financial year in which the business reorganisation has taken place.
(4) The provisions of section 35D, section 35DD or section 35DDA shall, in a case where an undertaking of the predecessor co-operative bank entitled to the deduction under the said section is transferred before the expiry of the period specified therein to a successor co-operative bank on account of business reorganisation, apply to the successor co-operative bank in the financial years subsequent to the year of business reorganisation as they would have applied to the predecessor co-operative bank, as if the business reorganisation had not taken place.
(5) For the purposes of this section,—
(a) “amalgamated co-operative bank” means—
(i) a co-operative bank with which one or more amalgamating co-operative banks merge; or
(ii) a co-operative bank formed as a result of merger of two or more amalgamating co-operative banks;
(b) “amalgamating co-operative bank” means—
(i) a co-operative bank which merges with another co-operative bank; or
(ii) every co-operative bank merging to form a new co-operative bank;
(c) “amalgamation” means the merger of an amalgamating co-operative bank or banks with an amalgamated co-operative bank, in such manner that—
(i) all the assets and liabilities of the amalgamating co-operative bank or banks immediately before the merger (other than the assets transferred, by sale or distribution on winding up, to the amalgamated co-operative bank) become the assets and liabilities of the amalgamated co-operative bank;
(ii) the members holding seventy-five per cent or more voting rights in the amalgamating co-operative bank become members of the amalgamated co-operative bank; and
(iii) the shareholders holding seventy-five per cent or more in value of the shares in the amalgamating co-operative bank (other than the shares held by the amalgamated co-operative bank or its nominee or its subsidiary, immediately before the merger) become shareholders of the amalgamated co-operative bank;
(d) “business reorganisation” means the reorganisation of business involving the amalgamation or demerger of a co-operative bank;
(e) “co-operative bank” shall have the meaning assigned to it in clause (cci) of section 5 of the Banking Regulation Act, 1949 (10 of 1949)88;
(f) “demerger” means the transfer by a demerged co-operative bank of one or more of its undertakings to any resulting co-operative bank, in such manner that—
(i) all the assets and liabilities of the undertaking or undertakings immediately before the transfer become the assets and liabilities of the resulting co-operative bank;
(ii) the assets and the liabilities are transferred to the resulting co-operative bank at values (other than change in the value of assets consequent to their revaluation) appearing in its books of account immediately before the transfer;
(iii) the resulting co-operative bank issues, in consideration of the transfer, its membership to the members of the demerged co-operative bank on a proportionate basis;
(iv) the shareholders holding seventy-five per cent or more in value of the shares in the demerged co-operative bank (other than shares already held by the resulting bank or its nominee or its subsidiary immediately before the transfer), become shareholders of the resulting co-operative bank, otherwise than as a result of the acquisition of the assets of the demerged co-operative bank or any undertaking thereof by the resulting co-operative bank;
(v) the transfer of the undertaking is on a going concern basis; and
(vi) the transfer is in accordance with the conditions specified by the Central Government, by notification in the Official Gazette, having regard to the necessity to ensure that the transfer is for genuine business purposes;
(g) “demerged co-operative bank” means the co-operative bank whose undertaking is transferred, pursuant to a demerger, to a resulting bank;
(h) “predecessor co-operative bank” means the amalgamating co-operative bank or the demerged co-operative bank, as the case may be;
(i) “successor co-operative bank” means the amalgamated co-operative bank or the resulting bank, as the case may be;
(j) “resulting co-operative bank” means—
(i) one or more co-operative banks to which the undertaking of the demerged co-operative bank is transferred in a demerger; or
(ii) any co-operative bank formed as a result of demerger.]
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Capital gains.
1[(1A) Notwithstanding anything contained in sub-section (1), where any person receives at any time during any previous year any money or other assets under an insurance from an insurer on account of damage to, or destruction of, any capital asset, as a result of—
(i) flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature; or
(ii) riot or civil disturbance; or
(iii) accidental fire or explosion; or
(iv) action by an enemy or action taken in combating an enemy (whether with or without a declaration of war),
then, any profits or gains arising from receipt of such money or other assets shall be chargeable to income-tax under the head “Capital gains” and shall be deemed to be the income of such person of the previous year in which such money or other asset was received and for the purposes of section 48, value of any money or the fair market value of other assets on the date of such receipt shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of such capital asset.
Explanation.—For the purposes of this sub-section, the expression “insurer” shall have the meaning assigned to it in clause (9) of section 22 of the Insurance Act, 1938 (4 of 1938).]
3[(2) Notwithstanding anything contained in sub-section (1), the profits or gains arising from the transfer by way of conversion by the owner of a capital asset into, or its treatment by him as stock-in-trade of a business carried on by him shall be chargeable to income-tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by him and, for the purposes of section 48, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset.]
4[(2A) 5Where any person has had at any time during previous year any beneficial interest in any securities, then, any profits or gains arising from transfer made by the depository or participant of such beneficial interest in respect of securities shall be chargeable to income-tax as the income of the beneficial owner of the previous year in which such transfer took place and shall not be regarded as income of the depository who is deemed to be the registered owner of securities by virtue of sub-section (1) of section 10 of the Depositories Act, 1996, and for the purposes of—
(i) section 48; and
(ii) proviso to clause (42A) of section 2,
the cost of acquisition and the period of holding of any securities shall be determined on the basis of the first-in-first-out method.
Explanation.—For the purposes of this sub-section, the expressions “beneficial owner” 6, “depository” 6 and “security” 6 shall have the meanings respectively assigned to them in clauses (a), (e) and (l) of sub-section (1) of section 2 of the Depositories Act, 1996.]
7[(3) The profits or gains arising from the transfer of a capital asset by a person to a firm or other association of persons or body of individuals (not being a company or a co-operative society) in which he is or becomes a partner or member, by way of capital contribution or otherwise, shall be chargeable to tax as his income of the previous year in which such transfer takes place and, for the purposes of section 48, the amount recorded in the books of account of the firm, association or body as the value of the capital asset shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset.
(4) The profits or gains arising from the transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm or other association of persons or body of individuals (not being a company or a co-operative society) or otherwise8, shall be chargeable to tax as the income of the firm, association or body, of the previous year in which the said transfer takes place and, for the purposes of section 48, the fair market value of the asset on the date of such transfer shall be deemed to be the full value of the consideration received or accruing as a result of the transfer.]
9[(5) Notwithstanding anything contained in sub-section (1), where the capital gain arises from the transfer of a capital asset, being a transfer by way of compulsory acquisition under any law, or a transfer the consideration for which was determined or approved by the Central Government or the Reserve Bank of India, and the compensation or the consideration for such transfer is enhanced or further enhanced by any court, Tribunal or other authority, the capital gain shall be dealt with in the following manner, namely :—
(a) the capital gain computed with reference to the compensation awarded in the first instance10 or, as the case may be, the consideration determined or approved in the first instance by the Central Government or the Reserve Bank of India shall be chargeable as 11[income under the head “Capital gains” of the previous year in which such compensation or part thereof, or such consideration or part thereof, was first received]; and
(b) the amount by which the compensation or consideration is enhanced or further enhanced by the court, Tribunal or other authority shall be deemed to be income chargeable under the head “Capital gains” of the previous year in which such amount is received by the assessee;
The following proviso shall be inserted after clause (b) of sub-section (5) of section 45 by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
Provided that any amount of compensation received in pursuance of an interim order of a court, Tribunal or other authority shall be deemed to be income chargeable under the head “Capital gains” of the previous year in which the final order of such court, Tribunal or other authority is made;
12[(c) where in the assessment for any year, the capital gain arising from the transfer of a capital asset is computed by taking the compensation or consideration referred to in clause (a) or, as the case may be, enhanced compensation or consideration referred to in clause (b), and subsequently such compensation or consideration is reduced by any court, Tribunal or other authority, such assessed capital gain of that year shall be recomputed by taking the compensation or consi-deration as so reduced by such court, Tribunal or other authority to be the full value of the consideration.]
Explanation.—For the purposes of this sub-section,—
(i) in relation to the amount referred to in clause (b), the cost of acquisition and the cost of improvement shall be taken to be nil;
(ii) the provisions of this sub-section shall apply also in a case where the transfer took place prior to the 1st day of April, 1988;
(iii) where by reason of the death of the person who made the transfer, or for any other reason, the enhanced compensation or consideration is received by any other person, the amount referred to in clause (b) shall be deemed to be the income, chargeable to tax under the head “Capital gains”, of such other person.]
13[(6) Notwithstanding anything contained in sub-section (1), the difference between the repurchase price of the units referred to in sub-section (2) of section 80CCB and the capital value of such units shall be deemed to be the capital gains arising to the assessee in the previous year in which such repurchase takes place or the plan referred to in that section is terminated and shall be taxed accordingly.
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(2) Where a shareholder on the liquidation of a company receives any money or other assets15 from the company, he shall be chargeable to income-tax under the head “Capital gains”, in respect of the money so received or the market value of the other assets on the date of distribution, as reduced by the amount assessed as dividend within the meaning of sub-clause (c) of clause (22) of section 2 and the sum so arrived at shall be deemed to be the full value of the consideration for the purposes of section 48.
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Explanation.—For the purposes of this section, “specified securities” shall have the meaning assigned to it in Explanation to section 77A17 of the Companies Act, 1956 (1 of 1956).]
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(i) any distribution of capital assets20 on the total or partial partition of a Hindu undivided family;
(ii) 21[***]
(iii) any transfer of a capital asset under a gift22 or will or an irrevocable trust :
23[Provided that this clause shall not apply to transfer under a gift or an irrevocable trust of a capital asset being shares, debentures or warrants allotted by a company directly or indirectly to its employees under 24[any Employees— Stock Option Plan or Scheme of the company offered to such employees in accordance with the guidelines issued by the Central Government in this behalf];]
(iv) any transfer of a capital asset by a company to its subsidiary company, if—
(a) the parent company or its nominees hold the whole of the share capital of the subsidiary company, and
(b) the subsidiary company is an Indian company;
25[(v) any transfer of a capital asset by a subsidiary company to the holding company, if—
(a) the whole of the share capital of the subsidiary company is held by the holding company, and
(b) the holding company is an Indian company :]
26[Provided that nothing contained in clause (iv) or clause (v) shall apply to the transfer of a capital asset made after the 29th day of February, 1988, as stock-in-trade;]
27[(vi) any transfer, in a scheme of amalgamation28, of a capital asset by the amalgamating company to the amalgamated company if the amalgamated company is an Indian company;]
29[(via) any transfer, in a scheme of amalgamation28, of a capital asset being a share or shares held in an Indian company, by the amalgamating foreign company to the amalgamated foreign company, if—
(a) at least twenty-five per cent of the shareholders of the amalga-mating foreign company continue to remain shareholders of the amalgamated foreign company, and
(b) such transfer does not attract tax on capital gains in the country, in which the amalgamating company is incorporated;]
30[(viaa) any transfer, in a scheme of amalgamation of a banking company with a banking institution sanctioned and brought into force by the Central Government under sub-section (7) of section 45 of the Banking Regulation Act, 1949 (10 of 1949), of a capital asset by the banking company to the banking institution.
Explanation.—For the purposes of this clause,—
(i) “banking company” shall have the same meaning assigned to it in clause (c) of section 531 of the Banking Regulation Act, 1949 (10 of 1949);
(ii) “banking institution” shall have the same meaning assigned to it in sub-section (15) of section 4531 of the Banking Regulation Act, 1949 (10 of 1949);]
32[(vib) any transfer, in a demerger, of a capital asset by the demerged company to the resulting company, if the resulting company is an Indian company;
(vic) any transfer in a demerger, of a capital asset, being a share or shares held in an Indian company, by the demerged foreign company to the resulting foreign company, if—
(a) 33[the shareholders holding not less than three-fourths in value of the shares] of the demerged foreign company continue to remain shareholders of the resulting foreign company; and
(b) such transfer does not attract tax on capital gains in the country, in which the demerged foreign company is incorporated :
Provided that the provisions of sections 391 to 39434 of the Companies Act, 1956 (1 of 1956) shall not apply in case of demergers referred to in this clause;
35[(vica) any transfer in a business reorganisation, of a capital asset by the predecessor co-operative bank to the successor co-operative bank;
(vicb) any transfer by a shareholder, in a business reorganisation, of a capital asset being a share or shares held by him in the predecessor co-operative bank if the transfer is made in consideration of the allotment to him of any share or shares in the successor co-operative bank.
Explanation.—For the purposes of clauses (vica) and (vicb), the expressions “business reorganisation”, “predecessor co-operative bank” and “successor co-operative bank” shall have the meanings respectively assigned to them in section 44DB;]
(vid) any transfer or issue of shares by the resulting company, in a scheme of demerger to the shareholders of the demerged company if the transfer or issue is made in consideration of demerger of the undertaking;]
(vii) any transfer by a shareholder, in a scheme of amalgamation36, of a capital asset being a share or shares held by him in the amalgamating company, if—
(a) the transfer is made in consideration of the allotment to him of any share or shares in the 37[amalgamated company except where the shareholder itself is the amalgamated company, and]
(b) the amalgamated company is an Indian company;
38[(viia) any transfer of a capital asset, being bonds or 39[Global Depository Receipts] referred to in sub-section (1) of section 115AC, made outside India by a non-resident to another non-resident;]
The following clause (viib) and Explanation thereto shall be inserted after clause (viia) of section 47 by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
(viib) any transfer of a capital asset, being a Government Security carrying a periodic payment of interest, made outside India through an intermediary dealing in settlement of securities, by a non-resident to another non-resident.
Explanation.—For the purposes of this clause, “Government Security” shall have the meaning assigned to it in clause (b) of section 239a of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
40[(viii) any transfer of agricultural land in India effected before the 1st day of March, 1970;]
41[(ix) any transfer of a capital asset, being any work of art, archaeological, scientific or art collection, book, manuscript, drawing, painting, photograph or print, to the Government or a University or the National Museum, National Art Gallery, National Archives or any such other public museum or institution as may be notified42 by the Central Government in the Official Gazette to be of national importance or to be of renown throughout any State or States.
43[(x) any transfer by way of conversion of 44[bonds or] debentures, debenture-stock or deposit certificates in any form, of a company into shares or debentures of that company;]
45[(xa) any transfer by way of conversion of bonds referred to in clause (a) of sub-section (1) of section 115AC into shares or debentures of any company;]
46[(xi) any transfer made on or before the 31st day of December, 47[1998] by a person (not being a company) of a capital asset being membership of a recognised stock exchange to a company in exchange of shares allotted by that company to the transferor.
Explanation.—For the purposes of this clause, the expression “membership of a recognised stock exchange” means the membership of a stock exchange in India which is recognised under the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
(xii) any transfer of a capital asset, being land of a sick industrial company, made under a scheme prepared and sanctioned under section 1848 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) where such sick industrial company is being managed by its workers— co-operative :
Provided that such transfer is made during the period commencing from the previous year in which the said company has become a sick industrial company under sub-section (1) of section 1749 of that Act and ending with the previous year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses.
Explanation.—For the purposes of this clause, “net worth” shall have the meaning assigned to it in clause (ga) of sub-section (1) of section 349 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986);]
50[(xiii) 51[any transfer of a capital asset or intangible asset by a firm to a company as a result of succession of the firm by a company in the business carried on by the firm, or any transfer of a capital asset to a company in the course of 52[demutualisation or] corporatisation of a recognised stock exchange in India as a result of which an association of persons or body of individuals is succeeded by such company :]
Provided that—
(a) all the assets and liabilities of the firm 53[or of the association of persons or body of individuals] relating to the business immediately before the succession become the assets and liabilities of the company;
(b) all the partners of the firm immediately before the succession become the shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the succession;
(c) the partners of the firm do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of allotment of shares in the company; and
(d) the aggregate of the shareholding in the company of the partners of the firm is not less than fifty per cent of the total voting power in the company and their shareholding continues to be as such for a period of five years from the date of the succession;
54[(e) the 55[demutualisation or] corporatisation of a recognised stock exchange in India is carried out in accordance with a scheme for 55[demutualisation or] corporatisation which is approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);]
55[(xiiia) any transfer of a capital asset being a membership right held by a member of a recognised stock exchange in India for acquisition of shares and trading or clearing rights acquired by such member in that recognised stock exchange in accordance with a scheme for demutualisation or corporatisation which is approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);]
56[(xiiib) any transfer of a capital asset or intangible asset by a private company or unlisted public company (hereafter in this clause referred to as the company) to a limited liability partnership or any transfer of a share or shares held in the company by a shareholder as a result of conversion of the company into a limited liability partnership in accordance with the provisions of section 56 or section 57 of the Limited Liability Partnership Act, 2008 (6 of 2009)57:
Provided that—
(a) all the assets and liabilities of the company immediately before the conversion become the assets and liabilities of the limited liability partnership;
(b) all the shareholders of the company immediately before the conversion become the partners of the limited liability partnership and their capital contribution and profit sharing ratio in the limited liability partnership are in the same proportion as their shareholding in the company on the date of conversion;
(c) the shareholders of the company do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of share in profit and capital contribution in the limited liability partnership;
(d) the aggregate of the profit sharing ratio of the shareholders of the company in the limited liability partnership shall not be less than fifty per cent at any time during the period of five years from the date of conversion;
(e) the total sales, turnover or gross receipts in the business of the company in any of the three previous years preceding the previous year in which the conversion takes place does not exceed sixty lakh rupees; and
(f) no amount is paid, either directly or indirectly, to any partner out of balance of accumulated profit standing in the accounts of the company on the date of conversion for a period of three years from the date of conversion.
Explanation.—For the purposes of this clause, the expressions “private company” and “unlisted public company” shall have the meanings58 respectively assigned to them in the Limited Liability Partnership Act, 2008 (6 of 2009);]
(xiv) where a sole proprietary concern is succeeded by a company in the business carried on by it as a result of which the sole proprietary concern sells or otherwise transfers any capital asset or intangible asset to the company :
Provided that—
(a) all the assets and liabilities of the sole proprietary concern relating to the business immediately before the succession become the assets and liabilities of the company;
(b) the shareholding of the sole proprietor in the company is not less than fifty per cent of the total voting power in the company and his shareholding continues to remain as such for a period of five years from the date of the succession; and
(c) the sole proprietor does not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of allotment of shares in the company;
(xv) any transfer in a scheme for lending of any securities under an agreement or arrangement, which the assessee has entered into with the borrower of such securities and which is subject to the guidelines issued by the Securities and Exchange Board of India, established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) 59[or the Reserve Bank of India constituted under sub-section (1) of section 3 of the Reserve Bank of India Act, 1934 (2 of 1934)], in this regard;]
60[(xvi) any transfer of a capital asset in a transaction of reverse mortgage under a scheme made and notified by the Central Government.]
The following clause (xvii) and Explanation thereto shall be inserted after clause (xvi) of section 47 by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
(xvii) any transfer of a capital asset, being share of a special purpose vehicle to a business trust in exchange of units allotted by that trust to the transferor.
Explanation.—For the purposes of this clause, the expression “special purpose vehicle” shall have the meaning assigned to it in the Explanation to clause (23FC) of section 10.
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(i) such capital asset is converted by the transferee company into, or is treated by it as, stock-in-trade of its business; or
(ii) the parent company or its nominees or, as the case may be, the holding company ceases or cease to hold the whole of the share capital of the subsidiary company,
the amount of profits or gains arising from the transfer of such capital asset not charged under section 45 by virtue of the provisions contained in clause (iv) or, as the case may be, clause (v) of section 47 shall, notwithstanding anything contained in the said clauses, be deemed to be income chargeable under the head “Capital gains” of the previous year in which such transfer took place.]
62[(2) Where at any time, before the expiry of a period of three years from the date of the transfer of a capital asset referred to in clause (xi) of section 47, any of the shares allotted to the transferor in exchange of a membership in a recognised stock exchange are transferred, the amount of profits and gains not charged under section 45 by virtue of the provisions contained in clause (xi) of section 47 shall, notwithstanding anything contained in the said clause, be deemed to be the income chargeable under the head “Capital gains” of the previous year in which such shares are transferred.]
63[(3) Where any of the conditions laid down in the proviso to clause (xiii) or the proviso to clause (xiv) of section 47 are not complied with, the amount of profits or gains arising from the transfer of such capital asset or intangible asset not charged under section 45 by virtue of conditions laid down in the proviso to clause (xiii) or the proviso to clause (xiv) of section 47 shall be deemed to be the profits and gains chargeable to tax of the successor company for the previous year in which the requirements of the proviso to clause (xiii) or the proviso to clause (xiv), as the case may be, are not complied with.]
64[(4) Where any of the conditions laid down in the proviso to clause (xiiib) of section 47 are not complied with, the amount of profits or gains arising from the transfer of such capital asset or intangible assets or share or shares not charged under section 45 by virtue of conditions laid down in the said proviso shall be deemed to be the profits and gains chargeable to tax of the successor limited liability partnership or the shareholder of the predecessor company, as the case may be, for the previous year in which the requirements of the said proviso are not complied with.]
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(i) expenditure incurred wholly and exclusively in connection with such transfer68;
(ii) the cost of acquisition of the asset and the cost of any improvement6 thereto:
69Provided that in the case of an assessee, who is a non-resident, capital gains arising from the transfer of a capital asset being shares in, or debentures of, an Indian company shall be computed by converting the cost of acquisition, expenditure incurred wholly and exclusively in connection with such transfer and the full value of the consideration received or accruing as a result of the transfer of the capital asset into the same foreign currency as was initially utilised in the purchase of the shares or debentures, and the capital gains so computed in such foreign currency shall be reconverted into Indian currency, so, however, that the aforesaid manner of computation of capital gains shall be applicable in respect of capital gains accruing or arising from every reinvestment thereafter in, and sale of, shares in, or debentures of, an Indian company :
Provided further that where long-term capital gain arises from the transfer of a long-term capital asset, other than capital gain arising to a non-resident from the transfer of shares in, or debentures of, an Indian company referred to in the first proviso, the provisions of clause (ii) shall have effect as if for the words “cost of acquisition” and “cost of any improvement”, the words “indexed cost of acquisition” and “indexed cost of any improvement” had respectively been substituted:
70[Provided also that nothing contained in the second proviso shall apply to the long-term capital gain arising from the transfer of a long-term capital asset being bond or debenture other than capital indexed bonds issued by the Government :]
71[Provided also that where shares, debentures or warrants referred to in the proviso to clause (iii) of section 47 are transferred under a gift or an irrevocable trust, the market value on the date of such transfer shall be deemed to be the full value of consideration received or accruing as a result of transfer for the purposes of this section :]
72[Provided also that no deduction shall be allowed in computing the income chargeable under the head “Capital gains” in respect of any sum paid on account of securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004.]
Explanation.—For the purposes of this section,—
(i) “foreign currency” 73 and “Indian currency” 73 shall have the meanings respectively assigned to them in section 2 of 74[the Foreign Exchange Management Act, 1999 (42 of 1999)];
(ii) the conversion of Indian currency into foreign currency and the reconversion of foreign currency into Indian currency shall be at the rate of exchange prescribed in this behalf;
(iii) “indexed cost of acquisition” 75 means an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee75 or for the year beginning on the 1st day of April, 1981, whichever is later;
(iv) “indexed cost of any improvement” means an amount which bears to the cost of improvement the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the year in which the improvement to the asset took place;
76[(v) “Cost Inflation Index”, in relation to a previous year, means such Index as the Central Government may, having regard to seventy-five per cent of average rise in the 76a[Consumer Price Index for urban non-manual employees] for the immediately preceding previous year to such previous year, by notification77 in the Official Gazette, specify, in this behalf.]]
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(i) on any distribution of assets on the total or partial partition of a Hindu undivided family;
(ii) under a gift or will;
(iii) (a) by succession, inheritance or devolution80, or
81[(b) on any distribution of assets on the dissolution of a firm, body of individuals, or other association of persons, where such dissolution had taken place at any time before the 1st day of April, 1987, or]
(c) on any distribution of assets on the liquidation of a company, or
(d) under a transfer to a revocable or an irrevocable trust, or
(e) under any such transfer as is referred to in clause (iv) 82[or clause (v)] 83[or clause (vi)] 84[or clause (via)] 85[or clause (viaa)] 86[or clause (vica) or 87[clause (vicb)] or 88[clause (xiii) or clause (xiiib) or clause (xiv) of section 47]];
89[(iv) such assessee being a Hindu undivided family, by the mode referred to in sub-section (2) of section 64 at any time after the 31st day of December, 1969,]
the cost of acquisition of the asset89a shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be.
90[Explanation.—In this 91[sub-section] the expression “previous owner of the property” in relation to any capital asset owned by an assessee means the last previous owner of the capital asset who acquired it by a mode of acquisition other than that referred to in clause (i) or clause (ii) or clause (iii) 92[or clause (iv)] of this 93[sub-section].]
94[(2) Where the capital asset being a share or shares in an amalgamated company which is an Indian company became the property of the assessee in consideration of a transfer referred to in clause (vii) of section 47, the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the share or shares in the amalgamating company.]
95[(2A) Where the capital asset, being a share or debenture of a company, became the property of the assessee in consideration of a transfer referred to in clause (x) or clause (xa) of section 47, the cost of acquisition of the asset to the assessee shall be deemed to be that part of the cost of debenture, debenture-stock, bond or deposit certificate in relation to which such asset is acquired by the assessee.]
96[(2AA) Where the capital gain arises from the transfer of specified security or sweat equity shares referred to in sub-clause (vi) of clause (2) of section 17, the cost of acquisition of such security or shares shall be the fair market value which has been taken into account for the purposes of the said sub-clause.]
97[(2AAA) Where the capital asset, being rights of a partner referred to in section 42 of the Limited Liability Partnership Act, 2008 (6 of 2009), became the property of the assessee on conversion as referred to in clause (xiiib) of section 47, the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the share or shares in the company immediately before its conversion.]
98[(2AB) Where the capital gain arises from the transfer of specified security or sweat equity shares, the cost of acquisition of such security or shares shall be the fair market value which has been taken into account while computing the value of fringe benefits under clause (ba) of sub-section (1) of section 115WC.]
The following sub-section (2AC) shall be inserted after sub-section (2AB) of section 49 by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
(2AC) Where the capital asset, being a unit of a business trust, became the property of the assessee in consideration of a transfer as referred to in clause (xvii) of section 47, the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the share referred to in the said clause.
99[(2B) 1[***]
(2C) The cost of acquisition of the shares in the resulting company shall be the amount which bears to the cost of acquisition of shares held by the assessee in the demerged company the same proportion as the net book value of the assets transferred in a demerger bears to the net worth of the demerged company immediately before such demerger.
(2D) The cost of acquisition of the original shares held by the shareholder in the demerged company shall be deemed to have been reduced by the amount as so arrived at under sub-section (2C).]
2[(2E) The provisions of sub-section (2), sub-section (2C) and sub-section (2D) shall, as far as may be, also apply in relation to business reorganisation of a co-operative bank as referred to in section 44DB.]
Explanation.—For the purposes of this section, “net worth” shall mean the aggregate of the paid up share capital and general reserves as appearing in the books of account of the demerged company immediately before the demerger.]
3[(3) Notwithstanding anything contained in sub-section (1), where the capital gain arising from the transfer of a capital asset referred to in clause (iv) or, as the case may be, clause (v) of section 47 is deemed to be income chargeable under the head “Capital gains” by virtue of the provisions contained in section 47A, the cost of acquisition of such asset to the transferee-company shall be the cost for which such asset was acquired by it.]
4[(4) Where the capital gain arises from the transfer of a property, the value of which has been subject to income-tax under clause (vii) 5[or clause (viia)] of sub-section (2) of section 56, the cost of acquisition of such property shall be deemed to be the value which has been taken into account for the purposes of the said clause (vii) 5[or clause (viia)].]
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(1) where the full value of the consideration received or accruing as a result of the transfer of the asset together with the full value of such consideration received or accruing as a result of the transfer of any other capital asset falling within the block of the assets during the previous year, exceeds the aggregate of the following amounts, namely :—
(i) expenditure incurred wholly and exclusively in connection with such transfer or transfers;
(ii) the written down value of the block of assets at the beginning of the previous year; and
(iii) the actual cost of any asset falling within the block of assets acquired during the previous year,
such excess shall be deemed to be the capital gains arising from the transfer of short-term capital assets;
(2) where any block of assets ceases to exist as such, for the reason that all the assets in that block are transferred during the previous year, the cost of acquisition of the block of assets shall be the written down value of the block of assets at the beginning of the previous year, as increased by the actual cost of any asset falling within that block of assets, acquired by the assessee during the previous year and the income received or accruing as a result of such transfer or transfers shall be deemed to be the capital gains arising from the transfer of short-term capital assets.]
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Provided that any profits or gains arising from the transfer under the slump sale of any capital asset being one or more undertakings owned and held by an assessee for not more than thirty-six months immediately preceding the date of its transfer shall be deemed to be the capital gains arising from the transfer of short-term capital assets.
(2) In relation to capital assets being an undertaking or division transferred by way of such sale, the “net worth” of the undertaking or the division, as the case may be, shall be deemed to be the cost of acquisition and the cost of improvement for the purposes of sections 48 and 49 and no regard shall be given to the provisions contained in the second proviso to section 48.
(3) Every assessee, in the case of slump sale, shall furnish in the prescribed form11 along with the return of income, a report of an accountant as defined in the Explanation below sub-section (2) of section 288, indicating the computation of the net worth of the undertaking or division, as the case may be, and certifying that the net worth of the undertaking or division, as the case may be, has been correctly arrived at in accordance with the provisions of this section.
12[Explanation 1.—For the purposes of this section, “net worth” shall be the aggregate value of total assets of the undertaking or division as reduced by the value of liabilities of such undertaking or division as appearing in its books of account :
Provided that any change in the value of assets on account of revaluation of assets shall be ignored for the purposes of computing the net worth.
Explanation 2.—For computing the net worth, the aggregate value of total assets shall be,—
(a) in the case of depreciable assets, the written down value of the block of assets determined in accordance with the provisions contained in sub-item (c) of item (i) of sub-clause (c) of clause (6) of section 43; 13[***]
14[(b) in the case of capital assets in respect of which the whole of the expenditure has been allowed or is allowable as a deduction under section 35AD, nil; and
(c) in the case of other assets, the book value of such assets.]]]
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(2) Without prejudice to the provisions of sub-section (1), where—
(a) the assessee claims before any Assessing Officer that the value adopted or assessed 16[or assessable] by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the date of transfer;
(b) the value so adopted or assessed 16[or assessable] by the stamp valuation authority under sub-section (1) has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court,
the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clause (i) of sub-section (1) and sub-sections (6) and (7) of section 23A, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with necessary modi-fications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act.
17[Explanation 1].—For the purposes of this section, “Valuation Officer” shall have the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).
18[Explanation 2.—For the purposes of this section, the expression “assessable” means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty.]
(3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed 18[or assessable] by the stamp valuation authority referred to in sub-section (1), the value so adopted or assessed 18[or assessable] by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.]
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The following proviso shall be inserted in section 51 by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
Provided that where any sum of money, received as an advance or otherwise in the course of negotiations for transfer of a capital asset, has been included in the total income of the assessee for any previous year in accordance with the provisions of clause (ix) of sub-section (2) of section 56, then, such sum shall not be deducted from the cost for which the asset was acquired or the written down value or the fair market value, as the case may be, in computing the cost of acquisition.
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(i) if the amount of the capital gain 32[is greater than the cost of 33[the residential house] so purchased or constructed (hereafter in this section referred to as the new asset)], the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or
(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain.
34[***]
35[(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme36 which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset :
Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,—
(i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and
(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.
Explanation.—37[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
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3954B. 40[(1)] 41[Subject to the provisions of sub-section (2), where the capital gain arises] from the transfer of a capital asset being land which, in the two years immediately preceding the date on which the transfer took place, was being used by 42[the assessee being an individual or his parent, or a Hindu undivided family] for agricultural purposes 43[(hereinafter referred to as the original asset)], and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,—
(i) if the amount of the capital gain is greater than the cost of the land so purchased (hereinafter referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase, the cost shall be nil; or
(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase, the cost shall be reduced, by the amount of the capital gain.]
44[(2) The amount of the capital gain which is not utilised by the assessee for the purchase of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme45 which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset :
Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase of the new asset within the period specified in sub-section (1), then,—
(i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of two years from the date of the transfer of the original asset expires; and
(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.
Explanation.—46[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]]
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4854D. 49[(1)] 50[Subject to the provisions of sub-section (2), where the capital gain arises] from the transfer by way of compulsory acquisition under any law of a capital asset, being land or building or any right in land or building, forming part of an industrial undertaking51 belonging to the assessee which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee for the purposes of the business of the said undertaking 52[(hereafter in this section referred to as the original asset)], and the assessee has within a period of three years after that date purchased any other land or building or any right in any other land or building or constructed any other building for the purposes of shifting or re-establishing the said undertaking or setting up another industrial undertaking, then, instead of the capital gain being charged to income-tax as the income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,—
(i) if the amount of the capital gain is greater than the cost of the land, building or right so purchased or the building so constructed (such land, building or right being hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or
(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain.]
53[(2) The amount of the capital gain which is not utilised by the assessee for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme54 which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset:
Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,—
(i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and
(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.
Explanation.—55[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
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5754E. (1) Where the capital gain arises from the transfer of a 58[long-term capital asset] 59[before the 1st day of April, 1992], (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, within a period of six months after the date of such transfer, invested or deposited the 60[whole or any part of the net consideration] in any specified asset (such specified asset being hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,—
(a) if the cost of the new asset is not less than the 61[net consideration] in respect of the original asset, the whole of such capital gain shall not be charged under section 45;
(b) if the cost of the new asset is less than the 61[net consideration] in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the new asset bears to the 62[net consideration] shall not be charged under section 45:
63[Provided that in a case where the original asset is transferred after the 28th day of February, 1983, the provisions of this sub-section shall not apply unless the assessee has invested or deposited the whole or, as the case may be, any part of the net consideration in the new asset by initially subscribing to such new asset:]
64[Provided further that in a case where the transfer of the original asset is by way of compulsory acquisition under any law and the full amount of compensation awarded for such acquisition is not received by the assessee on the date of such transfer, the period of six months referred to in this sub-section shall, in relation to so much of such compensation as is not received on the date of the transfer, be reckoned from the date immediately following the date on which such compensation is received by the assessee 65[or the 31st day of March, 1992, whichever is earlier].]
Explanation 1.—66[For the purposes of this sub-section, “specified asset” means,—
(a) in a case where the original asset is transferred before the 1st day of March, 1979, any of the following assets, namely:—]
(i) securities of the Central Government or a State Government;
(ii) 67savings certificates as defined in clause (c) of section 2 of the Government Savings Certificates Act, 1959 (46 of 1959);
(iii) units in the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963);
(iv) debentures specified by the Central Government for the purposes of clause (ii) of sub-section (1) of section 80L;
(v) shares in any Indian company which are issued to the public or are listed in a recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and any rules made thereunder, 68[where the investment in such shares is made before the 1st day of March, 1978];
68[(va) equity shares forming part of any eligible issue of capital, where the investment in such shares is made after the 28th day of February, 1978;]
(vi) deposits for a period of not less than three years with the State Bank of India established under the State Bank of India Act, 1955 (23 of 1955), or any subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959) or any nationalised bank, that is to say, any corresponding new bank, constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or any co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank);
69[(b) in a case where the original asset is transferred after the 28th day of February, 1979 70[but before the 1st day of March, 1983], such National Rural Development Bonds as the Central Government may notify71 in this behalf in the Official Gazette;]
72[(c) in a case where the original asset is transferred after the 28th day of February, 1983 73[but before the 1st day of April, 1986], any of the following assets, namely :—
(i) securities of the Central Government which that Government may, by notification in the Official Gazette, specify in this behalf;
(ii) special series of units of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), which the Central Government may, by notification74 in the Official Gazette, specify in this behalf;
(iii) such National Rural Development Bonds as have been notified74 under clause (b) of Explanation 1 or as may be notified in this behalf under this clause by the Central Government;
(iv) such debentures issued by the Housing and Urban Development Corporation Limited [a 75Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956)], as the Central Government may, by notification in the Official Gazette, specify in this behalf;]
76[(d) in a case where the original asset is transferred after the 31st day of March, 1986, any of the assets specified in clause (c) and such bonds issued by any public sector company, as the Central Government may, by notification77 in the Official Gazette, specify in this behalf;
78[***]]
79[(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 notification80 in the Official Gazette, specify in this behalf.]
81[Explanation 2.—”Eligible issue of capital” shall have the meaning assigned to it in sub-section (3) of section 80CC82.]
81[Explanation 3.—An assessee shall not be deemed to have invested the 83[whole or any part of the net consideration in any equity shares referred to in subclause (va) of clause (a)] of Explanation 1, unless the assessee has subscribed to or purchased the shares in the manner specified in sub-section (4) of section 80CC.]
Explanation 84[4].—”Cost”, in relation to any new asset, being a deposit referred to in 85[sub-clause (vi) of clause (a)] of Explanation 1, means the amount of such deposit.
86[Explanation 5.—”Net consideration”, in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.
87[(1A) Where the assessee deposits after the 27th day of April, 1978, the 88[whole or any part of the net consideration in respect] of the original asset in any new asset, being a deposit referred to in 89[sub-clause (vi) of clause (a)] of Explanation 1 below sub-section (1), the cost of such new asset shall not be taken into account for the purposes of that sub-section unless the following conditions are fulfilled, namely :—
(a) the assessee furnishes, along with the deposit, a declaration in writing, to the bank or the co-operative society referred to in the said 89[sub-clause (vi)] with which such deposit is made, to the effect that the assessee will not take any loan or advance on the security of such deposit during a period of three years from the date on which the deposit is made;
(b) the assessee furnishes, along with the return of income for the assessment year relevant to the previous year in which the transfer of the original asset was effected or within such further time as may be allowed by the 90[Assessing] Officer, a copy of the declaration referred to in clause (a) duly attested by an officer not below the rank of sub-agent, agent or manager of such bank or an officer of corresponding rank of such co-operative society.]
91[(1B) Where on the fulfilment of the conditions specified in sub-section (1A), the cost of the new asset referred to in that sub-section is taken into account for the purposes of sub-section (1), the assessee shall, within a period of ninety days from the expiry of the period of three years reckoned from the date of such deposit, furnish to the 92[Assessing] Officer a certificate from the officer referred to in clause (b) of sub-section (1A) to the effect that the assessee has not taken any loan or advance on the security of such deposit during the said period of three years.]
93[(1C) Notwithstanding anything contained in sub-section (1), where the capital gain arises from the transfer of the original asset, made after the 31st day of March, 1992, in respect of which the assessee had received any amount by way of advance on or before the 29th day of February, 1992 and had invested or deposited the whole or any part of such amount in the new asset on or before the later date, then, the provisions of clauses (a) and (b) of sub-section (1) shall apply in the case of such investment or deposit as they apply in the case of investment or deposit under that sub-section.]
(2) Where the new asset is transferred, or converted (otherwise than by transfer) into money, within a period of three years from the date of its acquisition, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable under the head “Capital gains” relating to 94[long-term capital assets] of the previous year in which the new asset is transferred or converted (otherwise than by transfer) into money.]
95[96[Explanation 1].—Where the assessee deposits after the 27th day of April, 1978, the 97[whole or any part of the net consideration in respect] of the original asset in any new asset, being a deposit referred to in 98[sub-clause (vi) of clause (a)] of Explanation 1 below sub-section (1), and such assessee takes any loan or advance on the security of such deposit, he shall be deemed to have converted (otherwise than by transfer) such deposit into money on the date on which such loan or advance is taken.]
99[Explanation 2.—In a case where the original asset is transferred after the 28th day of February, 1983 and the assessee invests the whole or any part of the net consideration in respect of the original asset in any new asset and such assessee takes any loan or advance on the security of such new asset, he shall be deemed to have converted (otherwise than by transfer) such new asset on the date on which such loan or advance is taken.]
1[***]
2[***]
3[***]
4[(3) Where the cost of the equity shares referred to in 5[sub-clause (va) of clause (a)] of Explanation 1 below sub-section (1) is taken into account for the purposes of clause (a) or clause (b) of sub-section (1) 6[***], a deduction with reference to such cost shall not be allowed under section 80CC7.]
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1054EA. (1) Where the capital gain arises from the transfer of a long-term capital asset 11[before the 1st day of April, 2000] (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of the net consideration in any of the 12[bonds, debentures, shares of a public company or units of any mutual fund referred to in clause (23D) of section 10,] specified13 by the Board in this behalf by notification in the Official Gazette (such assets hereafter in this section referred to as the 14[specified securities]), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,—
(a) if the cost of the 14[specified securities] is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45;
(b) if the cost of the 14[specified securities] is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the 14[specified securities] bears to the net consideration shall not be charged under section 45.
(2) Where the 14[specified securities] are transferred or converted (otherwise than by transfer) into money at any time within a period of three years from the date of their acquisition, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such 14[specified securities] as provided in clause (a) or clause (b) of sub-section (1) shall be deemed to be the income chargeable under the head “Capital gains” relating to long-term capital assets of the previous year in which the 15[specified securities] are transferred or converted (otherwise than by transfer) into money.
Explanation.—In a case where the original asset is transferred and the assessee invests the whole or any part of the net consideration in respect of the original asset in any 15[specified securities] and such assessee takes any loan or advance on the security of such 15[specified securities], he shall be deemed to have converted (otherwise than by transfer) such 15[specified securities] into money on the date on which such loan or advance is taken.
(3) Where the cost of the 15[specified securities] has been taken into account for the purposes of clause (a) or clause (b) of sub-section (1), a rebate with reference to such cost shall not be allowed under section 88.
Explanation.—For the purposes of this section,—
(a) “cost”, in relation to any 15[specified securities], means the amount invested in such 15[specified securities] out of the net consideration received or accruing as a result of the transfer of the original asset ;
(b) “net consideration”, in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by the expenditure incurred wholly and exclusively in connection with such transfer.
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1654EB. (1) Where the capital gain arises from the transfer of a long-term capital asset 17[before the 1st day of April, 2000] (the capital asset so transferred being hereafter in this section referred to as the original asset), and the assessee has, at any time within a period of six months after the date of such transfer invested the whole or any part of capital gains, in any of the assets specified18 by the Board in this behalf by notification in the Official Gazette (such assets hereafter in this section referred to as the long-term specified assets), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,—
(a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45 ;
(b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45.
Explanation.—“Cost”, in relation to any long-term specified asset, means the amount invested in such specified asset out of capital gains received or accruing as a result of the transfer of the original asset.
(2) Where the long-term specified asset is transferred or converted (otherwise than by transfer) into money at any time within a period of seven years from the date of its acquisition, the amount of capital gains arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such long-term specified asset as provided in clause (a), or as the case may be, clause (b) of sub-section (1) shall be deemed to be the income chargeable under the head “Capital gains” relating to long-term capital assets of the previous year in which the long-term specified asset is transferred or converted (otherwise than by transfer) into money.
(3) Where the cost of the long-term specified asset has been taken into account for the purposes of clause (a) or clause (b) of sub-section (1), a deduction from the amount of income-tax with reference to such cost shall not be allowed under section 88.]
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(a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45;
(b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45 :
20[Provided that the investment made on or after the 1st day of April, 2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees.]
The following second proviso shall be inserted after the existing proviso to sub-section (1) of section 54EC by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
Provided further that the investment made by an assessee in the long-term specified asset, from capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees.
(2) Where the long-term specified asset is transferred or converted (otherwise than by transfer) into money at any time within a period of three years from the date of its acquisition, the amount of capital gains arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such long-term specified asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1) shall be deemed to be the income chargeable under the head “Capital gains” relating to long-term capital asset of the previous year in which the long-term specified asset is transferred or converted (otherwise than by transfer) into money.
Explanation.—In a case where the original asset is transferred and the assessee invests the whole or any part of the capital gain received or accrued as a result of transfer of the original asset in any long-term specified asset and such assessee takes any loan or advance on the security of such specified asset, he shall be deemed to have converted (otherwise than by transfer) such specified asset into money on the date on which such loan or advance is taken.
21[(3) Where the cost of the long-term specified asset has been taken into account for the purposes of clause (a) or clause (b) of sub-section (1),—
(a) a deduction from the amount of income-tax with reference to such cost shall not be allowed under section 88 for any assessment year ending before the 1st day of April, 2006;
(b) a deduction from the income with reference to such cost shall not be allowed under section 80C for any assessment year beginning on or after the 1st day of April, 2006.]
Explanation.—For the purposes of this section,—
(a) “cost”, in relation to any long-term specified asset, means the amount invested in such specified asset out of capital gains received or accruing as a result of the transfer of the original asset;
22[(b) “long-term specified asset” for making any investment under this section during the period commencing from the 1st day of April, 2006 and ending with the 31st day of March, 2007, means any bond, redeemable after three years and issued on or after the 1st day of April, 2006, but on or before the 31st day of March, 2007,—
(i) by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988); or
(ii) by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956 (1 of 1956),22a
and notified23 by the Central Government in the Official Gazette for the purposes of this section with such conditions (including the condition for providing a limit on the amount of investment by an assessee in such bond) as it thinks fit:]
24[Provided that where any bond has been notified before the 1st day of April, 2007, subject to the conditions specified in the notification, by the Central Government in the Official Gazette under the provisions of clause (b) as they stood immediately before their amendment by the Finance Act, 2007, such bond shall be deemed to be a bond notified under this clause;]
25[(ba) “long-term specified asset” for making any investment under this section on or after the 1st day of April, 2007 means any bond, redeemable after three years and issued on or after the 1st day of April, 2007 by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988) or by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956 (1 of 1956).25a]
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(a) if the cost of the specified equity shares is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45;
(b) if the cost of the specified equity shares is less than the capital gain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the specified equity shares acquired bears to the whole of the capital gain shall not be charged under section 45.
Explanation.—For the purposes of this sub-section,—
(i) “eligible issue of capital” means an issue of equity shares which satisfies the following conditions, namely:—
(a) the issue is made by a public company formed and registered in India;
(b) the shares forming part of the issue are offered for subscription to the public;
(ii) “listed securities” shall have the same meaning as in clause (a) of the Explanation to sub-section (1) of section 112;
(iii) “unit” shall have the meaning assigned to it in clause (b) of the Explanation to section 115AB.
(2) Where the specified equity shares are sold or otherwise transferred within a period of one year from the date of their acquisition, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such specified equity shares as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be the income chargeable under the head “Capital gains” relating to long-term capital assets of the previous year in which such equity shares are sold or otherwise transferred.
28[(3) Where the cost of the specified equity shares has been taken into account for the purposes of clause (a) or clause (b) of sub-section (1),—
(a) a deduction from the amount of income-tax with reference to such cost shall not be allowed under section 88 for any assessment year ending before the 1st day of April, 2006;
(b) a deduction from the income with reference to such cost shall not be allowed under section 80C for any assessment year beginning on or after the 1st day of April, 2006.]]
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(a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ;
(b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45:
33[Provided that nothing contained in this sub-section shall apply where—
(a) the assessee,—
(i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or
(ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or
(iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and
(b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property” .]
34[***]
35[***] “net consideration”, in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.
(2) Where the assessee purchases, within the period of 36[two years] after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head “Income from house property”, other than the new asset, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a), or, as the case may be, clause (b), of sub-section (1), shall be deemed to be income chargeable under the head “Capital gains” relating to long-term capital assets of the previous year in which such residential house is purchased or constructed.
(3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable under the head “Capital gains” relating to long-term capital assets of the previous year in which such new asset is transferred.]
37[(4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme38 which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit ; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset :
Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,—
(i) the amount by which—
(a) the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of the new asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1),
exceeds
(b) the amount that would not have been so charged had the amount actually utilised by the assessee for the purchase or construction of the new asset within the period specified in sub-section (1) been the cost of the new asset,
shall be charged under section 45 as income of the previous year in which the period of three years from the date of the transfer of the original asset expires ; and
(ii) the assessee shall be entitled to withdraw the unutilised amount in accordance with the scheme aforesaid.
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(a) purchased new machinery or plant for the purposes of business of the industrial undertaking in the area to which the said undertaking is shifted ;
(b) acquired building or land or constructed building for the purposes of his business in the said area ;
(c) shifted the original asset and transferred the establishment of such undertaking to such area; and
(d) incurred expenses on such other purpose as may be specified in a scheme framed by the Central Government for the purposes of this section,
then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,—
(i) if the amount of the capital gain is greater than the cost and expenses incurred in relation to all or any of the purposes mentioned in clauses (a) to (d) (such cost and expenses being hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year ; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its being purchased, acquired, constructed or transferred, as the case may be, the cost shall be nil ; or
(ii) if the amount of the capital gain is equal to, or less than, the cost of the new asset, the capital gain shall not be charged under section 45 ; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its being purchased, acquired, constructed or transferred, as the case may be, the cost shall be reduced by the amount of the capital gain.
(2) The amount of capital gain which is not appropriated by the assessee towards the cost and expenses incurred in relation to all or any of the purposes mentioned in clauses (a) to (d) of sub-section (1) within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for all or any of the purposes aforesaid before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme42 which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit ; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for all or any of the purposes aforesaid together with the amount, so deposited shall be deemed to be the cost of the new asset :
Provided that if the amount deposited under this sub-section is not utilised wholly or partly for all or any of the purposes mentioned in clauses (a) to (d) of sub-section (1) within the period specified in that sub-section, then,—
(i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires ; and
(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.
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(a) purchased machinery or plant for the purposes of business of the industrial undertaking in the Special Economic Zone to which the said undertaking is shifted;
(b) acquired building or land or constructed building for the purposes of his business in the Special Economic Zone;
(c) shifted the original asset and transferred the establishment of such undertaking to the Special Economic Zone; and
(d) incurred expenses on such other purposes as may be specified in a scheme framed by the Central Government for the purposes of this section,
then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall, subject to the provisions of sub-section (2), be dealt with in accordance with the following provisions of this section, that is to say,—
(i) if the amount of the capital gain is greater than the cost and expenses incurred in relation to all or any of the purposes mentioned in clauses (a) to (d) (such cost and expenses being hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its being purchased, acquired, constructed or transferred, as the case may be, the cost shall be Nil; or
(ii) if the amount of the capital gain is equal to, or less than, the cost of the new asset, the capital gain shall not be charged under section 45, and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its being purchased, acquired, constructed or transferred, as the case may be, the cost shall be reduced by the amount of the capital gain.
(a) “Special Economic Zone” shall have the meaning assigned to it in clause (za) of *[section 2 of] the Special Economic Zones Act, 200545;
(b) “urban area” means any such area within the limits of a municipal corporation or municipality as the Central Government may, having regard to the population, concentration of industries, need for proper planning of the area and other relevant factors, by general or special order, declare to be an urban area for the purposes of this sub-section.
(2) The amount of capital gain which is not appropriated by the assessee towards the cost and expenses incurred in relation to all or any of the purposes mentioned in clauses (a) to (d) of sub-section (1) within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for all or any of the purposes aforesaid before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme46 which the Central Government may, by notification, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for all or any of the aforesaid purposes together with the amount so deposited shall be deemed to be the cost of the new asset :
Provided that if the amount deposited under this sub-section is not utilised wholly or partly for all or any of the purposes mentioned in clauses (a) to (d) of sub-section (1) within the period specified in that sub-section, then,—
(i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and
(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.]
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(i) the capital gain arises from the transfer of a long-term capital asset, being a residential property (a house or a plot of land), owned by the eligible assessee (herein referred to as the assessee); and
(ii) the assessee, before the due date of furnishing of return of income under sub-section (1) of section 139, utilises the net consideration for subscription in the equity shares of an eligible company (herein-referred to as the company); and
(iii) the company has, within one year from the date of subscription in equity shares by the assessee, utilised this amount for purchase of new asset,
then, instead of the capital gain being charged to income-tax as the income of the previous year in which the transfer takes place, it shall be dealt with in accordance with the following provisions of this section, that is to say,—
(a) if the amount of the net consideration is greater than the cost of the new asset, then, so much of the capital gain as it bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45 as the income of the previous year; or
(b) if the amount of the net consideration is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45 as the income of the previous year.
(2) The amount of the net consideration, which has been received by the company for issue of shares to the assessee, to the extent it is not utilised by the company for the purchase of the new asset before the due date of furnishing of the return of income by the assessee under section 139, shall be deposited by the company, before the said due date in an account in any such bank or institution as may be specified and shall be utilised in accordance with any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and the return furnished by the assessee shall be accompanied by proof of such deposit having been made.
(3) For the purposes of sub-section (1), the amount, if any, already utilised by the company for the purchase of the new asset together with the amount deposited under sub-section (2) shall be deemed to be the cost of the new asset:
Provided that if the amount so deposited is not utilised, wholly or partly, for the purchase of the new asset within the period specified in sub-section (1), then,—
(i) the amount by which—
(a) the amount of capital gain arising from the transfer of the residential property not charged under section 45 on the basis of the cost of the new asset as provided in sub-section (1),
exceeds—
(b) the amount that would not have been so charged had the amount actually utilised for the purchase of the new asset within the period specified in sub-section (1) been the cost of the new asset,
shall be charged under section 45 as income of the assessee for the previous year in which the period of one year from the date of the subscription in equity shares by the assessee expires; and
(ii) the company shall be entitled to withdraw such amount in accordance with the scheme.
(4) If the equity shares of the company or the new asset acquired by the company are sold or otherwise transferred within a period of five years from the date of their acquisition, the amount of capital gain arising from the transfer of the residential property not charged under section 45 as provided in sub-section (1) shall be deemed to be the income of the assessee chargeable under the head “Capital gains” of the previous year in which such equity shares or such new asset are sold or otherwise transferred, in addition to taxability of gains, arising on account of transfer of shares or of the new asset, in the hands of the assessee or the company, as the case may be.
(5) The provisions of this section shall not apply to any transfer of residential property made after the 31st day of March, 2017.
(6) For the purposes of this section,—
(a) “eligible assessee” means an individual or a Hindu undivided family;
(b) “eligible company” means a company which fulfils the following conditions, namely:—
(i) it is a company incorporated in India during the period from the 1st day of April of the previous year relevant to the assessment year in which the capital gain arises to the due date of furnishing of return of income under sub-section (1) of section 139 by the assessee;
(ii) it is engaged in the business of manufacture of an article or a thing;
(iii) it is a company in which the assessee has more than fifty per cent share capital or more than fifty per cent voting rights after the subscription in shares by the assessee; and
(iv) it is a company which qualifies to be a small or medium enterprise under the Micro, Small and Medium Enterprises Act, 2006 (27 of 2006);
(c) “net consideration” shall have the meaning assigned to it in the Explanation to section 54F;
(d) “new asset” means new plant and machinery but does not include—
(i) any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person;
(ii) any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature of a guest-house;
(iii) any office appliances including computers or computer software;
(iv) any vehicle; or
(v) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any previous year.]
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Provided that where the compensation in respect of transfer of the original asset by way of compulsory acquisition under any law is received before the 1st day of April, 1991, the aforesaid period or periods, if expired, shall extend up to the 31st day of December, 1991.]
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(a) 53[***]
54[(b) “cost of any improvement”,—
(1) in relation to a capital asset being goodwill of a business 55[or a right to manufacture, produce or process any article or thing] 56[or right to carry on any business] shall be taken to be nil ; and
(2) in relation to any other capital asset,—]
(i) where the capital asset became the property of the previous owner or the assessee before the 57[1st day of April, 58[1981]], 59[***] means all expenditure of a capital nature incurred in making any additions or alterations to the capital asset on or after the said date by the previous owner or the assessee, and
(ii) in any other case, means all expenditure of a capital nature incurred in making any additions or alterations to the capital asset by the assessee after it became his property, and, where the capital asset became the property of the assessee by any of the modes specified in 60[sub-section (1) of] section 49, by the previous owner,
but does not include any expenditure which is deductible in computing the income chargeable under the head “Interest on securities”, “Income from house property”, “Profits and gains of business or profession”, or “Income from other sources”, and the expression “improvement” shall be construed accordingly.
61(2) 62[For the purposes of sections 48 and 49, “cost of acquisition” 63,—
64[(a) in relation to a capital asset, being goodwill of a business 65[or a trade mark or brand name associated with a business] 66[or a right to manufacture, produce or process any article or thing] 67[or right to carry on any business], tenancy rights, stage carriage permits or loom hours,—
(i) in the case of acquisition of such asset by the assessee by purchase from a previous owner, means the amount of the purchase price ; and
(ii) in any other case [not being a case falling under sub-clauses (i) to (iv) of sub-section (1) of section 49], shall be taken to be nil ;
(aa) 68[in a case where, by virtue of holding a capital asset, being a share or any other security69, within the meaning of clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) (hereafter in this clause referred to as the financial asset), the assessee—
(A) becomes entitled to subscribe to any additional financial asset ; or
(B) is allotted any additional financial asset without any payment,
then, subject to the provisions of sub-clauses (i) and (ii) of clause (b)],—
(i) in relation to the original financial asset, on the basis of which the assessee becomes entitled to any additional financial asset, means the amount actually paid for acquiring the original financial asset ;
(ii) in relation to any right to renounce the said entitlement to subscribe to the financial asset, when such right is renounced by the assessee in favour of any person, shall be taken to be nil in the case of such assessee ;
(iii) in relation to the financial asset, to which the assessee has subscribed on the basis of the said entitlement, means the amount actually paid by him for acquiring such asset ;
70[(iiia) in relation to the financial asset allotted to the assessee without any payment and on the basis of holding of any other financial asset, shall be taken to be nil in the case of such assessee ;] and
(iv) in relation to any financial asset purchased by any person in whose favour the right to subscribe to such asset has been renounced, means the aggregate of the amount of the purchase price paid by him to the person renouncing such right and the amount paid by him to the company or institution, as the case may be, for acquiring such financial asset ;]
71[(ab) in relation to a capital asset, being equity share or shares allotted to a shareholder of a recognised stock exchange in India under a scheme for 72[demutualisation or] corporatisation approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), shall be the cost of acquisition of his original membership of the exchange:]
73[Provided that the cost of a capital asset, being trading or clearing rights of the recognised stock exchange acquired by a shareholder who has been allotted equity share or shares under such scheme of demutualisation or corporatisation, shall be deemed to be nil;]
(b) in relation to any other capital asset,—]
(i) where the capital asset became the property of the assessee74 before the 75[1st day of April, 76[1981]], means the cost of acquisition of the asset to the assessee or the fair77 market value of the asset on the 78[1st day of April, 79[1981]], at the option of the assessee ;
(ii) where the capital asset became the property of the assessee80 by any of the modes specified in 81[sub-section (1) of] section 49, and the capital asset became the property of the previous owner before the 82[1st day of April, 83[1981]], means the cost of the capital asset to the previous owner or the fair84 market value of the asset on the 82[1st day of April, 83[1981]], at the option of the assessee ;
(iii) where the capital asset became the property of the assessee80 on the distribution of the capital assets of a company on its liquidation and the assessee has been assessed to income-tax under the head “Capital gains” in respect of that asset under section 46, means the fair84 market value of the asset on the date of distribution ;
(iv) 85[***]
86[(v) where the capital asset, being a share or a stock of a company, became the property of the assessee on—
(a) the consolidation and division of all or any of the share capital of the company into shares of larger amount than its existing shares,
(b) the conversion of any shares of the company into stock,
(c) the re-conversion of any stock of the company into shares,
(d) the sub-division of any of the shares of the company into shares of smaller amount, or
(e) the conversion of one kind of shares of the company into another kind,
means the cost of acquisition of the asset calculated with reference to the cost of acquisition of the shares or stock from which such asset is derived.]
(3) Where the cost for which the previous owner acquired the property cannot be ascertained, the cost of acquisition to the previous owner means the fair market value on the date on which the capital asset became the property of the previous owner.
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8855A. With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter89, the 90[Assessing] Officer may refer the valuation of capital asset to a Valuation Officer—
(a) in a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the 90[Assessing] Officer is of opinion that the value so claimed 91[is at variance with its fair market value];
(b) in any other case, if the 90[Assessing] Officer is of opinion—
(i) that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage92 of the value of the asset as so claimed or by more than such amount92 as may be prescribed in this behalf ; or
(ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do,
93and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clauses (ha) and (i) of sub-section (1) and sub-sections (3A) and (4) of section 23, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall with the necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the 94[Assessing] Officer under sub-section (1) of section 16A of that Act.
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Income from other sources.
(2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head “Income from other sources”, namely :—
(i) dividends ;
96[(ia) income referred to in sub-clause (viii) of clause (24) of section 2 ;]
97[(ib) income referred to in sub-clause (ix) of clause (24) of section 2 ;]
98[(ic) income referred to in sub-clause (x) of clause (24) of section 2, if such income is not chargeable to income-tax under the head “Profits and gains of business or profession” ;]
99[(id) income by way of interest on securities, if the income is not chargeable to income-tax under the head “Profits and gains of business or profession” ;]
(ii) income from machinery, plant or furniture belonging to the assessee and let on hire, if the income is not chargeable to income-tax under the head “Profits and gains of business or profession” ;
(iii) where an assessee lets on hire machinery, plant or furniture belonging to him and also buildings, and the letting of the buildings is inseparable from the letting of the said machinery, plant or furniture, the income from such letting, if it is not chargeable to income-tax under the head “Profits and gains of business or profession” ;
1[(iv) income referred to in sub-clause (xi) of clause (24) of section 2, if such income is not chargeable to income-tax under the head “Profits and gains of business or profession” or under the head “Salaries” ;]
2[(v) where any sum of money exceeding twenty-five thousand rupees is received without consideration by an individual or a Hindu undivided family from any person on or after the 1st day of September, 2004 3[but before the 1st day of April, 2006], the whole of such sum :
Provided that this clause shall not apply to any sum of money received—
(a) from any relative; or
(b) on the occasion of the marriage of the individual; or
(c) under a will or by way of inheritance; or
(d) in contemplation of death of the payer; or
4[(e) from any local authority as defined in the Explanation to clause (20) of section 10; or
(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or
(g) from any trust or institution registered under section 12AA.]
Explanation.—For the purposes of this clause, “relative” means—
(i) spouse of the individual;
(ii) brother or sister of the individual;
(iii) brother or sister of the spouse of the individual;
(iv) brother or sister of either of the parents of the individual;
(v) any lineal ascendant or descendant of the individual;
(vi) any lineal ascendant or descendant of the spouse of the individual;
(vii) spouse of the person referred to in clauses (ii) to (vi);]
5[(vi) where any sum of money, the aggregate value of which exceeds fifty thousand rupees, is received without consideration, by an individual or a Hindu undivided family, in any previous year from any person or persons on or after the 1st day of April, 2006 6[but before the 1st day of October, 2009], the whole of the aggregate value of such sum:
Provided that this clause shall not apply to any sum of money received—
(a) from any relative; or
(b) on the occasion of the marriage of the individual6a; or
(c) under a will or by way of inheritance; or
(d) in contemplation of death of the payer; or
(e) from any local authority as defined in the Explanation to clause (20) of section 10; or
(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or
(g) from any trust or institution registered under section 12AA.
Explanation.—For the purposes of this clause, “relative” means—
(ii) brother or sister of the individual;
(iii) brother or sister of the spouse of the individual;
(iv) brother or sister of either of the parents of the individual;
(v) any lineal ascendant or descendant of the individual;
(vi) any lineal ascendant or descendant of the spouse of the individual;
(vii) spouse of the person referred to in clauses (ii) to (vi);]
7[(vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,—
(a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;
8[(b) any immovable property,—
(i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;
(ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration:
Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of this sub-clause:
Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property;]
(c) any property, other than immovable property,—
(i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;
(ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration :
Provided that where the stamp duty value of immovable property as referred to in sub-clause (b) is disputed by the assessee on grounds mentioned in sub-section (2) of section 50C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of section 50C and sub-section (15) of section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of sub-clause (b) as they apply for valuation of capital asset under those sections :
Provided further that this clause shall not apply to any sum of money or any property received—
(a) from any relative; or
(b) on the occasion of the marriage of the individual; or
(c) under a will or by way of inheritance; or
(d) in contemplation of death of the payer or donor, as the case may be; or
(e) from any local authority as defined in the Explanation to clause (20) of section 10; or
(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or
(g) from any trust or institution registered under section 12AA.
(a) “assessable” shall have the meaning assigned to it in the Explanation 2 to sub-section (2) of section 50C;
(b) “fair market value” of a property, other than an immovable property, means the value determined in accordance with the method as may be prescribed9;
(c) “jewellery” shall have the meaning assigned to it in the Explanation to sub-clause (ii) of clause (14) of section 2;
(d) “property” 10[means the following capital asset of the assessee, namely:—]
(i) immovable property being land or building or both;
(ii) shares and securities;
(iii) jewellery;
(iv) archaeological collections;
(v) drawings;
(vi) paintings;
(vii) sculptures; 11[***]
(viii) any work of art; 12[or]
12[(ix) bullion;]
13[(e) “relative” means,—
(i) in case of an individual—
(A) spouse of the individual;
(B) brother or sister of the individual;
(C) brother or sister of the spouse of the individual;
(D) brother or sister of either of the parents of the individual;
(E) any lineal ascendant or descendant of the individual;
(F) any lineal ascendant or descendant of the spouse of the individual;
(G) spouse of the person referred to in items (B) to (F); and
(ii) in case of a Hindu undivided family, any member thereof;]
(f) “stamp duty value” means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property;]
14[(viia) where a firm or a company not being a company in which the public are substantially interested, receives, in any previous year, from any person or persons, on or after the 1st day of June, 2010, any property, being shares of a company not being a company in which the public are substantially interested,—
(i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;
(ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration :
Provided that this clause shall not apply to any such property received by way of a transaction not regarded as transfer under clause (via) or clause (vic) or clause (vicb) or clause (vid) or clause (vii) of section 47.
15[(viib) where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares:
Provided that this clause shall not apply where the consideration for issue of shares is received—
(i) by a venture capital undertaking from a venture capital company or a venture capital fund; or
(ii) by a company from a class or classes of persons as may be notified by the Central Government in this behalf.
Explanation.—For the purposes of this clause,—
(a) the fair market value of the shares shall be the value—
(i) as may be determined in accordance with such method as may be prescribed16; or
(ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature,
whichever is higher;
(b) “venture capital company”, “venture capital fund” and “venture capital undertaking” shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of 17[Explanation] to clause (23FB) of section 10;]
18[(viii) income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A.]
The following clause (ix) shall be inserted after clause (viii) of sub-section (2) of section 56 by the Finance (No. 2) Act, 2014 w.e.f. 1-4-2015 :
(ix) any sum of money received as an advance or otherwise in the course of negotiations for transfer of a capital asset, if,—
(a) such sum is forfeited; and
(b) the negotiations do not result in transfer of such capital asset.
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(i) in the case of dividends, 20[other than dividends referred to in section 115-O,] 21[or interest on securities], any reasonable sum paid by way of commission or remuneration to a banker or any other person for the purpose of realising such dividend 22[or interest] on behalf of the assessee ;
23[(ia) in the case of income of the nature referred to in sub-clause (x) of clause (24) of section 2 which is chargeable to income-tax under the head “Income from other sources”, deductions, so far as may be, in accordance with the provisions of clause (va) of sub-section (1) of section 36 ;]
(ii) in the case of income of the nature referred to in clauses (ii) and (iii) of sub-section (2) of section 56, deductions, so far as may be, in accordance with the provisions of sub-clause (ii) of clause (a) and clause (c) of section 30, section 31 and 24[sub-sections (1) 25[***] and (2)] of section 32 and subject to the provisions of 26[section 38] ;
27[(iia) in the case of income in the nature of family pension, a deduction of a sum equal to thirty-three and one-third per cent of such income or 28[fifteen] thousand rupees, whichever is less.
(iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose29 of making or earning such income;
30[(iv) in the case of income of the nature referred to in clause (viii) of sub-section (2) of section 56, a deduction of a sum equal to fifty per cent of such income and no deduction shall be allowed under any other clause of this section.]
31[***]
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(a) in the case of any assessee,—
(i) any personal expenses of the assessee ;
34[(ia) any expenditure of the nature referred to in sub-section (12)35 of section 40A ;]
(ii) any interest chargeable under this Act which is payable outside India (not being interest on a loan issued for public subscription before the 1st day of April, 1938) on which tax has not been paid or deducted under Chapter XVII-B 36[***] ;
(iii) any payment which is chargeable under the head “Salaries”, if it is payable outside India, unless tax has been paid thereon or deducted therefrom under Chapter XVII-B ;
(iv) 37[***]
(b) 38[***]
39[(1A) The provisions of sub-clause (iia) of clause (a) of section 40 shall, so far as may be, apply in computing the income chargeable under the head “Income from other sources” as they apply in computing the income chargeable under the head “Profits and gains of business or profession” .]
40[(2) The provisions of section 40A shall, so far as may be, apply in computing the income chargeable under the head “Income from other sources” as they apply in computing the income chargeable under the head “Profits and gains of business or profession” .]
41[(3) In the case of an assessee, being a foreign company, the provisions of section 44D shall, so far as may be, apply in computing the income chargeable under the head “Income from other sources” as they apply in computing the income chargeable under the head “Profits and gains of business or profession” .]
42[(4) In the case of an assessee having income chargeable under the head “Income from other sources”, no deduction in respect of any expenditure or allowance in connection with such income shall be allowed under any provision of this Act in computing the income by way of any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature, whatsoever :
Provided that nothing contained in this sub-section shall apply in computing the income of an assessee, being the owner of horses maintained by him for running in horse races, from the activity of owning and maintaining such horses.
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(2) 43[***]
(3) 44[***]
45[***]
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(i) by way of trust which is not revocable during the lifetime of the beneficiary, and, in the case of any other transfer, which is not revocable during the lifetime of the transferee ; or
(ii) made before the 1st day of April, 1961, which is not revocable for a period exceeding six years :
Provided that the transferor derives no direct or indirect benefit from such income in either case.
(2) Notwithstanding anything contained in sub-section (1), all income arising to any person by virtue of any such transfer shall be chargeable to income-tax as the income of the transferor as and when the power to revoke the transfer arises, and shall then be included in his total income.
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(i) by way of trust which is not revocable during the lifetime of the beneficiary, and, in the case of any other transfer, which is not revocable during the lifetime of the transferee ; or
(ii) made before the 1st day of April, 1961, which is not revocable for a period exceeding six years :
Provided that the transferor derives no direct or indirect benefit from such income in either case.
(2) Notwithstanding anything contained in sub-section (1), all income arising to any person by virtue of any such transfer shall be chargeable to income-tax as the income of the transferor as and when the power to revoke the transfer arises, and shall then be included in his total income.
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(i) 55[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
(ii) to the spouse56 of such individual56 by way of salary, commission, fees or any other form of remuneration whether in cash or in kind from a concern in which such individual has a substantial interest :
57[Provided that nothing in this clause shall apply in relation to any income arising to the spouse where the spouse56 possesses technical or professional qualifications56 and the income is solely attributable to the application of his or her technical or professional knowledge and experience ;]
(iii) 58[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
(iv) subject to the provisions of clause (i) of section 27, 59[* * *] to the spouse60 of such individual from assets transferred60 directly or indirectly to the spouse by such individual otherwise than for adequate consideration60 or in connection with an agreement to live apart ;
(v) 61[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
(vi) to the son’s wife, 62[* * *] of such individual, from assets transferred60 directly or indirectly on or after the 1st day of June, 1973, to the son’s wife 62[* * *] by such individual otherwise than for adequate consideration60; 63[* * *]
(vii) to any person64 or association of persons from assets transferred64 directly or indirectly otherwise than for adequate consideration64 to the person or association of persons by such individual, to the extent to which the income from such assets is for the immediate or deferred benefit64 of his or her spouse 65[* * *]; and]
66[(viii) to any person67 or association of persons from assets transferred67 directly or indirectly on or after the 1st day of June, 1973, otherwise than for adequate consideration67, to the person or association of persons by such individual, to the extent to which the income from such assets is for the immediate or deferred benefit67 of his son’s wife 68[* * *].]
69[Explanation 1.—For the purposes of clause (ii), the individual in computing whose total income the income referred to in that clause is to be included, shall be the husband or wife whose total income (excluding the income referred to in that clause) is greater ; and where any such income is once included in the total income of either spouse, any such income arising in any succeeding year shall not be included in the total income of the other spouse unless the Assessing Officer is satisfied, after giving that spouse an opportunity of being heard, that it is necessary70 so to do.]
Explanation 2.—For the purposes of clause (ii), an individual shall be deemed to have a substantial interest in a concern—
(i) in a case where the concern is a company, if its shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than twenty per cent of the voting power are, at any time during the previous year, owned beneficially by such person or partly by such person and partly by one or more of his relatives ;
(ii) in any other case, if such person is entitled, or such person and one or more of his relatives are entitled in the aggregate, at any time during the previous year, to not less than twenty per cent of the profits of such concern.
Explanation 2A.—71[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
72[Explanation 3.—For the purposes of clauses (iv) and (vi), where the assets transferred directly or indirectly by an individual to his spouse or son’s wife (hereafter in this Explanation referred to as “the transferee” ) are invested by the transferee,—
(i) in any business, such investment being not in the nature of contribution of capital as a partner in a firm or, as the case may be, for being admitted to the benefits of partnership in a firm, that part of the income arising out of the business to the transferee in any previous year, which bears the same proportion to the income of the transferee from the business as the value of the assets aforesaid as on the first day of the previous year bears to the total investment in the business by the transferee as on the said day ;
(ii) in the nature of contribution of capital as a partner in a firm, that part of the interest receivable by the transferee from the firm in any previous year, which bears the same proportion to the interest receivable by the transferee from the firm as the value of investment aforesaid as on the first day of the previous year bears to the total investment by way of capital contribution as a partner in the firm as on the said day,
shall be included in the total income of the individual in that previous year.]
73[(1A) In computing the total income of any individual, there shall be included all such income as arises or accrues to his minor child 74[, not being a minor child suffering from any disability of the nature specified in section 80U] :
Provided that nothing contained in this sub-section shall apply in respect of such income as arises or accrues to the minor child on account of any—
(a) manual work done by him; or
(b) activity involving application of his skill, talent or specialised know-ledge and experience.
(a) where the marriage of his parents subsists, in the income of that parent whose total income (excluding the income includible under this sub-section) is greater ; or
(b) where the marriage of his parents does not subsist, in the income of that parent who maintains the minor child in the previous year,
and where any such income is once included in the total income of either parent, any such income arising in any succeeding year shall not be included in the total income of the other parent, unless the Assessing Officer is satisfied, after giving that parent an opportunity of being heard, that it is necessary so to do.]
75[(2) Where, in the case of an individual being a member of a Hindu undivided family, any property having been the separate property of the individual has, at any time after the 31st day of December, 1969, been converted by the individual into property belonging to the family through the act of impressing such separate property with the character of property belonging to the family or throwing it 76[into the common stock of the family or been transferred by the individual, directly or indirectly, to the family otherwise than for adequate consideration (the property so converted or transferred being hereinafter referred to as the converted property)], then, notwithstanding anything contained in any other provision of this Act or in any other law for the time being in force, for the purpose of computation of the total income of the individual under this Act for any assessment year commencing on or after the 1st day of April, 1971,—
(a) the individual shall be deemed to have transferred the converted property, through the family, to the members of the family for being held by them jointly ;
(b) the income derived from the converted property or any part thereof77 78[* * *] shall be deemed to arise to the individual and not to the family ;
79[(c) where the converted property has been the subject-matter of a partition (whether partial or total) amongst the members of the family, the income derived from such converted property as is received by the spouse 80[* * *] on partition shall be deemed to arise to the spouse 80[* * *] from assets transferred indirectly by the individual to the spouse 80[* * *] and the provisions of sub-section (1) shall, so far as may be, apply accordingly :]
Provided that the income referred to in clause (b) or clause (c) shall, on being included in the total income of the individual, be excluded from the total income of the family or, as the case may be, the spouse 81[* * *] of the individual.
Explanation 82[1].—For the purposes of sub-section (2),—
83[* * *] “property” includes any interest in property, movable or immovable, the proceeds of sale thereof and any money or investment for the time being representing the proceeds of sale thereof and where the property is converted into any other property by any method, such other property.
84[* * *]]
85[Explanation 2.—For the purposes of this section, “income” includes loss.]
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Provided that where any such asset is held jointly by more than one person, they shall be jointly and severally liable to pay the tax which is attributable to the income from the assets so included.
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(a) any interest, salary, bonus, commission or remuneration by whatever name called, paid to any member in respect of the previous year shall be deducted from the total income of the association or body and the balance ascertained and apportioned among the members in the proportions in which they are entitled to share in the income of the association or body ;
(b) where the amount apportioned to a member under clause (a) is a profit, any interest, salary, bonus, commission or remuneration aforesaid paid to the member by the association or body in respect of the previous year shall be added to that amount, and the result shall be treated as the member’s share in the income of the association or body ;
(c) where the amount apportioned to a member under clause (a) is a loss, any interest, salary, bonus, commission or remuneration aforesaid paid to the member by the association or body in respect of the previous year shall be adjusted against that amount, and the result shall be treated as the member’s share in the income of the association or body.
(2) The share of a member in the income or loss of the association or body, as computed under sub-section (1), shall, for the purposes of assessment, be apportioned under the various heads of income in the same manner in which the income or loss of the association or body has been determined under each head of income.
(3) Any interest paid by a member on capital borrowed by him for the purposes of investment in the association or body shall, in computing his share chargeable under the head “Profits and gains of business or profession” in respect of his share in the income of the association or body, be deducted from his share.
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94[Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless—
(a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and
(b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:
Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.]
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9869A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income99, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the 1[Assessing] Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income99 of the assessee for such financial year.]
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9869B. Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the 3[Assessing] Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the 3[Assessing] Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year.]
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569C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the 6[Assessing] Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year :]
7[Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.]
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969D. Where any amount is borrowed on a hundi from, or any amount due thereon is repaid to, any person otherwise than through an account payee cheque drawn on a bank, the amount so borrowed or repaid shall be deemed to be the income of the person borrowing or repaying the amount aforesaid for the previous year in which the amount was borrowed or repaid, as the case may be :
Provided that, if in any case any amount borrowed on a hundi has been deemed under the provisions of this section to be the income of any person, such person shall not be liable to be assessed again in respect of such amount under the provisions of this section on repayment of such amount.
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(2) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any short-term capital asset is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset.
(3) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any capital asset (other than a short-term capital asset) is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset not being a short-term capital asset.]
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(2) Where in respect of any assessment year, the net result of the computation under any head of income, other than “Capital gains”, is a loss and the assessee has income assessable under the head “Capital gains”, such loss may, subject to the provisions of this Chapter, be set off against his income, if any, assessable for that assessment year under any head of income including the head “Capital gains” (whether relating to short-term capital assets or any other capital assets).
14[(2A) Notwithstanding anything contained in sub-section (1) or sub-section (2), where in respect of any assessment year, the net result of the computation under the head “Profits and gains of business or profession” is a loss and the assessee has income assessable under the head “Salaries”, the assessee shall not be entitled to have such loss set off against such income.]
(3) Where in respect of any assessment year, the net result of the computation under the head “Capital gains” is a loss and the assessee has income assessable under any other head of income, the assessee shall not be entitled to have such loss set off against income under the other head.]
15[(4) Where the net result of the computation under the head “Income from house property” is a loss, in respect of the assessment years commencing on the 1st day of April, 1995 and the 1st day of April, 1996, such loss shall be first set off under sub-sections (1) and (2) and thereafter the loss referred to in section 71A shall be set off in the relevant assessment year in accordance with the provisions of that section.]
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(i) be set off against the income from house property assessable for that assessment year; and
(ii) the loss, if any, which has not been set off wholly, the amount of loss not so set off,
shall be carried forward to the following assessment year, not being more than eight assessment years immediately succeeding the assessment year for which the loss was first computed.]
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(i) it shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year ;
21[* * *]
(ii) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on :]
22[Provided that where the whole or any part of such loss is sustained in any such business as is referred to in section 33B which is discontinued in the circumstances specified in that section, and, thereafter, at any time before the expiry of the period of three years referred to in that section, such business is re-established, reconstructed or revived by the assessee, so much of the loss as is attributable to such business shall be carried forward to the assessment year relevant to the previous year in which the business is so re-established, reconstructed or revived, and—
(a) it shall be set off against the profits and gains, if any, of that business or any other business carried on by him and assessable for that assessment year; and
(b) if the loss cannot be wholly so set off, the amount of loss not so set off shall, in case the business so re-established, reconstructed or revived continues to be carried on by the assessee, be carried forward to the following assessment year and so on for seven assessment years immediately succeeding.]
(2) Where any allowance or part thereof is, under sub-section (2) of section 32 or sub-section (4) of section 35, to be carried forward, effect shall first be given to the provisions of this section.
(3) No loss 23[(other than the loss referred to in the proviso to sub-section (1) of this section)] shall be carried forward under this section for more than eight assessment years immediately succeeding the assessment year for which the loss was first computed.
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(a) a company owning an industrial undertaking or a ship or a hotel with another company; or
(b) a banking company referred to in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949)27 with a specified bank; or
(c) one or more public sector company or companies engaged in the business of operation of aircraft with one or more public sector company or companies engaged in similar business,
then, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or, as the case may be, allowance for unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation was effected, and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly.]
28[(2) Notwithstanding anything contained in sub-section (1), the accumulated loss shall not be set off or carried forward and the unabsorbed depreciation shall not be allowed in the assessment of the amalgamated company unless—
(a) the amalgamating company—
(i) has been engaged in the business, in which the accumulated loss occurred or depreciation remains unabsorbed, for three or more years;
(ii) has held continuously as on the date of the amalgamation at least three-fourths of the book value of fixed assets held by it two years prior to the date of amalgamation;
(b) the amalgamated company—
(i) holds continuously for a minimum period of five years from the date of amalgamation at least three-fourths of the book value of fixed assets of the amalgamating company acquired in a scheme of amalgamation;
(ii) continues the business of the amalgamating company for a minimum period of five years from the date of amalgamation;
(iii) fulfils such other conditions as may be prescribed29 to ensure the revival of the business of the amalgamating company or to ensure that the amalgamation is for genuine business purpose.]
(3) In a case where any of the conditions laid down in sub-section (2) are not complied with, the set off of loss or allowance of depreciation made in any previous year in the hands of the amalgamated company shall be deemed to be the income of the amalgamated company chargeable to tax for the year in which such conditions are not complied with.
(4) Notwithstanding anything contained in any other provisions of this Act, in the case of a demerger, the accumulated loss and the allowance for unabsorbed depreciation of the demerged company shall—
(a) where such loss or unabsorbed depreciation is directly relatable to the undertakings transferred to the resulting company, be allowed to be carried forward and set off in the hands of the resulting company;
(b) where such loss or unabsorbed depreciation is not directly relatable to the undertakings transferred to the resulting company, be apportioned between the demerged company and the resulting company in the same proportion in which the assets of the undertakings have been retained by the demerged company and transferred to the resulting company, and be allowed to be carried forward and set off in the hands of the demerged company or the resulting company, as the case may be.
(5) The Central Government may, for the purposes of this Act, by notification in the Official Gazette, specify such conditions as it considers necessary to ensure that the demerger is for genuine business purposes.
(6) Where there has been reorganisation of business, whereby, a firm is succeeded by a company fulfilling the conditions laid down in clause (xiii) of section 47 or a proprietary concern is succeeded by a company fulfilling the conditions laid down in clause (xiv) of section 47, then, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the predecessor firm or the proprietary concern, as the case may be, shall be deemed to be the loss or allowance for depreciation of the successor company for the purpose of previous year in which business reorganisation was effected and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly :
Provided that if any of the conditions laid down in the proviso to clause (xiii) or the proviso to clause (xiv) to section 47 are not complied with, the set off of loss or allowance of depreciation made in any previous year in the hands of the successor company, shall be deemed to be the income of the company chargeable to tax in the year in which such conditions are not complied with.
30[(6A) Where there has been reorganisation of business whereby a private company or unlisted public company is succeeded by a limited liability partnership fulfilling the conditions laid down in the proviso to clause (xiiib) of section 47, then, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the predecessor company, shall be deemed to be the loss or allowance for depreciation of the successor limited liability partnership for the purpose of the previous year in which business reorganisation was effected and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly :
Provided that if any of the conditions laid down in the proviso to clause (xiiib) of section 47 are not complied with, the set off of loss or allowance of depreciation made in any previous year in the hands of the successor limited liability partnership, shall be deemed to be the income of the limited liability partnership chargeable to tax in the year in which such conditions are not complied with.]
(7) For the purposes of this section,—
31[(a) “accumulated loss” means so much of the loss of the predecessor firm or the proprietary concern or the private company or unlisted public company before conversion into limited liability partnership or the amalgamating company or the demerged company, as the case may be, under the head “Profits and gains of business or profession” (not being a loss sustained in a speculation business) which such predecessor firm or the proprietary concern or the company or amalgamating company or demerged company, would have been entitled to carry forward and set off under the provisions of section 72 if the reorganisation of business or conversion or amalgamation or demerger had not taken place;]
32[(aa) “industrial undertaking” means any undertaking which is engaged in—
(i) the manufacture or processing of goods; or
(ii) the manufacture of computer software; or
(iii) the business of generation or distribution of electricity or any other form of power; or
33[(iiia) the business of providing telecommunication services, whether basic or cellular, including radio paging, domestic satellite service, network of trunking, broadband network and internet services; or]
(iv) mining; or
(v) the construction of ships, aircrafts or rail systems;]
34[(b) “unabsorbed depreciation” means so much of the allowance for depreciation of the predecessor firm or the proprietary concern or the private company or unlisted public company before conversion into limited liability partnership or the amalgamating company or the demerged company, as the case may be, which remains to be allowed and which would have been allowed to the predecessor firm or the proprietary concern or the company or amalgamating company or demerged company, as the case may be, under the provisions of this Act, if the reorganisation of business or conversion or amalgamation or demerger had not taken place;]]
35[(c) “specified bank” means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955) or a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959) or a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980).]
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Explanation.—For the purposes of this section,—
(i) “accumulated loss” means so much of the loss of the amalgamating banking company under the head “Profits and gains of business or profession” (not being a loss sustained in a speculation business) which such amalgamating banking company, would have been entitled to carry forward and set-off under the provisions of section 72 if the amalgamation had not taken place;
(ii) “banking company” shall have the same meaning assigned to it in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949)37;
(iii) “banking institution” shall have the same meaning assigned to it in sub-section (15) of section 45 of the Banking Regulation Act, 1949 (10 of 1949)37;
(iv) “unabsorbed depreciation” means so much of the allowance for depreciation of the amalgamating banking company which remains to be allowed and which would have been allowed to such banking company if amalgamation had not taken place.]
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(2) The provisions of this section shall apply if—
(a) the predecessor co-operative bank—
(i) has been engaged in the business of banking for three or more years; and
(ii) has held at least three-fourths of the book value of fixed assets as on the date of the business reorganisation, continuously for two years prior to the date of business reorganisation;
(b) the successor co-operative bank—
(i) holds at least three-fourths of the book value of fixed assets of the predecessor co-operative bank acquired through business reorganisation, continuously for a minimum period of five years immediately succeeding the date of business reorganisation;
(ii) continues the business of the predecessor co-operative bank for a minimum period of five years from the date of business reorganisation; and
(iii) fulfils such other conditions as may be prescribed to ensure the revival of the business of the predecessor co-operative bank or to ensure that the business reorganisation is for genuine business purpose.
(3) The amount of set-off of the accumulated loss and unabsorbed depreciation, if any, allowable to the assessee being a resulting co-operative bank shall be,—
(i) the accumulated loss or unabsorbed depreciation of the demerged co-operative bank if the whole of the amount of such loss or unabsorbed depreciation is directly relatable to the undertakings transferred to the resulting co-operative bank; or
(ii) the amount which bears the same proportion to the accumulated loss or unabsorbed depreciation of the demerged co-operative bank as the assets of the undertaking transferred to the resulting co-operative bank bears to the assets of the demerged co-operative bank if such accumulated loss or unabsorbed depreciation is not directly relatable to the undertakings transferred to the resulting co-operative bank.
(4) The Central Government may, for the purposes of this section, by notification in the Official Gazette, specify such other conditions as it considers necessary, other than those prescribed under sub-clause (iii) of clause (b) of sub-section (2), to ensure that the business reorganisation is for genuine business purposes.
(5) The period commencing from the beginning of the previous year and ending on the date immediately preceding the date of business reorganisation, and the period commencing from the date of such business reorganisation and ending with the previous year shall be deemed to be two different previous years for the purposes of set off and carry forward of loss and allowance for depreciation.
(6) In a case where the conditions specified in sub-section (2) or notified under sub-section (4) are not complied with, the set off of accumulated loss or unabsorbed depreciation allowed in any previous year to the successor co-operative bank shall be deemed to be the income of the successor co-operative bank chargeable to tax for the year in which the conditions are not complied with.
(7) For the purposes of this section,—
(a) “accumulated loss” means so much of loss of the amalgamating co-operative bank or the demerged co-operative bank, as the case may be, under the head “Profits and gains of business or profession” (not being a loss sustained in a speculation business) which such amalgamating co-operative bank or the demerged co-operative bank, would have been entitled to carry forward and set-off under the provisions of section 72 as if the business reorganisation had not taken place;
(b) “unabsorbed depreciation” means so much of the allowance for depreciation of the amalgamating co-operative bank or the demerged co-operative bank, as the case may be, which remains to be allowed and which would have been allowed to such bank as if the business reorganisation had not taken place;
(c) the expressions “amalgamated co-operative bank”, “amalgamating co-operative bank”, “amalgamation”, “business reorganisation”, “co-operative bank”, “demerged co-operative bank”, “demerger”, “predecessor co-operative bank”, “successor co-operative bank” and “resulting co-operative bank” shall have the meanings respectively assigned to them in section 44DB.]
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(2) Where for any40 assessment year any loss computed in respect of a speculation business has not been wholly set off under sub-section (1), so much of the loss as is not so set off or the whole loss where the assessee had no income from any other speculation business, shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and—
(i) it shall be set off against the profits and gains, if any, of any speculation business carried on by him assessable for that assessment year; and
(ii) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on.
(3) In respect of allowance on account of depreciation or capital expenditure on scientific research, the provisions of sub-section (2) of section 72 shall apply in relation to speculation business as they apply in relation to any other business.
(4) No loss shall be carried forward under this section for more than 41[four] assessment years immediately succeeding the assessment year for which the loss was first computed.
42[Explanation.—Where any part of the business of a company (43[other than a company whose gross total income consists mainly of income which is chargeable under the heads “Interest on securities”, “Income from house property”, “Capital gains” and “Income from other sources” ], or a company 43a[the principal business of which is the business of banking] or the granting of loans and advances) consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be deemed to be carrying on a speculation business44 to the extent to which the business consists of the purchase and sale of such shares.]
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(2) Where for any assessment year any loss computed in respect of the specified business referred to in sub-section (1) has not been wholly set off under sub-section (1), so much of the loss as is not so set off or the whole loss where the assessee has no income from any other specified business, shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and—
(i) it shall be set off against the profits and gains, if any, of any specified business carried on by him assessable for that assessment year; and
(ii) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on.]
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(a) in so far as such loss relates to a short-term capital asset, it shall be set off against income, if any, under the head “Capital gains” assessable for that assessment year in respect of any other capital asset;
(b) in so far as such loss relates to a long-term capital asset, it shall be set off against income, if any, under the head “Capital gains” assessable for that assessment year in respect of any other capital asset not being a short-term capital asset;
(c) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on.]
(2) No loss shall be carried forward under this section for more than eight assessment years immediately succeeding the assessment year for which the loss was first computed.
(3) 48[Omitted by the Finance Act, 2002, w.e.f. 1-4-2003.]]
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(2) 51[* * *]
52[(3) 53[* * *] In the case of an assessee, being the owner of horses maintained by him for running in horse races (such horses being hereafter in this sub-section referred to as race horses), 54[the amount of loss incurred by the assessee in the activity of owning and maintaining race horses in any assessment year shall not be set off against income, if any, from any source other than the activity of owning and maintaining race horses in that year and] shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year and—
(a) it shall be set off against the income, if any, 55[from the activity of own-ing and maintaining race horses] assessable for that assessment year :
Provided that the activity of owning and maintaining race horses is carried on by him in the previous year relevant for that assessment year ; and
(b) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on; so, however, that no portion of the loss shall be carried forward for more than four assessment years immediately succeeding the assessment year for which the loss was first computed.
(a) “amount of loss incurred by the assessee in the activity of owning and maintaining race horses” means—
(i) in a case where the assessee has no income by way of stake money, the amount of expenditure (not being in the nature of capital expenditure) laid out or expended by him wholly and exclusively for the purposes of maintaining race horses;
(ii) in a case where the assessee has income by way of stake money, the amount by which such income falls short of the amount of expenditure (not being in the nature of capital expenditure) laid out or expended by the assessee wholly and exclusively for the purposes of maintaining race horses;
(b) “horse race” means a horse race upon which wagering or betting may be lawfully made;
(c) “income by way of stake money” means the gross amount of prize money received on a race horse or race horses by the owner thereof on account of the horse or horses or any one or more of the horses winning or being placed second or in any lower position in horse races.]
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(2) Where any person carrying on any business or profession has been succeeded in such capacity by another person otherwise than by inheritance, nothing in this Chapter shall entitle any person other than the person incurring the loss to have it carried forward and set off against his income.
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(a) on the last day of the previous year the shares of the company carry-ing not less than fifty-one per cent of the voting power were beneficially held by persons who beneficially held shares of the company carrying not less than fifty-one per cent of the voting power on the last day of the year or years in which the loss was incurred 60[* * *] :
61[Provided that nothing contained in this section shall apply to a case where a change in the said voting power takes place in a previous year consequent upon the death of a shareholder or on account of transfer of shares by way of gift to any relative of the shareholder making such gift :]
62[Provided further that nothing contained in this section shall apply to any change in the shareholding of an Indian company which is a subsidiary of a foreign company as a result of amalgamation or demerger of a foreign company subject to the condition that fifty-one per cent shareholders of the amalgamating or demerged foreign company continue to be the shareholders of the amalgamated or the resulting foreign company.]
(b) 63[Omitted by the Finance Act, 1988, w.e.f. 1-4-1989.]
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A.—General
(2) The aggregate amount of the deductions69 under this Chapter shall not, in any case, exceed the gross total income of the assessee.
70[(3) Where, in computing the total income of an association of persons or a body of individuals, any deduction is admissible under section 80G or section 80GGA 71[or section 80GGC] or section 80HH or section 80HHA or section 80HHB or section 80HHC or section 80HHD or section 80-I or section 80-IA 72[or section 80-IB] 73[or section 80-IC] 74[or section 80-ID or section 80-IE] or section 80J75 or section 80JJ76, no deduction under the same section shall be made in computing the total income of a member of the association of persons or body of individuals in relation to the share of such member in the income of the association of persons or body of individuals.]
77[(4) Notwithstanding anything to the contrary contained in section 10A or section 10AA or section 10B or section 10BA or in any provisions of this Chapter under the heading “C—Deductions in respect of certain incomes”, where, in the case of an assessee, any amount of profits and gains of an undertaking or unit or enterprise or eligible business is claimed and allowed as a deduction under any of those provisions for any assessment year, deduction in respect of, and to the extent of, such profits and gains shall not be allowed under any other provisions of this Act for such assessment year and shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible business, as the case may be.
(5) Where the assessee fails to make a claim in his return of income for any deduction under section 10A or section 10AA or section 10B or section 10BA or under any provision of this Chapter under the heading “C.—Deductions in respect of certain incomes”, no deduction shall be allowed to him thereunder.]
78[(6) Notwithstanding anything to the contrary contained in section 10A or section 10AA or section 10B or section 10BA or in any provisions of this Chapter under the heading “C—Deductions in respect of certain incomes”, where any goods or services held for the purposes of the undertaking or unit or enterprise or eligible business are transferred to any other business carried on by the assessee or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the undertaking or unit or enterprise or eligible business and, the consideration, if any, for such transfer as recorded in the accounts of the undertaking or unit or enterprise or eligible business does not correspond to the market value of such goods or services as on the date of the transfer, then, for the purposes of any deduction under this Chapter, the profits and gains of such undertaking or unit or enterprise or eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date.
(i) in relation to any goods or services sold or supplied, means the price that such goods or services would fetch if these were sold by the undertaking or unit or enterprise or eligible business in the open market, subject to statutory or regulatory restrictions, if any;
(ii) in relation to any goods or services acquired, means the price that such goods or services would cost if these were acquired by the undertaking or unit or enterprise or eligible business from the open market, subject to statutory or regulatory restrictions, if any;]
79[(iii) in relation to any goods or services sold, supplied or acquired means the arm’s length price as defined in clause (ii) of section 92F of such goods or services, if it is a specified domestic transaction referred to in section 92BA.]
80[(7) Where a deduction under any provision of this Chapter under the heading “C.—Deductions in respect of certain incomes” is claimed and allowed in respect of profits of any of the specified business referred to in clause (c) of sub-section (8) of section 35AD for any assessment year, no deduction shall be allowed under the provisions of section 35AD in relation to such specified business for the same or any other assessment year.]
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8380AB. Where any deduction is required to be made or allowed under any section 84[* * *] included in this Chapter under the heading “C.—Deductions in respect of certain incomes” in respect of any income of the nature specified in that section which is included in the gross total income of the assessee, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income.]
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(1) 88[* * *]
(2) 89[* * *]
(3) 90[* * *]
(4) 91[* * *]
(5) “gross total income” means the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter 92[* * *] 93[* * *];
(6) 94[* * *]
(7) 95[* * *]
(8) 96[* * *]
(9) 97[* * *].]
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B.—Deductions in respect of certain payments
9980C. 1(1) In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted, in accordance with and subject to the provisions of this section, the whole of the amount paid or deposited in the previous year, being the aggregate of the sums referred to in sub-section (2), as does not exceed 1a[one lakh rupees].
(2) The sums referred to in sub-section (1) shall be any sums paid or deposited in the previous year by the assessee—
(i) to effect or to keep in force an insurance on the life of persons specified in sub-section (4);
(ii) to effect or to keep in force a contract for a deferred annuity, not being an annuity plan referred to in clause (xii), on the life of persons specified in sub-section (4):
Provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lieu of the payment of the annuity;
(iii) by way of deduction from the salary payable by or on behalf of the Government to any individual being a sum deducted in accordance with the conditions of his service, for the purpose of securing to him a deferred annuity or making provision for his spouse or children, in so far as the sum so deducted does not exceed one-fifth of the salary;
(iv) as a contribution by an individual to any provident fund to which the Provident Funds Act, 1925 (19 of 1925) applies;
(v) as a contribution to any provident fund set up by the Central Government and notified2 by it in this behalf in the Official Gazette, where such contribution is to an account standing in the name of any person specified in sub-section (4);
(vi) as a contribution by an employee to a recognised provident fund;
(vii) as a contribution by an employee to an approved superannuation fund;
(viii) as subscription to any such security of the Central Government or any such deposit scheme as that Government may, by notification in the Official Gazette, specify in this behalf;
(ix) as subscription to any such savings certificate as defined in clause (c) of section 23 of the Government Savings Certificates Act, 1959 (46 of 1959), as the Central Government may, by notification4 in the Official Gazette, specify in this behalf;
(x) as a contribution, in the name of any person specified in sub-section (4), for participation in the Unit-linked Insurance Plan, 1971 (hereafter in this section referred to as the Unit-linked Insurance Plan) specified in Schedule II of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);
(xi) as a contribution in the name of any person specified in sub-section (4) for participation in any such unit-linked insurance plan of the LIC Mutual Fund 5[referred to in] clause (23D) of section 10, as the Central Government may, by notification6 in the Official Gazette, specify in this behalf;
(xii) to effect or to keep in force a contract for such annuity plan of the Life Insurance Corporation or any other insurer as the Central Government may, by notification7 in the Official Gazette, specify;
(xiii) as subscription to any units of any Mutual Fund 8[referred to in] clause (23D) of section 10 or from the Administrator or the specified company under any plan formulated in accordance with such scheme as the Central Government may, by notification9 in the Official Gazette, specify in this behalf;
(xiv) as a contribution by an individual to any pension fund set up by any Mutual Fund 10[referred to in] clause (23D) of section 10 or by the Administrator or the specified company, as the Central Government may, by notification11 in the Official Gazette, specify in this behalf;
(xv) as subscription to any such deposit scheme of, or as a contribution to any such pension fund set up by, the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987) (hereafter in this section referred to as the National Housing Bank), as the Central Government may, by notification in the Official Gazette, specify12 in this behalf;
(xvi) as subscription to any such deposit scheme of—
(a) a public sector company which is engaged in providing long-term finance for construction or purchase of houses in India for residential purposes; or
(b) any authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both,
as the Central Government may, by notification13 in the Official Gazette, specify in this behalf;
(xvii) as tuition fees (excluding any payment towards any development fees or donation or payment of similar nature), whether at the time of admission or thereafter,—
(a) to any university, college, school or other educational institution situated within India;
(b) for the purpose of full-time education of any of the persons specified in sub-section (4);
(xviii) for the purposes of purchase or construction of a residential house property the income from which is chargeable to tax under the head “Income from house property” (or which would, if it had not been used for the assessee’s own residence, have been chargeable to tax under that head), where such payments are made towards or by way of—
(a) any instalment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis; or
(b) any instalment or part payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him; or
(c) repayment of the amount borrowed by the assessee from—
(1) the Central Government or any State Government, or
(2) any bank, including a co-operative bank, or
(3) the Life Insurance Corporation, or
(4) the National Housing Bank, or
(5) any public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes which is eligible for deduction under clause (viii) of sub-section (1) of section 36, or
(6) any company in which the public are substantially interested or any co-operative society, where such company or co-operative society is engaged in the business of financing the construction of houses, or
(7) the assessee’s employer where such employer is an authority or a board or a corporation or any other body established or constituted under a Central or State Act, or
(8) the assessee’s employer where such employer is a public company or a public sector company or a university established by law or a college affiliated to such university or a local authority or a co-operative society; or
(d) stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee,
but shall not include any payment towards or by way of—
(A) the admission fee, cost of share and initial deposit which a shareholder of a company or a member of a co-operative society has to pay for becoming such shareholder or member; or
(B) the cost of any addition or alteration to, or renovation or repair of, the house property which is carried out after the issue of the completion certificate in respect of the house property by the authority competent to issue such certificate or after the house property or any part thereof has either been occupied by the assessee or any other person on his behalf or been let out; or
(C) any expenditure in respect of which deduction is allowable under the provisions of section 24;
(xix) as subscription to equity shares or debentures forming part of any eligible issue of capital approved by the Board on an application made by a public company or as subscription to any eligible issue of capital by any public financial institution in the prescribed form14.
(i) “eligible issue of capital” means an issue made by a public company formed and registered in India or a public financial institution and the entire proceeds of the issue are utilised wholly and exclusively for the purposes of any business referred to in sub-section (4) of section 80-IA;
(ii) “public company” shall have the meaning assigned to it in section 315 of the Companies Act, 1956 (1 of 1956);
(iii) “public financial institution” shall have the meaning assigned to it in section 4A16 of the Companies Act, 1956 (1 of 1956);
(xx) as subscription to any units of any mutual fund referred to in clause (23D) of section 10 and approved by the Board on an application made by such mutual fund in the prescribed form17:
Provided that this clause shall apply if the amount of subscription to such units is subscribed only in the eligible issue of capital of any company.
18[(xxi) as term deposit—
(a) for a fixed period of not less than five years with a scheduled bank; and
(b) which is in accordance with a scheme19 framed and notified, by the Central Government, in the Official Gazette for the purposes of this clause.
Explanation.—For the purposes of this clause, “scheduled bank” means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), or a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), or a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank, being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934);]
20[(xxii) as subscription to such bonds issued by the National Bank for Agriculture and Rural Development, as the Central Government may, by notification in the Official Gazette21, specify in this behalf;]
22[(xxiii) in an account under the Senior Citizens Savings Scheme Rules, 200423;
(xxiv) as five year time deposit in an account under the Post Office Time Deposit Rules, 1981.]
(3) The provisions of sub-section (2) shall apply only to so much of any premium or other payment made on an 24[insurance policy, other than a contract for a deferred annuity, issued on or before the 31st day of March, 2012,] as is not in excess of twenty per cent of the actual capital sum assured.
(i) of the value of any premiums agreed to be returned, or
(ii) of any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person.
25[(3A) The provisions of sub-section (2) shall apply only to so much of any premium or other payment made on an insurance policy, other than a contract for a deferred annuity, issued on or after the 1st day of April, 2012 as is not in excess of ten per cent of the actual capital sum assured :
26[Provided that where the policy, issued on or after the 1st day of April, 2013, is for insurance on life of any person, who is—
(a) a person with disability or a person with severe disability as referred to in section 80U, or
(b) suffering from disease or ailment as specified in the rules made under section 80DDB,
the provisions of this sub-section shall have effect as if for the words “ten per cent”, the words “fifteen per cent” had been substituted.]
Explanation.—For the purposes of this sub-section, “actual capital sum assured” in relation to a life insurance policy shall mean the minimum amount assured under the policy on happening of the insured event at any time during the term of the policy, not taking into account—
(i) the value of any premium agreed to be returned; or
(ii) any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person.]
(4) The persons referred to in sub-section (2) shall be the following, namely:—
(a) for the purposes of clauses (i), (v), (x) and (xi) of that sub-section,—
(i) in the case of an individual, the individual, the wife or husband and any child of such individual, and
(ii) in the case of a Hindu undivided family, any member thereof;
(b) for the purposes of clause (ii) of that sub-section, in the case of an individual, the individual, the wife or husband and any child of such individual;
(c) for the purposes of clause (xvii) of that sub-section, in the case of an individual, any two children of such individual.
(5) Where, in any previous year, an assessee—
(i) terminates his contract of insurance referred to in clause (i) of sub-section (2), by notice to that effect or where the contract ceases to be in force by reason of failure to pay any premium, by not reviving contract of insurance,—
(a) in case of any single premium policy, within two years after the date of commencement of insurance; or
(b) in any other case, before premiums have been paid for two years; or
(ii) terminates his participation in any unit-linked insurance plan referred to in clause (x) or clause (xi) of sub-section (2), by notice to that effect or where he ceases to participate by reason of failure to pay any contribution, by not reviving his participation, before contributions in respect of such participation have been paid for five years; or
(iii) transfers the house property referred to in clause (xviii) of sub-section (2) before the expiry of five years from the end of the financial year in which possession of such property is obtained by him, or receives back, whether by way of refund or otherwise, any sum specified in that clause,
then,—
(a) no deduction shall be allowed to the assessee under sub-section (1) with reference to any of the sums, referred to in clauses (i), (x), (xi) and (xviii) of sub-section (2), paid in such previous year; and
(b) the aggregate amount of the deductions of income so allowed in respect of the previous year or years preceding such previous year, shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.
(6) If any equity shares or debentures, with reference to the cost of which a deduction is allowed under sub-section (1), are sold or otherwise transferred by the assessee to any person at any time within a period of three years from the date of their acquisition, the aggregate amount of the deductions of income so allowed in respect of such equity shares or debentures in the previous year or years preceding the previous year in which such sale or transfer has taken place shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.
27[(6A) If any amount, including interest accrued thereon, is withdrawn by the assessee from his account referred to in clause (xxiii) or clause (xxiv) of sub-section (2), before the expiry of the period of five years from the date of its deposit, the amount so withdrawn shall be deemed to be the income of the assessee of the previous year in which the amount is withdrawn and shall be liable to tax in the assessment year relevant to such previous year:
Provided that the amount liable to tax shall not include the following amounts, namely:—
(i) any amount of interest, relating to deposits referred to in clause (xxiii) or clause (xxiv) of sub-section (2), which has been included in the total income of the assessee of the previous year or years preceding such previous year; and
(ii) any amount received by the nominee or legal heir of the assessee, on the death of such assessee, other than interest, if any, accrued thereon, which was not included in the total income of the assessee for the previous year or years preceding such previous year.]
(7) For the purposes of this section,—
(a) the insurance, deferred annuity, provident fund and superannuation fund referred to in clauses (i) to (vii);
(b) unit-linked insurance plan and annuity plan referred to in clauses (xii) to (xiiia);
(c) pension fund and subscription to deposit scheme referred to in clauses (xiiic) to (xiva);
(d) amount borrowed for purchase or construction of a residential house referred to in clause (xv),
of sub-section (2) of section 88 shall be eligible for deduction under the corresponding provisions of this section and the deduction shall be allowed in accordance with the provisions of this section.
(8) In this section,—
(i) “Administrator” 28 means the Administrator as referred to in clause (a) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);
(ii) “contribution” to any fund shall not include any sums in repayment of loan;
(iii) “insurance” shall include—
(a) a policy of insurance on the life of an individual or the spouse or the child of such individual or a member of a Hindu undivided family securing the payment of specified sum on the stipulated date of maturity, if such person is alive on such date notwithstanding that the policy of insurance provides only for the return of premiums paid (with or without any interest thereon) in the event of such person dying before the said stipulated date;
(b) a policy of insurance effected by an individual or a member of a Hindu undivided family for the benefit of a minor with the object of enabling the minor, after he has attained majority to secure insurance on his own life by adopting the policy and on his being alive on a date (after such adoption) specified in the policy in this behalf;
(iv) “Life Insurance Corporation” means the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956);
(v) “public company” shall have the same meaning as in section 329 of the Companies Act, 1956 (1 of 1956);
(vi) “security” means a Government security as defined in clause (2) of section 230 of the Public Debt Act, 1944 (18 of 1944);
(vii) “specified company” means a company as referred to in clause (h) of section 231 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);
(viii) “transfer” shall be deemed to include also the transactions referred to in clause (f) of section 269UA.]
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3480CCA. (1) Where an assessee, being—
(a) an individual, or
(b) a Hindu undivided family, 35[* * *]
(c) 36[* * *]
has in the previous year—
(i) deposited any amount in accordance with such scheme as the Central Government may, by notification37 in the Official Gazette, specify in this behalf 38[* * *]; or
(ii) paid any amount to effect or to keep in force a contract for such annuity plan of the Life Insurance Corporation as the Central Government may, by notification39 in the Official Gazette, specify,
out of his income chargeable to tax, he shall, in accordance with, and subject to, the provisions of this section, be allowed a deduction in the computation of his total income of the whole of the amount deposited or paid (excluding interest or bonus accrued or credited to the assessee’s account, if any) as does not exceed the amount of twenty thousand rupees in the previous year :
40[Provided that in relation to—
(a) the assessment years commencing on the 1st day of April, 1989 and the 1st day of April, 1990, this sub-section shall have effect as if for the words “twenty thousand rupees”, the words “thirty thousand rupees” had been substituted;
(b) the assessment year commencing on the 1st day of April, 1991 and subsequent assessment years, this sub-section shall have effect as if for the words “twenty thousand rupees”, the words “forty thousand rupees” had been substituted:]
41[Provided further that no deduction under this sub-section shall be allowed in relation to any amount deposited or paid under clauses (i) and (ii) on or after the 1st day of April, 1992.]
(2) Where any amount—
(a) standing to the credit of the assessee 42[under the scheme referred to in clause (i) of sub-section (1)] in respect of which a deduction has been allowed under sub-section (1) together with the interest accrued on such amount is withdrawn in whole or in part in any previous year, or
(b) is received on account of the surrender of the policy or as annuity or bonus in accordance with the annuity plan of the Life Insurance Corporation in any previous year,
an amount equal to the whole of the amount referred to in clause (a) or clause (b) shall be deemed to be the income of the assessee of that previous year in which such withdrawal is made or, as the case may be, amount is received, and shall, accordingly, be chargeable to tax as the income of that previous year :
43[Provided that nothing contained in this sub-section shall apply to any amount received by the assessee on account of the surrender of the policy in accordance with the terms of the annuity plan of the Life Insurance Corporation where the assessee elects to surrender before the 1st day of October, 1992, the said annuity plan in respect of which he had paid any amount under clause (ii) of sub-section (1) before the 1st day of April, 1992.]
44[(3) Notwithstanding anything contained in any other provision of this Act, where a partition has taken place among the members of a Hindu undivided family or where an association of persons has been dissolved after a deduction has been allowed under sub-section (1), the provisions of sub-section (2) shall apply as if the person in receipt of income referred to therein is the assessee.]
Explanation I.—For the removal of doubts, it is hereby declared that interest on the deposits made 45[under the scheme referred to in clause (i) of sub-section (1)] shall not be chargeable to tax except in the manner and to the extent specified in sub-section (2).
Explanation II.—For the purposes of this section, “Life Insurance Corporation” shall have the same meaning as in clause (a) of sub-section (8) of section 80C.]
THE BANKING REGULATION ACT, 19493
(Act No. 10 of 1949)
[10th March, 1949]
(1) This Act may be called the Banking 4[Regulation] Act, 1949.
5[(2) It extends to the whole of India 6[* * *].]
(3) It shall come into force on such date7as the Central Government may, by notification in the Official Gazette, appoint in this behalf.
——————–
3. For Statement of Objects and Reasons, see Gazette of India, 1948, Pt. V, pp. 311 and 312, for Report of Select Committee, see Gazette of India, 1949, Pt. V, pp. 45 to 48.
Extended to Dadra and Nagar Haveli by Reg. 6 of 1963 Section 2 and Schedule I w.e.f. 1-7-1965 and to Goa, Daman and Diu by Reg. 11 of 1963, Section 3 and Schedule Nothing in this Acts (except section 34A) shall apply to the Industrial Development Bank of India vide Act 18 of 1964, Section 34.
4.Substituted by Act 23 of 1965, Section 11, for “Companies” w.e.f. 1-3-1966.
5.Substituted by Act 20 of 1950, Section 2, for sub-section (2).
6.The words “except the State of Jammu and Kashmir” omitted by Act 62 of 1956, Section 2 and Schedule.
7.Came into force on 16th March, 1949; see Notification NO. F.4(46)-FI/49, dated 10th March, 1949, published in the Gazette of India, 1949, Pt. I, P. 326.
The provisions of this Act shall be in addition to, and not, save as hereunder expressly provided, in derogation of the 1[Companies Act, 1956 (1 of 1956)], and any other law for the time being in force.
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1.Substituted by Act 95 of 1956, Section 14 and Schedule, for “Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1- 1957.
1[Act to apply to co-operative societies in certain cases. Nothing in this Act shall apply to. —
(a) a primary agricultural credit society;
(b) a co-operative land mortgage bank; and
(c) any other co-operative society, except in the manner and to the extent specified in Part V.]
——————–
1. Substituted by Act 23 of 1956, Section 12, for the former Section 12, for the former section w.e.f. 1-3-1966.
(1) The Central Government, if on a representation made by the Reserve Bank in this behalf it is satisfied that it is expedient so to do, may by notification in the Official Gazette suspend for such period, not exceeding sixty days, as may be specified in the notification, the operation of all or any of the provisions of this Act, either generally or in relation to any specified banking company.
(2) In a case of special emergency, the Governor of the Reserve Bank, or in his absence a Deputy Governor of the Reserve Bank nominated by him in this behalf may, by order in writing, exercise the powers of the Central Government under sub-section (1) so however that the period of suspension shall not exceed thirty days, and where the Governor or the Deputy Governor, as the case may be, does so, he shall report the matter to the Central Government forthwith, and the order shall, as soon as may be, be published in the Gazette of India.
(3) The Central Government may, by notification in the Official Gazette, extend from time to time the period of any suspension ordered under sub-section (1) or subsection (2) for such period, not exceeding sixty days at any one time, as it thinks fit so however that the total period does not exceed one year.
(4) A copy of any notification issued under sub-section (3) shall be laid on the table of 1[Parliament] as soon as may be after it is issued.
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1. Substituted by the A. O. 1950, for “the Dominion Legislature”.
1[In this Act], unless there is anything repugnant in the subject or context, —
2[(a) “approved securities” means—
(i) securities in which a trustee may invest money under clause (a), clause (b), clause (bb), clause (c) or clause (d) of section 20 of the Indian Trusts Act, 1882 (2 of 1882);
(ii) such of the securities authorised by the Central Government under clause (f) of section 20 of the Indian Trusts Act, 1882 (2 of 1882), as may be prescribed;]
(b) “banking” means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise;
(c) “banking company” means any company which transacts the business of banking 3[in India];
Explanation. — Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause;
4[(ca) “banking policy” means any policy which is specified from time to time by the Reserve Bank in the interest of the banking system or in the interest of monetary stability or sound economic growth, having due regard to the interests of the depositors, the volume of deposits and other resources of the bank and the need for equitable allocation and the efficient use of these deposits and resources;]
5[(cc) “branch” or “branch office” , in relation to a banking company, means any branch or branch office, whether called a pay office or sub-pay office or by any other name, at which deposits are received, cheques cashed or moneys lent, and for the purposes of section 35 includes any place of business where any other form of business referred to in sub-section (1) of section 6 is transacted;]
6[(d) “company” means any company as defined in section 3 of the Companies Act, 1956 (1 of 1956); and includes a foreign company within the meaning of section 591 of that Act;)
7[(da) “corresponding new bank” means a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970); or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980);]
8[* * * * *]
(f) “demand liabilities” means liabilities which must be met on demand, and “time liabilities” means liabilities which are not demand liabilities;
9[(ff) “Deposit Insurance Corporation” means the Deposit Insurance Corporation established under section 3 of the Deposit Insurance Corporation Act, 1961 (47 of 1961);]
10[(ffa) “Development Bank” means the Industrial Development Bank of India established under section 3 of the Industrial Development Bank of India Act, 1964 (18 of 1964);
(ffb) “Exim Bank” means the Export-Import Bank of India established under section 3 of the Export-Import India Act, 1981 (28 of 1981);]
11[(ffc) “Reconstruction Bank” means the Industrial Reconstruction Bank of India established under section 3 of the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984);]
12[(ffd) “National Housing Bank” means the National Housing Bank established under section 3 of the National Housing Bank Act, 1987;]
(g) “gold” includes gold in the form of coin, whether legal tender or not, or in the form of bullion or ingot, whether refined or not;
13[(gg) “managing agent” includes. —
(i) Secretaries and Treasurers;
(ii) Where the managing agent is a company, and director of such company, and any member thereof who holds substantial interest in such company;
(iii) Where the managing agent is a firm, any partner of such firm;]
14[(h) “managing director”, in relation to a banking company, means a director who, by virtue of an agreement with the banking company or of a resolution passed by the banking company in general meeting or by its Board of directors or, by virtue of its memorandum or articles of association, is entrusted with the management of the whole, or substantially the whole of the affairs of the company, and includes a director occupying the position of a managing director, by whatever name called:]
15[Provided that the managing director shall exercise his powers subject to the superintendence, control and direction of the Board of Directors;]
16[(ha) “National Bank” means the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981;]
17[* * * * *]
(j) “prescribed” means prescribed by rules made under this Act;
16[(ja) “regional rural bank” means a regional rural bank established under section 3 of the Regional Rural Banks Act, 1976 (21 of 1976);]
17[* * * * *]
18[(1) “Reserve Bank” means the Reserve Bank of India constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934);]
17[* * * * *]
(n) “secured loan or advance” means a loan or advance made on the security of assets the market value of which is not at any time less than the amount of such loan or advance; and “unsecured loan or advance” means a loan or advance not so secured;
19[(ni) “Small Industries Bank” means the Small Industries Development Bank of India established under section 3 of the Small Industries Development Bank of India, 1989;]
20[(na) “small-scale industrial concern” means an industrial concern in which the investment in plant and machinery is not in excess of seven and a half lakhs of rupees or such higher amount, not exceeding twenty lakhs of rupees, as the Central Government may, by notification in the Official Gazette, specify in this behalf, having regard to the trends in industrial development and other relevant factors;]
21[(nb) “Sponsor Bank” has the meaning assigned to it in the Regional Rural Banks Act, 1976 (21 of 1976);
(nc) “State Bank of India” means the State Bank of India constituted under section 3 of the State Bank of India Act, 1955 (23 of 1955);]
22[(nd)] “subsidiary bank” has the meaning assigned to it in the State Bank of India (Subsidiary Banks) Act, 1959;
23[(ne)] ” substantial interest”. —
(i) in relation to a company, means the holding of a beneficial interest by an individual or his spouse or minor child, whether singly or taken together, in the shares thereof, the amount paid up on which exceeds five lakhs of rupees or ten percent of the paid-up capital of the company, whichever is less;
(ii) in relation to a firm, means the beneficial interest held therein by an individual or his spouse o r minor child, whether singly or taken together, which represents more than ten per cent of the total capital subscribed by all the partners of the said firm;]]
24[(o) all other words and expressions used herein but not defined and defined in the Companies Act, 1956 (1 of 1956), shall have the meanings respectively assigned to them in that Act.]
25[* * * * *]
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1. Substituted by Act 55 of 1963, Section 6, for “(1) In this Act,” w.e.f. 1-2-1964
2. Clause (a) Substituted by Act 1 of 1984, Section 13 w.e.f. 15-2-1984.
3. Substituted by Act 20 of 1950, Section 3, for “in any State”.
4. Inserted By Act 58 of 1958, Section 2 w.e.f. 1-2-1969.
5. Inserted By Act 58 of 1959, Section 2 w.e.f. 1-10-1959.
6. Substituted by Act 58 of 1959 Section 2, for clause (d) w.e.f. 1-10-1959.
7. Inserted By Act 1 of 1984, Section 13 w.e.f. 15-2-1984.
8. Clause (e) omitted by Act 52 of 1953, Section 2.
9. Inserted By Act 47 of 1961, Section 51 and Schedule II, Pt. II w.e.f. 1-1-1962.
10. Inserted By Act 1 of 1984, Section 13 w.e.f. 15-2-1984.
11. Inserted by Act 62 of 1984, Section 71 and Third Schedule w.e.f. 20-3-1985.
12. Inserted by Act 53 of 1987, Section 56 and Second Schedule w.e.f. 9-7-1988.
13. Inserted by Act 58 of 1968, Section 2 w.e.f. 1-2-1969.
14. Substituted by Act 33 of 1959, Section 2, for clause (h) w.e.f. 1-10-1959.23Added by Act 58 of 1968, Section 2 w.e.f. 1-2-1969.
15. Added by Act 58 of 1968, Section 2 w.e.f. 1-2-1969.
16. Inserted by Act 61 of 1981, Section 61 and Second Schedule, Pt. II w.e.f. 1-5-1982.
17. Clauses (i), (k) and (m) omitted by Act 33 of 1959, Section 2 w.e.f. 1-5-1982.
18. Inserted by Act 1 of 1984, Section 13 w.e.f. 15-2-1984
19. Inserted by Act 39 of 1989, Section 53 and Second Schedule, Pt. III w.e.f. 25-10-1989
20. Inserted by Act 58 of 1968, Section 2 w.e.f. 1-2-1969.
21. Inserted by Act 58 of 1968, Section 2 w.e.f. 1-2-1969
22. Clause (nb) re/lettered as Clause (nb) by Act 1 of 1984, Section 13 w.e.f. 15-2-1984
23. Clause (nc) re/lettered as Clause (ne) by Act 1 of 1984, Section 13 w.e.f. 15-2-1984
24. Inserted by Act 33 of 1959, Section 2 w.e.f. 1-10-1959.
25. Sub-section (2) omitted by the A.O. 1950
1[Act to override memorandum, articles, etc. Save as otherwise expressly provided in this Act. (a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a banking company, or in any agreement executed by it, or in any resolution passed by the banking company in general meeting or by its Board of Directors, whether the same be registered, executed or passed, as the case may be, before or after the commencement of the Banking Companies (Amendment) Act, 1959 (33 of 1959); and
(b) any provision contained in the memorandum, articles, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be.]
——————–
1. Inserted by Act 33 of 1959, Section 2 w.e.f. 1-10-1959.
(1) In addition to the business of banking, a banking company may engage in any one or more of the following forms of business, namely: —
(a) the borrowing, raising, or taking up of money; the lending or advancing of money either upon or without security; the drawing, making, accepting, discounting, buying, selling, collecting and dealing in bills of exchange, hoondees, promissory notes, coupons, drafts, bills of lading, railway receipts, warrants, debentures, certificates, scrips and other instruments and securities whether transferable or negotiable or not; the granting and issuing of letters of credit, traveller’s cheques and circular notes; the buying, selling and dealing in bullion and specie; the buying and selling of foreign exchange including foreign bank notes; the acquiring, holding, issuing on commission, underwriting and dealing in stock, funds, shares, debentures, debenture stock, bonds, obligations, securities and investments of all kinds; the purchasing and selling of bonds, scrips or other forms of securities on behalf of constituents or others, the negotiating of loans and advances; the receiving of all kinds of bonds, scrips or valuables on deposit or for safe custody or otherwise; the providing of safe deposit vaults; the collecting and transmitting of money and securities;
(b) acting as agents for any Government or local authority or any other person or persons; the carrying on of agency business of any description including the clearing and forwarding of goods, giving of receipts and discharges and otherwise acting as an attorney on behalf of customers, but excluding the business of a 1[managing agent or secretary and treasurer] of a company;
(c) contracting for public and private loans and negotiating and issuing the same;
(d) the effecting, insuring, guaranteeing, underwriting, participating in managing and carrying out of any issue, public or private, of State, municipal or other loans or of shares, stock, debentures, or debenture stock of any company, corporation or association and the lending of money for the purpose of any such issue;
(e) carrying on and transacting every kind of guarantee and indemnity business;
(f) managing, selling and realising any property which may come into the possession of the company in satisfaction or part satisfaction of any of its claims;
(g) acquiring and holding and generally dealing with any property or any right, title or interest in any such property which may form the security or part of the security for any loans or advances or which may be connected with any such security;
(h) undertaking and executing trusts;
(i) undertaking the administration of estates as executor, trustee or otherwise;
(j) establishing and supporting or aiding in the establishment and support of associations, institutions, funds, trusts and conveniences calculated to benefit employees or ex-employees of the company or the dependents or connections of such persons; granting pensions and allowances and making payments towards insurance; subscribing to or guaranteeing moneys for charitable or benevolent objects or for any exhibition or for any public, general or useful object;
(k) the acquisition, construction, maintenance and alteration of any building or works necessary or convenient for the purposes of the company;
(l) selling, improving, managing, developing, exchanging, leasing, mortgaging, disposing of or turning into account or otherwise dealing with all or any part of the property and rights of the company;
(m) acquiring and undertaking the whole or any part of the business of any person or company, when such business is of a nature enumerated or described in this sub- section;
(n) doing all such other things as are incidental or conducive to the promotion or advancement of the business of the company;
(o) any other form of business which the Central Government may, by notification in the Official Gazette, specify as a form of business in which it is lawful for a banking company to engage.
(2) No banking company shall engage in any form of business other than those referred to in sub-section (1).
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1. Substituted by Act 33 of 1959, Section 4, for “managing agent” w.e.f. 1-10-1959
1[Use of words “bank”, “banker”, “banking” or “banking company”. (1) No company other than a banking company shall use as part of its name 2[or in connection with its business] any of the words “bank”, “banker” or “banking” and no company shall carry on the business of banking in India unless it uses as part of its name at least one of such words.
(2) No firm, individual or group of individuals shall, for the purpose of carrying on any business, use as part of its or his name any of the words “bank”, “banking” or “banking company”.
(3) Nothing in this section shall apply to. —
(a) a subsidiary of a banking company formed for one or more of the purposes mentioned in sub-section (1) of section 19, whose name indicates that it is a subsidiary of that banking company;
(b) any association of banks formed for the protection of their mutual interests and registered under section 25 of the Companies Act, 1956 (1 of 1956).]
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1. Subsituted by Act 55 of 1963, Section 7, for the former section 7 w.e.f. 1-2-1964.
2. Inserted by Act 1 of 1984, Section 14 w.e.f. 15-2-1984
Notwithstanding anything contained in section 6 or in any contract, no banking company shall directly or indirectly deal in the buying or selling or bartering of goods, except in connection with the realisation of security given to or held by it, or engage in any trade, or buy, sell or barter goods for others otherwise than in connection with bills of exchange received for collection or nego-tiation or with such of its business as is referred lo in clause (i) of sub-section (1) of section 6:
1[Provided that this section shall not apply to any such business as is specified in pursuance of clause (o) of sub-section (1) of section 6.
Explanation. — For the purposes of this section, “goods” means every kind of movable property, other than actionable claims, stocks, shares, money, bullion and specie, and all instruments referred to in clause (a) of sub-section (1) of section 6.
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1. Subsituted by Act 1 of 1984, Section 15 w.e.f. 15-2-194
Notwithstanding anything contained in section 6, no banking company shall hold any immovable property howsoever acquired, except such as is required for its own use, for any period exceeding seven years from the acquisition thereof or from the commencement of this Act, whichever is later or any extension of such period as in this section provided, and such properly shall be disposed of within such period or extended period, as the case may be:
Provided that the banking company may, within the period of seven years as aforesaid deal or trade in any such property for the purpose of facilitating the disposal thereof:
Provided further that the Reserve Bank may in any particular case extend the aforesaid period of seven years by such period not exceeding five years where it is satisfied that such extension would be in the interests of the depositors of the banking company.
1[Prohibition of employment of managing agents and restrictions on certain forms of employment. (1) No banking company —
(a) shall employ or be managed by a managing agent; or
(b) shall employ or continue the employment of any person—
(i) who is, or at any time has been, adjudicated insolvent, or has suspended payment or has compounded with his creditors, or who is, or has been, convicted by a criminal court of an offence involving moral turpitude; or
(ii) whose remuneration or part of whose remuneration takes the form of commission or of a share in the profits of the company:
2[Provided that nothing contained in this sub-clause shall apply to the payment by a banking company of—
(a) any bonus in pursuance of a settlement or award arrived at or made under any law relating to industrial disputes or in accordance with any scheme framed by such banking company or in accordance with the usual practice prevailing in banking business;
(b) any commission to any broker (including guarantee broker), cashier-contractor, clearing and forwarding agent, auctioneer or any other person, employed by the banking company under a contract otherwise than as a regular member of the staff of the company; or]
(iii) whose remuneration is, in the opinion of the Reserve Bank, excessive; or
(c) shall be managed by any person—
3[(i) who is a director of any other company not being—
(a) a subsidiary of the banking company, or
(b) a company registered under section 25 of the Companies Act, 1956 (1 of 1956):
Provided that the prohibition in this sub-clause shall not apply in respect of any such director for a temporary period not exceeding three months or such further period not exceeding nine months as the Reserve Bank may allow; or]
(ii) who is engaged in any other business or vocation; or
(iii) 4[whose term of office as a person managing the company is] for period exceeding five years at any one time:
5[Provided that the term of office of any such person may be renewed or extended by further periods not exceeding five years on each occasion subject to the condition that such renewal/extension shall not be sanctioned earlier than two years from the date on which it is to come into force:
Provided also that where the term of office of such person is for an indefinite period, such term, unless it otherwise comes to an end earlier, shall come to an end immediately on the expiry of five years from the date of his appointment or on the expiry of three months from the date of commencement of section 8 of the Banking Laws (Miscellaneous Provisions) Act, 1963 (55 of 1963), whichever is later:]
Provided further that nothing in this clause shall apply to a director, other than the managing director, of a banking company by reason only of his being such director.
Explanation. — For the purpose of sub-clause (iii) of clause (b), the expression “remuneration”, in relation to person employed or continued in employment, shall include salary, fees and perquisites but shall not include any allowances or other amounts paid to him for the purpose of reimbursing him in respect of the expense actually incurted by him in the performance of his duties.
(2) In forming its opinion under sub-clause (iii) of clause (b) of sub-section (1), the Reserve Bank may have regard among other matters to the following: —
(i) the financial condition and history of the banking company, its size and area of operation, its resources, the volume of its business, and the trend of its earning capacity;
(ii) the number of its branches or offices;
(iii) the qualifications, age and experience of the person concerned;
(iv) the remuneration paid to other persons employed by the banking company or to any person occupying a similar position in any other banking company similarly situated; and
(v) the interests of its depositors.
6[7[***].]
(6) Any decision or order of the Reserve Bank made under this section shall be final for all purposes.]
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1. Subsituted by Act 33 of 1959, Section 6, for the proviso w.e.f. 1-10-1959
2. Subsituted by Act 33 of 1959, Section 6 for sub-clause (i) w.e.f. 1-10-1959.
3. Subsituted by Act 33 of 1959, Section 6 for sub-clause (i) w.e.f. 1-10-1959.
4. Subsituted by Act 55 of 1963, Section 8, for certain words w.e.f. 1-2-1964.
5. Subsituted by Act 55 of 1963, Section 8, for the first proviso w.e.f. 1-2-1964.
6. Subsituted by Act 33 of 1959, Section 6, for sub-section (3) w.e.f. 1-10-1959.
7. Sub-sections (3), (4) and (5) omitted by Act 55 of 1963, Section 8 w.e.f. 1-2-1964.
1[Board of directors to include persons with professional or other experience. (1) Notwithstanding anything contained in any other law for the time being in force, every banking company,
(a) in existence on the commencement of section 3 of the Banking Laws (Amendment) Act, 1968 (58 of 1968), or
(b) which comes into existence thereafter,
shall comply with the requirements of this section:
Provided that nothing contained in this sub-section shall apply to a banking company referred to in clause (a) for a period of three months from such commencement.
(2) Not less than fifty-one per cent, of the total number of members of the Board of directors of a banking company shall consist of persons, who—
(a) shall have special knowledge or practical experience in respect of one or more of the following matters, namely:—
(i) accountancy,
(ii) agriculture and rural economy,
(iii) banking,
(iv) co-operation,
(v) economics,
(vi) finance,
(vii) law,
(viii) small-scale industry,
(ix) any other matter the special knowledge of, and practical experience in, which would, in the opinion of the Reserve Bank, be useful to the banking company:
Provided that out of the aforesaid number of directors, not less than two shall be persons having special knowledge or practical experience in respect of agriculture and rural economy, co-operation or small-scale industry; and
(b) shall not—
(1) have substantial interest in, or be connected with, whether as employee, manager or managing agent,—
(i) any company, not being a company registered under section 25 of the Companies Act, 1956 (1 of 1956), or
(ii) any firm,
which carries on any trade, commerce or industry and which, in either case, is not a small-scale industrial concern, or
(2) be proprietors of any trading, commercial or industrial concern, not being a small-scale industrial concern.
2[(2A) Notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956), or in any other law for the time being in force, —
(i) no director of a banking company, other than its chairman or whole-time director, by whatever name called, shall hold office continuously for a period exceeding eight years;
(ii) a chairman or other whole-time director of a banking company who has been removed from office as such chairman, or whole-time director, as the case may be, under the provisions of this Act shall also cease to be a director of the banking company and shall also not be eligible to be appointed as a director of such banking company, whether by election or co-option or otherwise, for a period of four years from the date of his ceasing to be the -chairman or whole-time director as the case may be.]
(3) If, in respect of any banking company the requirements, as laid down in subsection (2), are not fulfilled at any time, the Board of directors of such banking company shall re-constitute such Board so as to ensure that the said requirements are fulfilled.
(4) If, for the purpose of re-constituting the Board under sub-section (3), it is necessary to retire any director or directors, the Board may, by lots drawn in such manner as may be prescribed, decide which director or directors shall cease to hold office and such decision shall be binding on every director of the Board.
(5) Where the Reserve Bank is of opinion that the composition of the Board of directors of a banking company is such that it does not fulfil the requirements of subsection (2), it may, after giving to such banking company a reasonable opportunity of being heard, by an order in writing, direct the banking company to so re-constitute its Board of directors as to ensure that the said requirements are fulfilled and, if within two months from the date of receipt of that order, the banking company does not comply with the directions made by the Reserve Bank, that Bank may, after determining, by lots drawn in such manner as may be prescribed, the person who ought to be removed from the membership of the Board of directors, remove such person from the office of the director of banking company and with a view to complying with the provision of sub-section (2) appoint a suitable person as a member of the Board of directors in the place of the person so removed whereupon the person so appointed shall be deemed to have been duly elected by the banking company as its director.
(6) Every appointment, removal or reconstitution duly made, and every election duly held, under this section shall be final and shall not be called into question in any court.
(7) Every director elected or, as the case may be, appointed under this section shall hold office until the date up to which his predecessor would have held office, if the election had not been held, or, as the case may be, the appointment had not been made.
(8) No act or proceeding of the Board of directors of a banking company shall be invalid by reason only of any defect in the composition thereof or on the ground that it is subsequently discovered that any of its members did not fulfil the requirements of this section.
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1. Section 10A to 10D Inserted by Act 58 of 1968, Section 3 w.e.f. 1-2-1969.
2. Inserted by Act 1 of 1984, Section 16 w.e.f. 15-2-1984.
1[(1) Notwithstanding anything contained in any law for the time being in force or in any contract to the contrary, every banking company in existence on the commencement of the Banking Regulation (Amendment) Act, 1994 (20 of 1944), or which comes into existence thereafter shall have one of its directors, who may be appointed on a whole-time or a part-time basis, as chairman of its board of directors, and where he is appointed on a whole-time basis, as chairman of its board of directors, he shall be entrusted with the management of the whole of the affairs of the banking company :
Provided that the chairman shall exercise his powers subject to the superintendence, control and direction of the board of directors.
(1A) Where a chairman is appointed on a part-time basis, —
(i) such appointment shall be with the previous approval of the Reserve Bank and be subject to such conditions as the Reserve Bank may specify while giving such approval;
(ii) the management of the whole of the affairs of such banking company shall be entrusted to a managing director who shall exercise his powers subject to the superintendence, control and direction of the board of directors.]
(2) 2[Every chairman of the board of directors who is appointed on a whole-time basis and every managing director] of a banking company shall be in the whole-time employment of such company and shall hold office for such period, not exceeding five years, as the board of directors may fix, but shall, subject to the provisions of this section, be eligible for re-election of reappointment:
Provided that nothing in this sub-section shall be construed as prohibiting a chairman from being a director of a subsidiary of the banking company or a director of a company registered under section 25 of the Companies Act, 1956 (1 of 1956).
(3) Every person holding office on the commencement of section 3 of the Banking Laws (Amendment) Act, 1968 (58 of 1968), as managing director of a banking company shall—
(a) if there is a chairman of its board of directors, vacate office on such commencement, or
(b) if there is no chairman of its board of directors, vacate office on the date on which the chairman of its board of directors is elected or appointed in accordance with the provisions of this section.
(4) 3[Every chairman who is appointed on a whole-time basis and every managing director of a banking company appointed under sub-section (1A)] shall be person who has special knowledge and practical experience of—
(a) the working of a banking company, or of the State Bank of India or any subsidiary bank or a financial institution, or
(b) financial, economic or business administration :
Provided that a person shall be disqualified for being a 3[chairman who is appointed on a whole time basis or a managing director], if be—
(a) is a director of any company other than a company referred to in the proviso to sub-section (2), or
(b) is a partner of any firm which carries on any trade, business or industry, or
(c) has substantial interest in any other company or firm, or
(d) is a director, manager, managing agent, partner or proprietor of any trading, commercial or industrial concern, or
(e) is engaged in any other business or vocation.
(5) 3[A chairman of the board of directors appointed on a whole-time basis or a managing director] of a banking company may, by writing, under his hand addressed to the company, resign his office, 4[* * *].
5[(5A) 3[A chairman of the board of directors appointed on a whole-time basis or a managing director] whose term of office has come to an end, either by reason of his resignation or by reason of expiry of the period of his office, shall, subject to the approval of the Reserve Bank, continue in office until his successor assumes office.
(6) Without prejudice to the provisions of section 36AA where the Reserve Bank is of opinion that any person who, is, or has been elected to be, the 3[chairman of the board of directors who is appointed on a whole-time basis or the managing director] of a banking company is not a fit and proper person to hold such office, it may, after giving to such person and to the banking company a reasonable opportunity of being heard by order in writing, require the banking company to elect or appoint any other person as the 3[chairman of the board of directors who is appointed on a whole-time basis or the managing director] and if, within a period of two months from the date of receipt of such order, the banking company fails to elect or appoint a suitable person as the 3[chairman of the board of directors who is appointed on a whole-time basis or the managing director], the Reserve Bank may, by order, remove the first-mentioned person from the office of the 6[chairman of the board of directors who is appointed on a whole-time basis or the managing director] of the banking company and appoint a suitable person in his place whereupon the person so appointed shall be deemed to have been duly elected or appointed, as the case may be, as the 6[chairman of the board of directors who is appointed on a whole-time basis or the managing director] of such banking company and any person elected or 6[appointed as chairman on a whole-time basis or managing director] under this sub-section shall hold office for the residue of the period of office of the person in whose place he has been so elected or appointed.
(7) The banking company and any person against whom an order of removal is made under sub-section (6) may, within thirty days from the date of communication to it or to him of the order, prefer an appeal to the Central Government and the decision of the Central Government thereon, and subject thereto, the order made by the Reserve Bank under sub-section (6), shall be final and shall not be called into question in any court.
(8) Notwithstanding anything contained in this section, the Reserve Bank may, if in its opinion it is necessary in the public interest so to do, permit 6[the chairman of the board of directors who is appointed on a whole-time basis or the managing director] to undertake such part-time honorary work as is not likely to interfere with his duties as 6[such chairman or managing director].
(9) Notwithstanding anything contained in this section, where a person 6[appointed on a whole-time basis, as chairman of the board of directors or the managing director] dies or resigns or is by infirmity or otherwise rendered incapable of carrying out his duties or is absent on leave or otherwise in circumstances not involving the vacation of his office, the banking company may, with the approval of the Reserve Bank, make suitable arrangements for carrying out the 6[duties of chairman or managing director] for a total period not exceeding four months.
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1. Subsituted by Act 20 of 1994, Section 2, for sub-section (1) w.e.f. 31-1-1994.
2. Subsituted by Act 20 of 1994, Section 2, for certain words w.e.f. 31-1-1994.
3. Subsituted by Act 20 of 1994, Section 2 w.e.f. 31-1-1994.
4. Certain words omitted by Act 1 of 1984, Section 17 w.e.f. 15-2-1984.
5. Inserted by Act 1 of 1984, Section 17 w.e.f. 15-2-1984.
6. Subsituted by Act 20 of 1994, Section 2 w.e.f. 31-1-1994.
1[Power of Reserve Bank to appoint [Chairman of the Board of directors appointed on a whole-time basis or a managing director] of a banking company. (1) Where the office, of the 2[chairman of the board of directors appointed on a whole-time basis or a managing director] of a banking company is vacant, the Reserve Bank may, if it is of opinion that the continuation of such vacancy is likely to adversely affect the interests of the banking company, appoint a person eligible under sub-section (4) of section 10B to be so appointed, to be the 2[chairman of the board of directors appointed on a whole-time basis or a managing director] of the banking company and where the person so appointed is not a director of such banking company, he shall, so long as he holds the office of the 2[chairman of the board of directors appointed on a whole-time basis or a managing director], be deemed to be director of the banking company.
(2) The 3[chairman of the board of directors appointed on a whole-lime basis or a managing director] so appointed by the Reserve Bank shall be in the whole-time employment of the banking company and shall hold office for such period not exceeding three years, as the Reserve Bank may specify, but shall, subject to other provisions of this Act, be eligible for reappointment.
(3) The 3[chairman of the board of directors appointed on a whole-time basis or a managing director] so appointed by the Reserve Bank shall draw from the banking company such pay and allowances as the Reserve Bank may determine and may be removed from office only by the Reserve Bank.
(4) Save as otherwise provided in this section, the provisions of section 10B shall, as far as may be, apply to the 3[chairman of the board of directors appointed on a whole-time basis or a managing director] appointed by the Reserve Bank under subsection (1) as they apply to a 3[chairman of the board of directors appointed on a whole-time basis or a managing director] appointed by the banking company.]
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1. Inserted by Act 1 of 1984, Section 18 w.e.f. 15-2-1984.
2. Subsituted by Act 20 of 1994, Section 3 w.e.f. 31-1-1994.
3. Subsituted by Act 20 of 1994, Section 3 w.e.f. 31-1-1994.
1[Chairman and certain directors not to be required to hold qualification shares. 2[Chairman of the board of directors who is appointed on a whole-lime basis or a managing director] of a banking company (by whomsoever appointed) and a director of a banking company (appointed by the Reserve Bank under section 10A) shall not be required to hold qualification shares in the banking company.]
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1. Subsituted by Act 1 of 1984, Section 19 w.e.f. 15-2-1984.
2. Subsituted by Act 20 of 1994, Section 4 w.e.f. 31-1-1994.
Any appointment or removal of a 1[director, chairman of the board of directors who is appointed on a whole-time basis or a managing director] in pursuance of section IOA or section 10B 2[or section 10BB] shall have effect and any such person shall not be entitled to claim any compensation for the loss or termination of office, notwithstanding anything contained in any law or in any contract, memorandum or articles of association.]
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1. Subsituted by Act 20 of 1994, sec 5 w.e.f. 31-1-1994.
2. Inserted by Act 1 of 1984, Section 20 w.e.f. 31-1-1984.
(1) Notwithstanding anything contained in 1[section 149 of the Companies Act, 1956 (1 of 1956)], no banking company in existence on the commencement of this Act, shall, after the expiry of three years from such commencement or of such further period not exceeding one year as the Reserve Bank, having regard to the interests of the depositors of the company, may think fit in any particular case to allow, carry on business 2[in India], and no other banking company shall after the commencement of this Act, commence or carry on business 2[in India] 3[unless it complies with such of the requirements of this section as are applicable to it].
4[(2) In the case of a banking company incorporated outside India—
(a) the aggregate value of its paid-up capital and reserves shall not be less than fifteen lakhs of rupees and if it has a place or places of business in the city of Bombay or Calcutta or both, twenty lakhs of rupees; and
(b) 5[the banking company shall deposit and keep deposited with the Reserve Bank either in cash or in the form of unencumbered approved securities, or partly in cash and partly in the form of such securities—
(i) an amount which shall not be less than the minimum required by clause (a); and
(ii) as soon as may be after the expiration of each 6[* * *] year, an amount calculated at twenty per cent of its profit for that year in respect of all business transacted through its branches in India, as disclosed in the profit and loss account prepared with reference to that year under section 29:]
Provided that any such banking company may at any time replace—
(i) any securities so deposited by cash or by any other unencumbered approved securities or partly by cash and partly by other such securities, so however, that the total amount deposited is not affected;
(ii) any cash so deposited by unencumbered approved securities of an equal value.]
7[(2A) Notwithstanding anything contained in sub-section (2), the Central Government may, on the recommendation of the Reserve Bank, and having regard to the adequacy of the amounts already deposited and kept deposited by a banking company under sub-section (2), in relation to its deposit liabilities in India, declare by order in writing that the provisions of sub-clause (ii) of clause (b) of sub-section (2) shall not apply to such banking company for such period as may be specified in the order.]
(3) In the case of any banking company to which the provisions of sub-section (2) do not apply, the aggregate value of its paid-up capital and reserves shall not be less than—
(i) if it has places of business in more than one State, five lakhs of rupees, and if any such place or places of business is or are situated in the city of Bombay or Calcutta or both, ten lakhs of rupees;
(ii) if it has all its places of business in one State none of which is situated in the city of Bombay or Calcutta, one lakh of rupees in respect of its principal place of business, plus ten thousand rupees in respect of each of its other places of business situated in the same district in which it has its principal place of business, plus twenty-five thousand rupees in respect of each place of business situated elsewhere in the State otherwise than in the same district:
Provided that no banking company to which this clause applies shall be required to have paid-up capital and reserves exceeding an aggregate value of five lakhs of rupees:
Provided further that no banking company to which this clause applies and which has only one place of business, shall be required to have paid-up capital and reserves exceeding an aggregate value of fifty thousand rupees:
8[Provided further that in the case of every banking company to which this clause applies and which commences banking business for the first time after the commencement of the Banking Companies (Amendment) Act, 1962 (36 of 1962), the value of its paid-up capital shall not be less than five lakhs of rupees;]
(iii) if it has all its places of business in one State, one or more of which is or are situated in the city of Bombay or Calcutta, five lakhs of rupees, plus twenty-five thousand rupees in respect of each place of business situated outside the city of Bombay or Calcutta, as the case may be:
Provided that no banking company to which this clause applies shall be required to have paid-up capital and reserves exceeding an aggregate value of ten lakhs of rupees.
Explanation. — For the purposes of this sub-section, a place of business situated 9[in a State] other than that in which the principal place of business of the banking company is situated shall, if it is not more than twenty-five miles distant from such principal place of business, be deemed to be situated within the same State as such principal place of business.
(4) Any amount deposited and kept deposited with the Reserve Bank under 10[* * *] sub-section (2) by any banking company incorporated 11[outside India] shall, in the event of the company ceasing for any reason to carry on banking business 12[in India], be an asset of the company on which the claims of all the creditors of the company 12[in India] shall be a first charge.
13[(5) For the purposes of this section, —
(a) “place of business” means any office, sub-office, sub-pay office and any place of business at which deposits are received, cheques cashed, or moneys lent;
(b) “value” means the real or exchangeable value, and not the nominal value which may be shown in the books of the banking company concerned.]
(6) If any dispute arises in computing the aggregate value of the paid-up capital and reserves of any banking company, a determination thereof by the Reserve Bank shall be final for the purposes of this section.
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1. Subsituted by Act 95 of 1956, Section 14 and Schedule, for “section 103 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.
2. Subsituted by Act 20 of 1950, Section 3, for “in any state”.
3. Subsituted by Act 33 of 1959, Section 7, for certain words w.e.f. 1-10-1959.
4. Subsituted by Act 33 of 1959, Section 7, for sub-section (2) w.e.f. 1-10-1959.
5. Subsituted by Act 36 of 1962, Section 2, for certain words.
6. The word “calendar” omitted by Act 66 of 1988, Section 7 w.e.f. 31-12-1988.
7. Inserted by Act 36 of 1962, Section 2.
8. Inserted by Act 36 of 1962, Section 2.
9. Subsituted by Act 62 of 1956, Section 2 and Schedule, for “in India”.
10. The words “the proviso to” omitted by Act 33 of 1959, Section 7 w.e.f. 1-10-1959.
11. Subsituted by Act 20 of 1950, Section 3, for “elsewhere than in a State”.
12. Subsituted by Act 20 of 1950, Section 3, for “in the States”.
13. Subsituted by Act 33 of 1959, Section 7, for sub-section (5) w.e.f. 1-10-1959.
1[Regulation of paid-up capital, subscribed capital and authorised capital and voting rights of shareholders. (1) No banking company shall carry on business in India, unless it satisfies the following conditions, namely:—
(i) that the subscribed capital of the company is not less than one-half of the authorised capital, and the paid-up capital is not less than one-half of the subscribed capital and that, if the capital is increased, it complies with the conditions prescribed in this clause within such period not exceeding two years as the Reserve Bank may allow;
(ii) that the capital of the company consists of ordinary shares only or of ordinary shares or equity shares and such preferential shares as may have been issued prior to the 1st day of July, 1944:
Provided that nothing contained in this sub-section shall apply to any banking company incorporated before the 15th day of January, 1937.
[(2) No person holding shares in a banking company shall, in respect of any shares held by him, exercise voting rights 2[on poll] 3[in excess of 4(ten per cent)] of the total voting rights of all the shareholders of the banking company.]
(3) Notwithstanding anything contained in any law for the time being in force or in any contract or instrument no suit or other proceeding shall be maintained against any person registered as the holder of a share in a banking company on the ground that the title to the said share vests in a person other than the registered holder :
Provided that nothing contained in this sub-section shall bar a suit or other proceeding—
(a) by a transferee of the share on the ground that he has obtained from the registered holder a transfer of the share in accordance with any law relating to such transfer; or
(b) on behalf of a minor or a lunatic on the ground that the registered holder holds the share on behalf of the minor or lunatic.
(4) Every chairman, managing director or chief executive officer by whatever name called of a banking company shall furnish to the Reserve Bank through that banking company returns containing full particulars of the extent and value of his holding of shares, whether directly or indirectly, in the banking company and of any change in the extent of such holding or any variation in the rights attaching thereto and such other information relating to those shares as the Reserve Bank may, by order, require and in such form and at such time as may be specified in the order.]
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1. Subsituted by Act 95 of 1956, Section 3, for section 12 w.e.f. 14-1-1957.
2. Inserted by Act 33 of 1959, Section 8 w.e.f. 1-10-1959.
3. Subsituted by Act 55 of 1963, Section 9, for “inexcess of five percent” w.e.f. 1-12-1964.
4. Subsituted by Act 20 of 1994, sSection 6 w.e.f. 31-1-1994.
1[Election of new directors. (1) The Reserve Bank may, by order, require any banking company to call a general meeting of the shareholders of the company within such time, not less than two months from the date of the order, as may be specified in the order or within such further time as the Reserve Bank may allow in this behalf, to elect in accordance with the voting rights permissible under this Act fresh directors, and the banking company shall be bound to comply with the order.
(2) Every director elected under sub-section (1) shall hold office until the date up to which his predecessor would have held office, if the election had not been held.
(3) Any election duly held under this section shall not be called in question in any court.]
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1. Inserted by Act 95 of 1956, Section 4 w.e.f. 14-1-1957.
Notwithstanding anything to the contrary contained in 1[sections 76 and 79 of the Companies Act, 1956 (1 of 1956)], no banking company shall pay out directly or indirectly by way of commission, brokerage, discount or remuneration in any form in respect of any shares issued by it, any amount exceeding in the aggregate two and one-half per cent of the paid-up value of the said shares.
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1. Subsituted by Act 95 of 1956, Section 14 and Schedule I, for “section 105 and 105A of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.
No banking company shall create any charge upon any unpaid capital of the company, and any such charge shall be invalid.
1[Prohibition of floating charge on assets. (1) Notwithstanding anything contained in section 6, no banking company shall create a floating charge on the undertaking or any property of the company or any part thereof, unless the creation of such floating charge is certified in writing by the Reserve Bank as not being detrimental to the interests of the depositors of such company.
(2) Any such charge created without obtaining the certificate of the Reserve Bank shall be invalid.
(3) Any banking company aggrieved by the refusal of a certificate under subsection (1) may, within ninety days from the date on which such refusal is communicated to it, appeal to the Central Government.
(4)The decision of the Central Government where an appeal has been preferred to it under sub-section (3) or of the Reserve Bank where no such appeal has been preferred shall be final.]
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1. Inserted by Act 33 of 1959, Section 9 w.e.f. 1-10-1959.
1[(1)] No banking company shall pay any dividend on its shares until all its capitalised expenses (including preliminary expenses, organisation expenses, share-selling commission, brokerage, amounts of losses incurred and any other item of expenditure not represented by tangible assets) have been completely written off.
2[(2)] Notwithstanding anything to the contrary contained in sub-section (1) or in the Companies Act, 1956(1 of 1956), a banking company may pay dividends on its shares without writing off—
(i) the depreciation, if any, in the value of its investments in approved securities in any case where such depreciation has not actually been capitalised or otherwise accounted for as a loss;
(ii) the depreciation, if any, in the value of its investments in shares, debentures or bonds (other than approved securities) in any case where adequate provision for such depreciation has been made to the satisfaction of the auditor of the banking company;
(iii) the bad debts, if any, in any case where adequate provision for such debts has been made to the satisfaction of the auditor of the banking company.]
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1. Section 15 renumbered as sub-section (1) of that section by Act 33 of 1959, Section 10 w.e.f. 1-10-1959.
2. Inserted by Act 33 of 1959, Section 10 w.e.f. 1-10-1959.
1[(Prohibition of common directors. 2[(1) No banking company incorporated in India shall have as a director in its Board of directors any person who is a director of any other banking company.
(1A) No banking company referred to in sub-section (1) shall have in its Board of directors, more than three directors who are directors of companies which among themselves are entitled to exercise voting rights in excess of twenty per cent of the total voting rights of all the shareholders to that banking company.]
(2) If immediately before the commencement of the Banking Companies (Amendment) Act, 1956 (95 of 1956), any person holding office as a director of a banking company is also a director of companies which among themselves are entitled to exercise voting rights in excess of twenty percent of the total voting rights of all the shareholders of the banking company, he shall, within such period from such commencement as the Reserve Bank may specify in this behalf-
(a) either resign his office as a director of the banking company; or
(b) choose such number of companies as among themselves are not entitled to exercise voting rights in excess of twenty per cent, of the total voting rights of all the shareholders of the banking company as companies in which he wishes to continue to hold the office of a director and resign his office as a director in the other companies.]
3[(3) Nothing in sub-section (1) shall apply to, or in relation to, any director appointed by the Reserve Bank.]
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1. Subsituted by Act 95 of 1956, Section 5, for section 16 w.e.f. 14-1-1957.
2. Subsituted by Act 20 of 1994, Section 7 w.e.f. 22-3-1994.
3. Inserted by Act 58 of 1968, Section 4 w.e.f. 1-2-1969.
1[Reserve Fund. (1) Every banking company incorporated in India shall create a reserve fund and 2[* * *] shall, out of the balance of profit of each year as disclosed in the profit and loss account prepared under section 29 and before any dividend is declared, transfer to the reserve fund a sum equivalent to not less than twenty per cent of such profit.
3[(1A) Notwithstanding anything contained in sub-section (1), the Central Government may, on the recommendation of the Reserve Bank and having regard to the adequacy of the paid-up capital and reserves of a banking company in relation to its deposit liabilities, declare by order in writing that the provisions of sub-section (1) shall not apply to the banking company for such period as may be specified in the order:
Provided that no such order shall be made unless, at the time it is made, the amount in the reserve fund under sub-section (1), together with the amount in the share premium account is not less than the paid-up capital of the banking company.]
(2) Where a banking company appropriates any sum or sums from the reserve fund or the share premium account, it shall, within twenty-one days from the date of such appropriation, report the fact to the Reserve Bank, explaining the circumstances relating to such appropriation:
Provided that the Reserve Bank may, in any particular case, extend the said period of twenty-one days by such period as it thinks fit or condone any delay in the making of such report.
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1. Subsituted by Act 33 of 1959, Section 1, for section 17 and 18 w.e.f. 1-10-1959.
2. Certain words omitted by Act 36 of 1962, Section 3.
3. Inserted by Act 36 of 1962, Section 3.
1[Cash reserve. (1) Every banking company, not being a scheduled bank, shall maintain in India by way of cash reserve with itself or by way of balance in a current account with the Reserve Bank, or by way of net balance in current accounts or in one or more of the aforesaid ways, a sum equivalent to at least three per cent of the total of its demand and time liabilities in India as on the last Friday of the second preceding fortnight and shall submit to the Reserve Bank before the twentieth day of every month a return showing the amount so held on alternate Fridays during a month with particulars of its demand and time liabilities in India on such Fridays or if any such Friday is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881), at the close of business on the preceding working day.
Explanation. —In this section, and in section 24, —
(a) “liabilities in India” shall not include—
(i) the paid-up capital or the reserves or any credit balance in the profit and loss account of the banking company;
(ii) any advance taken from the Reserve Bank or from the Development Bank or from the Exim Bank 2[or from the Reconstruction Bank] 3[or from the National Housing Bank] or from the National Bank 4[or from the Small Industries Bank] by the banking company;
(iii) in the case of a Regional Rural Bank, also any loan taken by such bank from its Sponsor Bank;
(b) “fortnight” shall mean the period from Saturday to the second following Friday, both days inclusive;
(c) “net balance in current accounts” shall, in relation to a banking company, mean the excess, if any, of the aggregate of the credit balances in current account maintained by that banking company with State Bank of India or a subsidiary bank or a corresponding new bank over the aggregate of the credit balances in current account held by the said banks with such banking company;
(d) for the purposes of computation of liabilities, the aggregate of the liabilities of a banking company to the State Bank of India, a subsidiary bank, a corresponding new bank, a regional rural bank, another banking company, a co-operative bank or any other financial institution notified by the Central Government in this behalf, shall be reduced by the aggregate of the liabilities of all such banks and institutions to the banking company;
(e) the expression “co-operative bank” shall have the meaning assigned to it in clause (cci) of section 56.
(2) The Reserve Bank may, for the purposes of this section and section 24, specify from time to time, with reference to any transaction or class of transactions, that such transaction or transactions shall be regarded as liability in India of a banking company and, if any question arises as to whether any transaction or class of transactions shall be regarded for the purposes of this section and section 24 as liability in India of a banking company, the decision of the Reserve Bank thereon shall be final.]
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1. Inserted by Act 62 of 1984, Section 71 and Third Schedule 20-3-1985.
2. Inserted by Act 62 of 1984, Section 71 and Third Schedule 20-3-1985
3. Inserted by Act 53 of 1987, Section 56 and Schedule w.e.f. 9-7-1988.
4. Inserted by Act 39 of 1989, Section 53 and Second Schedule, Pt. II w.e.f. 25-10-1989.
1[(1) A banking company shall not form any subsidiary company except a subsidiary company formed for one or more of the following purposes, namely: —
(a) the undertaking of any business which, under clauses (a) to (o) of subsection (3) of section 6, is permissible for a banking company to undertake, or
(b) with the previous permission in writing of the Reserve Bank, the carrying on of the business of banking exclusively outside India, or
(c) the undertaking of such other business, which the Reserve Bank may, with the prior approval of the Central Government, consider to be conducive to the spread of banking in India or to be other wise useful or necessary in the public interest.
Explanation. —For the purposes of section 8, a banking company shall not be deemed, by reason of its forming or having a subsidiary company, to be engaged indirectly in the business carried on by such subsidiary company.]
(2) Save as provided in sub-section (1), no banking company shall hold shares in any company, whether as pledgee, mortgagee or absolute owner, of an amount exceeding thirty per cent of the paid-up share capital of that company or thirty per cent of its own paid-up share capital and reserves, whichever is less:
Provided that any banking company which is on the date of the commencement of this Act holding any shares in contravention of the provisions of this sub-section shall not be liable to any penalty therefor if it reports the matter without delay to the Reserve Bank and if it brings its holding of shares into conformity with the said provisions within such period, not exceeding two years, as the Reserve Bank may think fit to allow.
(3) Save as provided in sub-section (1) and notwithstanding anything contained in sub-section (2), a banking company shall not, after the expiry of one year from the date of the commencement of this Act, hold shares, whether as pledgee, mortagagee or absolute owner, in any company in the management of which any managing director or manager of the banking company is in any manner concerned or interested.
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1. Subsituted Act 1 of 1984, Section 22 w.e.f. 15-2-1984.
1[Restrictions on loans and advances. (1) Notwithstanding anything to the contrary contained in section 77 of the Companies Act, 1956 (1 of 1956), no banking company shall,—
(a) grant any loans or advances on the security of its own shares, or—
(b) enter into any commitment for granting any loan or advance to or on behalf of—
(i) any of its directors,
(ii) any firm in which any of its directors is interested as partner, manager, employee or guarantor, or
(iii) any company [not being a subsidiary of the banking company or a company registered under section 25 of the Companies Act, 1956 (1 of 1956), or a Government company] of which 2[or the subsidiary or the holding company of which] any of the directors of the banking company is a director, managing agent, manager, employee or guarantor or in which he holds substantial interest, or
(iv) any individual in respect of whom any of its directors is a partner or guarantor.
(2) Where any loan or advance granted by a banking company is such that a commitment for granting it could not have been made if clause (b) of sub-section (1) had been in force on the date on which the loan or advance was made, or is granted by a banking company after the commencement of section 5 of the Banking Laws (Amendment) Act, 1968 (58 of 1968), but in pursuance of a commitment entered into before such commencement, steps shall be taken to recover the amounts due to the banking company on account of the loan, or advance together with interest, if any, due thereon within the period stipulated at the time of the grant of the loan or advance, or where no such period has been stipulated, before the expiry of one year from the commencement of the said section 5:
Provided that the Reserve Bank may, in any case, on an application in writing made to it by the banking company in this behalf, extend the period for the recovery of the loan or advance until such date, not being a date beyond the period of three years from the commencement of the said section 5, and subject to such terms and conditions, as the Reserve Bank may deem fit:
Provided further that this sub-section shall not apply if and when the director concerned vacates the office of the director of the banking company, whether by death, retirement, resignation or otherwise.
(3) No loan or advance, referred to in sub-section (2), or any part thereof shall be remitted without the previous approval of the Reserve Bank, and any remission without such approval shall be void and of no effect.
(4) Where any loan or advance referred to in sub-section (2), payable by any person, has not been repaid to the banking company within the period specified in that subsection, then, such person shall, if he is a director of such banking company on the date of the expiry of the said period, be deemed to have vacated his office as such on the said date.
Explanation. — In this section—
(a) “loans or advance” shall not include any transaction which the Reserve Bank may, having regard to the nature of the transaction, the period within which, and the manner and circumstances in which, any amount due on account of the transaction is likely to be realised, the interest of the depositors and other relevant considerations, specify by general or special order as not being a loan or advance for the purpose of this section;
(b) “director” include a member of any board or committee in India constituted by a banking company for the purpose of managing, or for the purpose of advising it in regard to the management of, all or any of its affairs.
(5) If any question arises whether any transaction is a loan or advance for the purposes of this section, it shall be referred to the Reserve Bank, whose decision thereon shall be final.]
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1. Subsituted by Act 58 of 1968, Section 5, for section 20 w.e.f. 1-2-1969.
2. Subsituted by Act 58 of 1968, Section 5, for section 20 w.e.f. 1-2-1969.
1[Restrictions on power to remit debts. (1) Notwithstanding anything to the contrary contained in section 293 of the Companies Act, 1956 (1 of 1956), a banking company shall not, except with the prior approval of the Reserve Bank, remit in whole or in part any debt due to it by—
(a) any of its directors, or
(b) any firm or company in which any of its directors is interested as director, partner, managing agent or guarantor, or
(c) any individual if any of its directors is his partner or guarantor.
(2) Any remission made in contravention of the provisions of sub-section (1) shall be void and of no effect.]
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1. Inserted by Act 55 of 1963, Section 12 w.e.f. 1-2-1964.
(1) Where the Reserve Bank is satisfied that it is necessary or expedient in the public interest 1[or in the interests of depositors] 2[ or banking policy] so to do, it may determine the policy in relation to advances to be followed by banking companies generally or by any banking company in particular, and when the policy has been so determined, all banking companies or the banking company concerned, as the case may be, shall be bound to follow the policy as so determined.
(2) Without prejudice to the generality of the power vested in the Reserve Bank under sub-section (1) the Reserve Bank may give directions to banking companies, either generally or to any banking company or group of banking companies in particular, 3[as to—
(a) the purposes for which advances may or may not be made,
(b) the margins to be maintained in respect of secured advances,
(c) the maximum amount of advances or other financial accommodation which, having regard to the paid-up capital, reserves and deposits of a banking company and other relevant considerations, may be made by that banking company to any one company, firm, association of persons or individual,
(d) the maximum amount up to which, having regard to the considerations referred to in clause (c), guarantees may be given by a banking company on behalf of any one company, firm, association of persons or individual, and
(e) the rate of interest and other terms and conditions on which advances or other financial accommodation may be made or guarantees may be given.]
4[(3) Every banking company shall be bound to comply with any directions given to it under this section.]
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1. Inserted by Act 55 of 1963, Section 13 w.e.f. 1-2-1964.
2. Inserted by Act 58 of 1968, Section 6 w.e.f. 1-2-1969.
3. Subsituted by Act 55 of 1963, Section 13, for certain words w.e.f. 1-2-1954.
4. Inserted by Act 55 of 1963, Section 13 w.e.f. 1-3-1964.
1[Rates of interest charged by banking companies not to be subject to scrutiny by courts. Notwithstanding anything contained in the Usurious Loans Act, 1918 (10 of 1918), or any other law relating to indebtedness in force in any State, a transaction between a banking company and its debtor shall not be re-opened by any court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive.]
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1. Inserted by Act 1 of 1984, Section 24 w.e.f. 15-2-1984.
1[(1) Save as hereinafter provided, no company shall carry on banking business in India unless it holds a licence issued in that behalf by the Reserve Bank and any such licence may be issued subject of such conditions as the Reserve Bank may think fit to impose.]
(2) Every banking company in existence on the commencement of this Act, before the expiry of six months from such commencement, and every other company before commencing banking business 2[in India], shall apply in writing to the Reserve Bank for a licence under this section:
Provided that in the case of a banking company in existence on the commencement of this Act, nothing in sub-section (1) shall be deemed to prohibit the company from carrying on banking business until it is granted a licence in pursuance of 3is section] or is by notice in writing informed by the Reserve Bank that a licence cannot be granted to it:
Provided further that the Reserve Bank shall not give a notice as aforesaid to a banking company in existence on the commencement of this Act before the expiry of the three years referred to in sub-section (1) of section 11 or of such further period as the Reserve Bank may under that sub-section think fit to allow.
(3) Before granting any licence under this section, the Reserve Banking may require to be satisfied by an inspection of the books of the company or otherwise that 4[***] the following conditions are fulfilled, namely : —
5[(a) that the company is or will be in a position to pay its present or future depositors in full as their claims accrue;
(b) that the affairs of the company are not being, or are not likely to be, conducted in a manner deterimental to the interests of its present or future depositors;]
6[(c) that the general character of the proposed management of the company will not be prejudicial to the public interest or the interest of its depositors;
(d) that the company has adequate capital structure and earning prospects;
(e) that the public interest will be served by the grant of a licence to the company to carry on banking business in India;
(f) that having regard to the banking facilities available in the proposed principal area of operations of the company, the potential scope for expansion of banks already in existence in the area and other relevant factors the grant of the licence would not be prejudicial to the operation and consolidation of the banking system consistent with monetary stability and economic growth;
(g) any other condition, the fulfilment of which would, in the opinion of the Reserve Bank, be necessary to ensure that the carrying on of banking business in India by the company will not be prejudicial to the public interest or the interests of the depositors.]
7[(3A) Before granting any licence under this section to a company incorporated outside India, the Reserve Bank may require to be satisfied by an inspection of the books of the company or otherwise that the conditions specified in sub-section (3) are fulfilled and that the carrying on of banking business by such company in India will be in the public interest and that the Government or law of the country in which it is incorporated does not discriminate in any way against banking companies registered in India and that the company complies with all the provisions of this Act applicable to banking companies incorporated outside India.]
8[(4) The Reserve Bank may cancel a licence granted to a banking company under this section —
(i) if the company ceases to carry on banking business in India; or
(ii) if the company at any time fails to comply with any of the conditions imposed upon it under sub-section (1); or
(iii) if at any time, any of the conditions referred to in sub-section (3) 7[and sub-section (3A)] is not fulfilled:
Provided that before cancelling a licence under clause (ii) or clause (iii) of this sub-section on the ground that the banking company has failed to comply with or has failed to fulfil any of the conditions referred to therein, the Reserve Bank, unless it is of opinion that the delay will be prejudicial to the interests of the company’s depositors or the public, shall grant to the company on such terms as it may specify, an opportunity of taking the necessary steps for complying with or fulfilling such condition.
(5) Any banking company aggrieved by the decision of the Reserve Bank cancelling a licence under this section may, within thirty days from the date on which such decision is communicated to it, appeal to the Central Government.
(6) The decision of the Central Government where an appeal has been preferred to it under sub-section (5) or of the Reserve Bank where no such appeal has been preferred shall be final.]
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1. Subsituted by Act 33 of 1959, Section 13, for sub-section (1) w.e.f. 1-10-1959.
2. Subsituted by Act 20 of 1950, Section 3, for “in any state”.
3. Subsituted by Act 33 of 1959, Section 13, for “sub-section” (2)” w.e.f. 1-10-1959.
4. The words “all or any of” omitted by Act 1 of 1984, Section 25 w.e.f. 15-2-1984.
5. Subsituted by Act 33 of 1959, Section 13, for clauses (a) and (b) w.e.f. 1-10-1959.
6. Subsituted by Act 1 of 1984, Section 25, for clause ( c) w.e.f. 15-2-1984.
7. Inserted by Act 1 of 1984, Section 25 w.e.f. 15-2-1984.
8. Subsituted by Act 33 of 1959, Section 13, for sub-sections (4) and (5) w.e.f. 1-10-1959.
1[Restrictions on opening of new, and transfer of existing, places of business. (1) Without obtaining the prior permission of the Reserve Bank—
(a) no banking company shall open a new place of business in India or change otherwise than within the same city, town or village, the location of an existing place of business situated in India; and
(b) no banking company incorporated in India shall open a new place of business outside India or change, otherwise than within the same city, town or village in any country or area outside India, the location of an existing place of business situated in that country or area:
Provided that nothing in this sub-section shall apply to the opening for a period not exceeding one month of a temporary place of business within a city, town or village or the environs thereof within which the banking company already has a place of business, for the purpose of affording banking facilities to the public on the occasion of an exhibition, a conference or a mela or any other like occasion.
(2) Before granting any permission under this section, the Reserve Bank may require to be satisfied by an inspection under section 35 or otherwise as to the financial condition and history of the company, the general character of its management, the adequacy of its capital structure and earning prospects and that public interest will be served by the opening or, as the case may be, change of location, of the place of business.
(3) The Reserve Bank may grant permission under sub-section (1) subject to such conditions as it may think fit to impose either generally or with reference to any particular case.
(4) Where, in the opinion of the Reserve Bank, a banking company has, at any time, failed to comply with any of the conditions imposed on it under this section, the Reserve Bank may, by order in writing and after affording reasonable opportunity to the banking company for showing cause against the action proposed to be taken against it, revoke any permission granted under this section.
2[(4A) Any regional rural bank requiring the permission of the Reserve Bank under this section shall forward its application to the Reserve Bank through the National Bank which shall give its comments on the merits of the application and send it to the Reserve Bank:
Provided that the regional rural bank shall also send an advance copy of the application directly to the Reserve Bank.]
(5) For the purpose of this section “place of business” includes any sub-office, pay office, subpay office and any place of business at which deposits are received, cheques cashed or moneys lent.]
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1. Subsituted by Act 33 of 1959, Section 14, for section 23 w.e.f. 1-10-1959.
2. Inserted by Act 61 of 1981, Section 61 and Second Schedule, Pt. II w.e.f. 1-5-1982.
(1) After the expiry of two years from the commencement of this Act, every banking company shall maintain 1[in India] in cash, gold or unencumbered approved securities, valued at a price not exceeding the current market price, an amount which shall not at the close of business on any day be less than 20 percent of the total of its 2[demand and time liabilities] 3[in India].
4[Explanation— For the purposes of this section, “unencumbered approved securities” of a banking company shall include its approved securities lodged with another institution for an advance or any other credit arrangement to the extent to which such securities have not been drawn against or availed of.]
5[(2) In computing the amount for the purposes of sub-section (1), the deposit required under sub-section (2) of section 11 to be made with the Reserve Bank by a banking company incorporated outside India and any balances maintained in India by a banking company in current account with the Reserve Bank or the State Bank of India or with any other bank which may be notified in this behalf by the Central Government, including in the case of a scheduled bank the balance required under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934) to be so maintained, shall be deemed to be cash maintained in India.]
6[(2A)(a) Notwithstanding anything contained in sub-section (1) or in sub-section (2), after the expiry of two years from the commencement of the Banking Companies (Amendment) Act, 1962 (36 of 1962),—
(i) a scheduled bank, in addition to the average daily balance which it is, or may be, required to maintain under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934), and
(ii) every other banking company, in addition to the cash reserve which it is required to maintain under section 18,
7[shall maintain in India,—
(A) in cash, or
(B) in gold valued at a price not exceeding the current market price or in unencumbered approved securities valued at a price determined in accordance with such one or more of, or combination of, the following methods of valuation, namely, valuation with reference to cost price, market price, book value or face value, as may be specified by the Reserve Bank from time to time,
an amount which shall not, at the close of business on any day, be less than twenty-five per cent or such other percentage not exceeding forty per cent, as the Reserve Bank may, from time to time, by notification in the Official Gazette, specify, of the total of its demand and time liabilities in India, as on the last Friday of the second preceding fortnight;]
8[(b) in computing the amount for the purposes of clause (a), —
(i) the deposit required under sub-section (2) of section 11 to be made with the Reserve Bank by a banking company incorporated outside India;
(ii) any cash or balances maintained in India by a banking company other than a scheduled bank with itself or with the Reserve Bank or by way of net balance in current account in excess of the aggregate of the cash or balance or net balance required to be maintained under section 18;
(iii) any balances maintained by a scheduled bank with the Reserve Bank in excess of the balance required to be maintained by it under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934);
(iv) the net balance in current accounts maintained in India by a scheduled bank;
(v) any balances maintained by a Regional Rural Bank in call or fixed deposit with its Sponsor Bank, shall be deemed to be cash maintained in India].
9[Explanation. — For the purpose of clause (a) of this sub-section, the market price of an approved security shall be the price as on the date of the issue of the notification or as on any earlier or later date as may be notified from time to time by the Reserve Bank in respect of any class or classes of securities.
10[(2B) The Reserve Bank may, by notification in the Official Gazette, vary the percentage referred to in sub-section (2A) in respect of a Regional Rural Bank 11[***].]
12[(3) For the purpose of ensuring compliance with the provisions of this section, every banking company shall, not later than twenty days after the end of the month to which it relates, furnish to the Reserve Bank in the prescribed form and manner a monthly return showing particulars of its assets maintained in accordance with this section, and its demand and time liabilities in India at the close of business on each alternate Friday during the month, or if any such Friday is a public holiday, at the close of business on the preceding working day:
Provided that every Regional Rural Bank shall also furnish a copy of the said return to the National Bank.]
(4)(a) If on any alternate Friday or, if such Friday is a public holiday, on the preceding working day, the amount maintained by a banking company at the close of business on that day falls below the minimum prescribed by or under clause (a) of sub-section (2A) such banking company shall be liable to pay to the Reserve Bank in respect of that day’s default, penal interest for that day at the rate of three per cent per annum above the bank rate on the amount by which the amount actually maintained falls short of the prescribed minimum on that day; and
(b) If the default occurs again on the next succeeding alternate Friday, or, if such Friday is a public holiday, on the preceding working day, and continues on succeeding alternate Fridays or preceding working days, as the case may be, the rate of penal interest shall be increased to a rate of five per cent per annum above the bank rate on each such shortfall in respect of that alternate Friday and each succeeding alternate Friday or preceding working day, if such Friday is a public holiday, in which the default continues.
(5)(a) Without prejudice to the provisions of sub-section (3), the Reserve Bank may require a banking company to furnish to it a return in the form and manner specified by it showing particulars of its assets maintained in accordance with this section and its demand and time liabilities in India, as at the close of business on each day of a month; and
(b) Without prejudice to the provisions of sub-section (4), on the failure of a banking company to maintain as on any day, the amount so required to be maintained by or under clause (a) of sub-section (2A) the Reserve Bank may, in respect of such default, require the banking company to pay penal interest for that day as provided in clause (a) of sub-section (4) and if the default continues on the next succeeding working day, the penal interest may be increased as provided in clause (b) of sub-section (4) for the concerned days.
(6)(a) The penalty payable under sub-section (4) and sub-section (5) shall be paid within a period of fourteen days from the date on which a notice issued by the Reserve Bank demanding payment of the same is served on the banking company and in the event of failure of the banking company to pay the same within such period, the penalty may be levied by a direction of the principal civil court having jurisdiction in the area where an office of the defaulting banking company is situated, such direction to be made only upon an application made by the Reserve Bank in this behalf to the court; and
(b) When the court makes a direction under clause (a), it shall issue a certificate specifying the sum payable by the banking company and every such certificate shall be enforceable in the same manner as if it were a decree made by the court in a suit.
(7) When under the provisions of clause (b) of sub-section (4), penal interest at the increased rate of five per cent, above the bank rate has become payable by a banking company, if thereafter the amount required to be maintained on the next succeeding alternate Friday, or if such Friday is a public holiday, the next preceding working day, is still below the prescribed minimum, every director, manager or secretary of the banking company, who is knowingly and wilfully a party to the default, shall be punishable with fine which may extend to five hundred rupees and with a further fine which may extend to five hundred rupees for each subsequent alternate Friday or the preceding working day, as the case may be, on which the default continues.
(8) Notwithstanding anything contained in this section, if the Reserve Bank is satisfied, on an application in writing by the defaulting banking company, that the banking company had sufficient cause for its failure to comply with the provisions of clause (a) of sub-section (2A), the Reserve Bank may not demand the payment of the penal interest.
Explanation. — In this section, the expression “public holiday” means a day which is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881)].
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1. Inserted by Act 33 of 1959, Section 15 w.e.f. 1-10-1959.
2. Subsituted by Act 1 of 1984, Section 26, for “time and demand liabilities” w.e.f. 29-3-1985.
3. Subsituted by Act 20 of 1950, Section 3, for “in the States”.
4. Subsituted by Act 33 of 1959, Section 15, for the former Explanation w.e.f. 1-10-1959.
5. Subsituted by Act 33 of 1959, Section 15, for sub-section (2) w.e.f. 1-10-1959.
6. Inserted by Act 36 of 1962, Section 6.
7. Subsituted by Act 1 of 1984, Section 26, for certain words and figures w.e.f. 29-3-1985.
8. Subsituted by Act 1 of 1984, Section 26, for clause (b) w.e.f. 29-9-1985.
9. Inserted by Act 1 of 1984 Section 26 w.e.f. 29-3-1985.
10. Inserted by Act 21 of 1976, Section 33 w.e.f. 26-9-1975.
11. Certain words omitted by Act I of 1984, Section 26 w.e.f. 29-3-1985.
12. Subsituted by Act 1 of 1984, Section 26, for sub-section (3) w.e.f. 29-3-1985.
1[(1) The assets in India of every banking company at the close of business on the last Friday of every quarter or, if that Friday is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881), at the close of the business on the preceding working day, shall not be less than seventy-five percent of its demand and time liabilities in India.
(2) Every banking company shall, within one month from the end of every quarter, submit to the Reserve Bank a return in the prescribed form and manner of the assets and liabilities referred to in sub-section (1) as at the close of business on the last Friday of the previous quarter, or, if that Friday is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881) at the close of business on the preceding working day:]
2[Provided that every regional rural bank shall also furnish a copy of the said return to the National Bank.]
For the purposes of this section, —
3[(a) “assets in India” shall be deemed to include export bills drawn in, and import bills drawn on and payable in India and expressed in such currencies as the Reserve Bank may from time to time approve in this behalf and also such securities as the Reserve Bank may approve in this behalf notwithstanding that all or any of the said bills or securities are held outside India;]
4[(b) “liabilities in India” shall not include the paid-up capital or the reserves or any crredit balance in the profit and loss account of the banking company;]
5[(c)] “quarter” means the period of three months ending on the last day of March, June, September or December.
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1. Subsituted by Act 33 of 1959, Section 16, for sub-sections (1) and (2) w.e.f. 1-10-1959.
2. Inserted by Act 61 of 1981, Section 61 and Second Schedule, Pt. II w.e.f. 10-5-1982.
3. Subsituted by Act 20 of 1950, Section 7, for clause (a).
4. Inserted by Act 33 of 1959, Section 16 w.e.f. 1-10-1959.
5. Clause (b) relettered as clause (c) by Act 33 of 1959, Section 16 w.e.f. 1-10-1959.
Every banking company shall, within thirty days after the close of each calendar year, submit a return in the prescribed form and manner to the Reserve Bank as at the end of such calendar year of all accounts 1[in India] which have not been operated upon for ten years 2[* * *]:
Provided that in the case of money deposited for a fixed period the said term of ten years shall be reckoned from the date of the expiry of such fixed period:
3[Provided further that every regional rural bank shall also furnish a copy of the said return to the National Bank.]
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1. Subsituted by Act 20 of 1950, Section 3, for “in a States”.
2. Certain words omitted by Act 55 of 1963, Section 14 w.e.f. 1-2-1964.
3. Inserted by Act 61 of 1981, Section 61 and Second Schedule, Pt. II w.e.f. 1-5-1982.
(I) Every banking company shall, before me close of the month succeeding that to which it relates, submit to the Reserve Bank a return in the prescribed form and manner showing its assets and liabilities [in India] as at the close of business on the last Friday of every month or if that Friday is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881), at the close of business on the preceding working day.
2[(2) The Reserve Bank may at any time direct a banking company to furnish it within such time as may be specified by the Reserve Bank, with such statements and information relating to the business or affairs of the banking company (including any business or affairs with which such banking company is concerned) as the Reserve Bank may consider necessary or expedient to obtain for the purposes of this Act, and without prejudice to the generality of the foregoing power may call for information every half-year regarding 3[the investments of a banking company and the classification of its advances in respect of industry, commerce and agriculture].]
1[(3). Every regional rural bank shall submit a copy of the return which it submits to the Reserve Bank under sub-section (1) also to the National Bank and the powers exercisable by the Reserve Bank under sub-section (2) may also be exercised by the National Bank in relation to regional rural banks.]
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1. Inserted by Act 61 of 1981, Section 61 and Second Schedule, Pt. II w.e.f. 1-5-1982.
2. Subsituted by Act 95 of 1956, Section 6, for sub-section (2) w.e.f. 14-1-1957.
3. Subsituted by Act 33 of 1959, Section 17, for certain words w.e.f. 1-10-1959.
1[Power to publish information. The Reserve Bank or the National Bank, or both, if they consider it in the public interest so to do, may publish any information obtained by them under this Act in such consolidated form as they think fit.]
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1. Subsituted by Act 61 of 1981, Section 61 and Second Schedule, Pt. II w.e.f. 1-5-1982.
(1) At the expiration of each calendar year 1[or at the expiration of a period of twelve months ending with such date2 as the Central Government may, by notification in the Official Gazette, specify in this behalf,] every banking company incorporated 95[in India], in respect of all business transacted by it, and every banking company incorporated 3[outside India], in respect of all business transacted through its branches 4[in India], shall prepare with reference to 5[that year or period, as the case may be,] a balance-sheet and profit and loss account as on the last working day of 6[that year or the period, as the case may be] in the Forms set out in the Third Schedule or as near thereto as circumstances admit:
7[Provided that with a view to facilitating the transition from one period, of accounting to another period of-accounting under this sub-section, the Central Government may, by order published in the Official Gazette, make such provisions as it considers necessary or expedient for the preparation of, or for other matters relating to, the balance sheet or profit and loss account in respect of the concerned year or period, as the case may be.]
(2) The balance-sheet and profit and loss account shall be signed—
(a) in the case of a banking company incorporated 4[in India], by the manager or the principal officer of the company and where there are more than three directors of the company, by at least three of those directors, or where there are not more than three directors, by all the directors, and
(b) in the case of a banking company incorporated 3[outside India] by the manager or agent of the principal office of the company 4[in India].
(3) Notwithstanding that the balance-sheet of a banking company is under subsection (I) required to be prepared in a form other than the form 8[set out in Part I -of Schedule VI to the Companies Act, 1956 (1 of 1956)], the requirements of that relating to the balance-sheet and profit and loss account of a company shall, in so far as they are not inconsistent with this Act, apply to the balance-sheet or profit and loss account, as the case may be, of a banking company.
9[(3A) Notwithstanding anything to the contrary contained in sub-section (3) of section 210 of the Companies Act, 1956 (1 of 1956), the period to which the profit and loss account relates shall, in the case of a banking company, be the period ending with the last working day of the year immediately preceding the year in which the annual general meeting is held.]
10[Explanation. —In sub-section (3A), “year” means the year or, as the case may be, the period referred to in sub-section (1).]
(4) The Central Government, after giving not less than three months’ notice of its mention so to do by a notification in the Official Gazette, may from time to time by a like notification amend the Form set out in the Third Schedule.
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101. Inserted by Act 66 of 1988, Section 8 w.e.f. 30-12-1988.
102. 31st day of March (pecified by Central Government Vide S.O. 86 (E), dated 29 th January, 1992), published in the Gazette of India, Extra., Pt. II, Section 3(ii) NO. 77, dated 29th January, 1992.
103. Subsituted by Act 20 of 1950, Section 3, for “ourside the States”.
104. Subsituted by Act 20 of 1950, Section 3, for “in a State”.
105. Subsituted by Act 66 of 1988, Section 8, for “that year” w.e.f. 30-12-1988.
106. Subsituted by Act 66 of 1988, Section 8, for “the year” w.e.f. 30-12-1988.
107. Subsituted by Act 66 of 1988, Section 8, for “the year” w.e.f. 30-12-1988.
108. Subsituted by Act 95 of 1956, Section 14 and Schedule, for “marked F in the Third Schedule to the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.
109. Inserted by Act 1 of 1984, Section 27 w.e.f. 15-2-1984.
110. Inserted by Act 66 of 1988, Section 8 w.e.f. 30-12-1988.
1[(1) The balance-sheet and profit and loss account prepared in accordance with section 29 shall be audited by a person duly qualified under any law for the time being in force to be an auditor of companies.]
2[(1A) Notwithstanding anything contained in any law for the time being in force or in any contract to the contrary, every banking shall, before appointing re-appointing or removing any auditor or auditors, obtain the previous approval of the Reserve Bank.
(1B) Without prejudice to anything contained in the Companies Act, 1956 (1 of 1956), or any other law for the time being in force, where the Reserve Bank is of opinion that it is necessary in the public interest or in the interest of the banking company or its depositors so to do, 3[it may at any time by order direct that a special audit of the banking company’s accounts, for any such transaction or class of transactions or for such period or periods as may be specified in the order, shall be conducted and may by the same or a different order either appoint a person duly qualified under any law for the time being in force to be an auditor of companies or direct the auditor of the banking company himself to conduct such special audit] and the auditor shall comply with such directions and make a report of such audit to the Reserve Bank and forward a copy thereof to the company.
(1C) The expenses of, or incidental to 3[the special audit] specified in the order made by the Reserve Bank shall be borne by the banking company.]
(2) The auditor shall have the powers of, exercise the functions vested in, and discharge the duties and be subject to the liabilities and penalties imposed on, auditors of companies by 4[section 227 of the Companies Act, 1956 (1 of 1956), 5[,and auditors, if any, appointed by the law establishing, constituting or forming the banking company concerned.]
(3) In addition to the matters which under the aforesaid Act the auditor is required to state in his report, he shall, in the case of a banking company incorporated 6[in India], state in his report,—
(a) whether or not the information and explanation required by him have been found to be satisfactory;
(b) whether or not the transactions of the company which have come to his notice have been within the powers of the company;
(c) whether or not the returns received from branch offices of the company have been found adequate for the purposes of his audit;
(d) whether the profit and loss account shows a true balance 7[of profit or loss] for the period covered by such account;
(e) any other matter which he considers should be brought to the notice of the shareholders of the company.
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1. Subsituted by Act 58 of 1968, Section 8, for sub-section (1) w.e.f. 1-2-1969.
2. Inserted by Act 58 of 1968, Section 8 w.e.f. 1-2-1969.
3. Subsituted by Act 66 of 1988, Section 9, for certain words w.e.f. 30-12-1988.
4. Subsituted by Act 58 of 1968, Section 8 for “section 145 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 1-2-1969.
5. Inserted by Act 66 of 1988, Section 9, for certain words w.e.f. 30-12-1988.
6. Subsituted by Act 20 of 1950, Section 3, for “in a State.”
7. Subsituted by Act 55 of 1963, Section 15, for “of profit and loss”.
The accounts and balance-sheet referred to in section 29 together with the auditor’s report shall be published in the prescribed manner and three copies thereof shall be furnished as returns to the Reserve Bank within three months from the end of the period to which they refer:
Provided that the Reserve Bank may in any case extend the said period of three months for the furnishing of such returns by a further period not exceeding three months:
1[Provided further that a regional rural bank shall furnish such returns also to the National Bank.]
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1. Inserted by Act 58 of 1968, Section 8 w.e.f. 1-2-1969.
1[(1) Where a banking company in any year furnishes its accounts and balance-sheet in accordance with the provisions of section 31, it shall at the same time send to the registrar three copies of such accounts and balance-sheet and of the auditor’s report, and where such copies are so sent, it shall not be necessary to file with the registrar, in the case of a public company, copies of the accounts and balance-sheet and of the auditor’s report, and, in the case of a private company, copies of the balance-sheet and of the auditor’s report as required by sub-section (1) of section 220 of the Companies Act, 1956 (1 of 1956); and the copies so sent shall be chargeable with the same fee and shall be dealt with in all respects as if they were filed in accordance with that section.]
(2) When in pursuance of sub-section (2) of section 27 the Reserve Bank requires any additional statement or information in connection with the balance-sheet and accounts furnished under section 31, the banking company shall, when supplying such statement or information, send a copy thereof to the registrar.
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1. Subsituted by Act 33 of 1959, Section 19 w.e.f. 1-10-1959.
Every banking company incorporated 1[outside India] shall, not later than the first Monday in August of any year in which it carries on business, display in a conspicuous place in its principal office and in every branch office 2[in India] a copy of its last audited balance-sheet and profit and loss account prepared under section 29, and shall keep the copy so displayed until replaced by a copy of the subsequent balance-sheet and profit and loss account so prepared, and every such banking company shall display in like manner copies of its complete audited balance-sheet and profit and loss account relating to its banking business as soon as they are available, and shall keep the copies so displayed until copies of such subsequent accounts are available.
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1. Subsituted by Act 20 of 1950, Section 3, for “outside the States”.
2. Subsituted by Act 20 of 1950, Section 3, for “in a State”.
Nothing in this Act shall apply to the preparation of accounts by a banking company and the audit and submission thereof in respect of any accounting year which has expired prior to the commencement of this Act, and notwithstanding the other provisions of this Act, such accounts shall be prepared, audited and submitted in accordance with the law in force immediately before the commencement of this Act.
1[Production of documents of confidential nature. (1) Notwithstanding anything contained in section 11 of the Industrial Disputes Act, 1947 (14 of 1947), or any other law for the time being in force, no banking company shall, in any proceeding under the said Act or in any appeal or other proceeding arising therefrom or connected therewith, be compelled by any authority before which such proceeding is pending to produce, or give inspection of, any of its books of account or other document or furnish or disclose any statement or information, when the banking company claims that such document, statement or information is of a confidential nature and that the production or inspection of such document or the furnishing or disclosure of such statement or information would involve disclosure of information relating to—
(a) any reserves not shown as such in its published balance-sheet; or
(b) any particulars not shown therein in respect of provisions made for bad and doubtful debts and other usual or necessary provisions.
(2) If, in any such proceeding in relation to any banking company other than the Reserve Bank of India, any question arises as to whether any amount out of the reserves or provisions referred to in sub-section (1) should be taken into account by the authority before which such proceeding is pending, the authority may, if it so thinks fit, refer the question to the Reserve Bank and the Reserve Bank shall, after taking into account principles of sound banking and all relevant circumstances concerning the banking company, furnish to the authority a certificate stating that the authority shall not take into account any amount as such reserves and provisions of the banking company or may take them into account only to the extent of the amount specified by it in the certificate, and the certificate of the Reserve Bank on such question shall be final and shall not be called in question in any such proceeding.
2[(3) For the purposes of this section “banking company” includes the Reserve Bank, the Development Bank, the Exim Bank, 3[the Reconstruction Bank], 4[the National Housing Bank], the National Bank, 5[the Small Industries Bank] the State Bank of India, a corresponding new bank, a regional rural bank and a subsidiary bank.]
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1. Inserted by Act 23 of 1960, Section 2.
2. Subsituted by Act 1 of 1984, Section 28, for sub-section (3) w.e.f. 15-2-1984.
3. Inserted by Act 62 of 1984, Section 71 and Third Schedule w.e.f. 20-3-1985.
4. Inserted by Act 53 of 1987, Section 56 and Second Schedule w.e.f. 9-7-1988.
5. Inserted by Act 39 of 1989, Section 53 and Second Schedule, Part III, w.e.f. 25-10-1989.
(1) Notwithstanding anything to the contrary contained in 1[section 235 of the Companies Act, 1956 (1 of 1956)], the Reserve Bank at any time may, and on being directed so to do by the Central Government shall, cause an inspection to be made by one or more of its officers of any banking company and its books and accounts; and the Reserve Bank shall supply to the banking company a copy of its report on such inspection.
2[(1A) (a) Notwithstanding anything to the contrary contained in any law for the time being in force and without prejudice to the provisions of sub-section (1), the Reserve Bank, at any time, may also cause a scrutiny to be made by any one or more of its officers, of the affairs of any banking company and its books and accounts; and
(b) a copy of the report of the scrutiny shall be furnished to the banking company if the banking company makes a request for the same or if any adverse action is contemplated against the banking company on the basis of the scrutiny.]
(2) It shall be the duty of every director or other officer 3[or employee] of the banking company to produce to any officer making an inspection under sub-section (1) [or a scrutiny under sub-section (1A)] all such books, accounts and other documents in his custody or power and to furnish him with any statements and information relating to the affairs of the banking company as the said officer may require of him within such time as the said officer may specify.
(3) Any person making an inspection under sub-section (1) 4[for a scrutiny under sub-section (1A)] may examine on oath any director or other officer 3[or employee] of the banking company in relation to its business, and may administer an oath accordingly.
(4) The Reserve Bank shall, if it has been directed by the Central Government to cause an inspection to be made, and may, in any other case, report to the Central Government on any inspection 4[or scrutiny] made under this section, and the Central Government, if it is of opinion after considering the report that the affairs of the banking company are being conducted to the detriment of the interests of its depositors, may, after giving such opportunity to the banking company to make a representation in connection with the report as, in the opinion of the Central Government, seems reasonable, by order in writing—
(a) prohibit the banking company from receiving fresh deposits;
(b) direct the Reserve Bank to apply under section 38 for the winding up of the banking company:
Provided that the Central Government may defer, for such period as it may think fit, the passing of an order under this sub-section, or cancel or modify any such order, upon such terms and conditions as it may think fit to impose.
(5) The Central Government may, after giving reasonable notice to the banking company, publish the report submitted by the Reserve Bank or such portion thereof as may appear necessary.
5[Explanation. —For the purpose of this section, the expression “banking company” shall include—
(i) in the case of a banking company incorporated outside India, all its branches in India; and
(ii) in the case of a banking company incorporated in India—
(a) all its subsidiaries formed for the purpose of carrying on the business of banking exclusively outside India; and
(b) all its branches whether situated in India or outside India.]
6[(6) The powers exercisable by the Reserve Bank under this section in relation to regional rural banks may (without prejudice to the exercise of such powers by the Reserve Bank in relation to any regional rural bank whenever it considers necessary so to do) be exercised by the National Sank in relation to the regional rural banks, and accordingly, sub-sections (1) to (5) shall apply in relation to regional rural banks as if every reference therein to the Reserve Bank included also a reference to the National Bank.]
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1. Subsituted by Act 95 of 1956, Section 14 and Schedule, for “section 138 of the Indian companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.
2. Inserted by Act 1 of 1984, Section 29 w.e.f. 15-2-1984.
3. Inserted by Act 55 of 1963, Section 17 w.e.f. 1-2-1964.
4. Inserted by Act 1 of 1984, Section 29 w.e.f. 15-2-1984.
5. Added Act 33 of 1959 Section 20 w.e.f. 1-10-1959.
6. Inserted by Act 61 of 1981, Section 61 and Second Schedule, Pt. II. W.e.f. 1-5-1982.
Section 35A. Power of the Reserve Bank to give directions
1[Power of the Reserve Bank to give directions. (1) Where the Reserve Bank is satisfied that—
(a) in the 2[public interest]; or
3[(aa) in the interest of banking policy; or]
(b) to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or
(c) to secure the proper management of any banking company generally,
it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to comply with such directions.
(2) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any direction issued under sub-section (1), and in so modifying or cancelling any direction may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have effect.
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1. Subsituted by Act 7 of 1961, Section 2, for “national interest”.
2. Subsituted by Act 7 of 1961, Section 2, for “national interest”.
3. Inserted by Act 58 of 1968, Section 10 w.e.f. 1-2-1969.
(1) In the case of a banking company—
(a) no amendment of any provision relating to 1[the maximum permissible number of directors or] the 2[appointment or re-appointment or termination of appointment or remuneration of a chairman, a] 3[managing director or any other director, whole-time or otherwise] or of a manager or a chief executive officer by whatever name called, whether that provision be contained in the company’s memorandum or articles of association, or in an agreement entered into by it, or in any resolution passed by the company in general meeting or by its Board of directors shall have effect unless approved by the Reserve Bank;
4[(b) no appointment or re-appointment or termination of appointment of a chairman, a managing or whole-time director, manager or chief executive officer by whatever name called, shall have effect unless such appointment, re-appointment or termination of appointment is made with the previous approval of the Reserve Bank.]
5[Explanation. —For the purpose of this sub-section, any provision conferring any benefit or providing any amenity or perquisite, in whatever form, whether during or after the termination of the term of office 6[of the chairman or the manager] or the chief executive officer by whatever name called or the managing director, or any other director, whole-time or otherwise, shall be deemed to be a provision relating to his remuneration.]
(2) Nothing contained in sections 7[268 and 269, the proviso to sub-section (3) of section 309, sections 310 and 311, the proviso to section 387, and section 388] (in so far as section 388 makes the 8[provisions of sections 269, 310] and 311 apply in relation to the manager of a company) of the Companies Act, 1956 (1 of 1956), shall 9[apply to any matter in respect of which the approval of the Reserve Bank has to be obtained under sub-section (1)].
10[(2A) Nothing contained in section 198 of the Companies Act, 1956 (1 of 1956) shall apply to a banking company and the provisions of sub-section (1) of section 309 and of section 387 of that Act shall, in so far as they are applicable to a banking company, have effect as if no reference had been made in the said provisions to section 198 of that Act.]
(3) No act done by a person 11[as chairman or a managing or whole-time director] or a director not liable to retire by rotation or a manager or a chief executive officer by whatever name called, shall be deemed to be invalid on the ground that it is subsequently discovered that his 12[appointment or reappointment] had not taken effect by reason of any of the provisions of this Act; but nothing in this sub-section shall be construed as rendering valid any act done by such person after his 13[appointment or reappointment] has been shown to the banking company not to have had effect.]
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1. Inserted by Act 1 of 1984, Section 30 w.e.f. 15-2-1984.
2. Subsituted by Act 58 of 1968, Section 11, for “appointment or reappointment or renuneration of a” w.e.f. 1-2-1969.
3. Subsituted by Act 33 of 1959, Section 21, for “managing or whole-time director or of a director no liable to retire by rotation” w.e.f. 1-10-1959.
4. Subsituted by Act 58 of 1968, Section 11, for clause (b) w.e.f. 1-2-1969.
5. Added by Act 33 of 1959, Section 21 w.e.f. 1-10-1959.
6. Subsituted by Act 58 of 1968, Section 11, for “of the manager” w.e.f. 1-2-1969.
7. Subsituted by Act 36 of 1962, Section 7, for “268, 269, 310, 311 and 388”.
8. Subsituted by Act 1 of 1984, Section 30 for “provisions of sections 310” w.e.f. 15-2-1984.
9. Subsituted by Act 33 of 1959, Section 21, for certain words w.e.f. 1-10-1959.
10. Inserted by Act 1 of 1984, Section 30 w.e.f. 15-2-1984.
11. Subsituted by Act 58 of 1968, Section 12, for “as a managing or whole-time director.
12. Subsituted by Act 58 of 1968, Section 11, for “appointment” w.e.f. 1-2-1969.
13. Subsituted by Act 58 of 1968, Section 11, for “appointment” w.e.f. 1-2-1969.
(1) The Reserve Bank may—
(a) caution or prohibit banking companies or any banking company in particular against entering into any particular transaction or class of transactions, and generally give advice to any banking company;
(b) on a request by the companies concerned and subject to the provision of section 1[44A], assist, as intermediary or otherwise, in proposals for the amalgamation of such banking companies;
(c) give assistance to any banking company by means of the grant of a loan or advance to it underclause (3) of sub-section (1) of section 18 of the Reserve Bank of India Act, 1934 (2 of 1934);
2[(d)3[at any time, if it is satisfied that in the public interest or in me interest of banking policy or for preventing the affairs of the banking company being conducted in a manner detrimental to the interests of the banking company or its depositors it is necessary so to do,] by order in writing and on such terms and conditions as may be specified therein—
(i) require the banking company to call a meeting of its directors for the purpose of considering any matter relating to or arising out of the affairs of the banking company; or require an officer of the banking company to discuss any such matter with an officer of the Reserve Bank;
(ii) depute one or more of its officers to which the proceedings at any meeting of the Board of directors of the banking company or of any committee or of any other body constituted by it; require the banking company to give an opportunity to the officers so deputed to be heard at such meetings and also require such officers to send a report of such proceedings to the Reserve Bank;
(iii) require the Board of directors of the banking company or any committee or any other body constituted by it to give in writing to any officer specified by the Reserve Bank in this behalf at his usual address all notices of, and other communications relating to, any meeting of the Board, committee or other body constituted by it;
(iv) appoint one or more of its officers to observe the manner in which the affairs of the banking company or of its offices or branches are being conducted and make a report thereon;
(v) require the banking company to make, within such time as may be specified in the order, such changes in the management as the Reserve Bank may consider necessary 4[***].]
(2) The Reserve Bank shall make an annual report to the Central Government on the trend and progress of banking in the country, with particular reference to its activities under clause (2) of section 17 of the Reserve Bank of India Act, 1934 (2 of 1934), including in such report its suggestions, if any, for the strengthening of banking business throughout the country.
(3) The Reserve Bank may appoint such staff at such places as it considers necessary for the scrutiny of the returns, statements and information furnished by banking companies under this Act, and generally to ensure the efficient performance of its functions under this Act.
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1. Subsituted by Act 33 of 1959, Section 22 for “45” w.e.f. 1-10-1959.
2. Subsituted by Act 95 of 1956, Section 8, for clause (d) w.e.f. 14-1-1957.
3. Subsituted by Act 58 of 1968, Section 12, for certain words w.e.f. 1-2-1969.
4. Certain words omitted by Act 58 of 1968, Section 12 w.e.f. 1-2-1969.
1[Certain provisions of the Act not to apply to certain banking companies. (1) The provisions of section II, sub-section (1) of section 12, and sections 17, 18, 24 and 25 shall not apply to a banking company—
(a) which, whether before or after the commencement of the Banking Companies (Amendment) Act, 1959 (33 of 1959), has been refused a licence under section 22, or prohibited from accepting fresh deposits by a compromise, arrangement or scheme sanctioned by a court or by any order made in any proceeding relating to such compromise, arrangement or scheme, or prohibited from accepting deposits by virtue of any alteration made in its memorandum; or
(b) whose licence has been cancelled under section 22, whether before or after the commencement of the Banking Companies (Amendment) Act, 1959 (33 of 1959).
(2) Where the Reserve Bank is satisfied that any such banking company as is referred to in sub-section (1) has repaid, or has made adequate provision for repaying all deposits accepted by the banking company, either in full or to the maximum extent possible, the Reserve Bank may, by notice published in the Official Gazette, notify that the banking company has ceased to be a banking company within the meaning of this Act, and thereupon all the provisions of this Act applicable to such banking company shall cease to apply to it, except as respects things done or omitted to be done before such notice.]
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1. Inserted by Act 33 of 1959, Section 23 w.e.f. 1-10-1969.
1[PART IIA: CONTROL OVER MANAGEMENT
(1) Where the Reserve Bank is satisfied that in the public interest or for preventing the affairs of a banking company being conducted in a manner detrimental to the interests of the depositors or for securing the proper management of any banking company it is necessary so to do, the Reserve Bank may, for reasons to be recorded in writing, by order, remove from office, with effect from such date as may be specified in the order, 2[any chairman, director,] chief executive officer (by whatever name called) or other officer or employee of the banking company.
(2) No order under sub-section (1) shall be made 3[unless the chairman, director] or chief executive officer or other officer or employee concerned has been given a reasonable opportunity of making a representation to the Reserve Bank against the proposed order:
Provided that if, in the opinion of the Reserve Bank, any delay would be detrimental to the interests of the banking company or its depositors, the Reserve Bank may, at the time of giving the opportunity aforesaid or at any time thereafter, by order direct that, pending the consideration of the representation aforesaid, if any, 4[the chairman or, as the case may be, director or chief executive officer] or other officer or employee, shall not, with effect from the date of such order—
(a) 5[act as such chairman or director] or chief executive officer or other officer or employee of the banking company;
(b) in any way, whether directly or indirectly, be concerned with, or take part in the management of, the banking company.
(3)(a) Any person against whom an order of removal has been made under subsection (1) may, within thirty days from the date of communication to him of the order, prefer an appeal to the Central Government.
(b) The decision of the Central Government on such appeal, and subject thereto, the order made by the Reserve Bank under sub-section (I), shall be final and shall not be called into question in any court.
(4) Where any order is made in respect of 6[a chairman, director] or chief executive officer or other officer or employee of a banking company under sub-section (1), he shall cease to be 7[a chairman or, as the case may be, a director,] chief executive officer or other officer or employee of the banking company and shall not, in any way, whether directly or indirectly, be concerned with, or take part in the management of, any banking company for such period not exceeding five years as may be specified in the order.
(5) If any person in respect of whom an order is made by the Reserve Bank under sub-section (1) or under the proviso to sub-section (2) contravenes the provisions of this section, he shall be punishable with fine which may extend to two hundred and fifty rupees for each day during which such contravention continues.
(6) Where an order under sub-section (1) has been made, the Reserve Bank may, by order in writing, appoint a suitable person in place of 8[the chairman or director], or chief executive officer or other officer or employee who has been removed from his office under that sub-section, with effect from such date as may be specified in the order.
(7) Any person appointed as 9[chairman, director or chief executive officer] or other officer or employee under this section shall, —
(a) hold office during the pleasure of the Reserve Bank and subject thereto for a period not exceeding three years or such further periods not exceeding three years at a time as the Reserve Bank may specify;
(b) not incur any obligation or liability by reason only of his being a 9[chairman, director or chief executive officer] or other officer or employee or for anything done or omitted to be done in good faith in the execution of the duties of his office or in relation thereto.
(8) Notwithstanding anything contained in any law or in any contract, memorandum or articles of association, on the removal of a person from office under this section, that person shall not be entitled to claim any compensation for the loss or termination of office.
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1. Part IIA (Sections 36AA to 36AC) Indicated by Act 55 of 1963, Section 18 w.e.f. 1-2-1964.
2. Substituted by Act 58 of 1968, Section 13, for “any director” w.e.f. 1-2-1969.
3. Substituted by Act 58 of 1968, Section 13, for “unless the director” w.e.f. 1-2-1969.
4. Substituted by Act 58 of 1968, Section 13, for “the director or, as the case may be, chief executive officer” w.e.f. 1-2-1969.
5. Substituted by Act 58 of 1968, Section 13, for “act as such director” w.e.f. 1-2-1969.
6. Substituted by Act 58 of 1968, Section 13, for “a director” w.e.f. 1-2-1969.
7. Substituted by Act 58 of 1968, Section 13, for “a director or as the case may be” w.e.f. 1-2-1969.
8. Substituted by Act 58 of 1968, Section 13, for “the director” w.e.f. 1-2-1969.
9. Substituted by Act 58 of 1968, Section 13, for “director or chief executive officer” w.e.f. 1-2-1969.
1[Supersession of Board of directors of a multi-State co-operative bank. (1) Where the Reserve Bank is satisfied that in the public interest or for preventing the affairs of a multi-State co-operative bank being conducted in a manner detrimental to the interest of the depositors of the multi-State co-operative bank or for securing the proper management of the multi-State co-operative bank, it is necessary so to do, the Reserve Bank may, for reasons to be recorded in writing, by order, supersede the Board of directors of such multi-State co-operative bank for a period not exceeding five years as may be specified in the order, which may be extended from time to time, so, however, that total period shall not exceed five years.
(2) The Reserve Bank may, on supersession of the Board of directors of the multi-State co-operative bank under sub-section (1) appoint an administrator for such period as it may determine.
(3) The Reserve Bank may issue such directions to the Administrator as it may deem appropriate and the Administrator shall be bound to follow such directions.
(4) Upon making the order of supersession of the Board of directors of a multi-State co-operative bank, –
(a) The Chairman, managing director and other directors as from the date of supersession of the Board shall vacate their offices as such;
(b) All the powers, functions and duties which may, by or under the provisions of the Multi-State Co-operative Societies Act, 2002 or this Act or any other law for the time being in force, be exercised and discharged by or on behalf of the Board of directors of such a multi-State Co-operative bank or by a resolution passed in general meeting of such co-operative bank, shall, until the Board of directors of such co-operative bank is reconstituted, be exercised and discharged by the Administrator appointed by the Reserve Bank under sub-section (2):
Provided that the power exercised by the Administrator shall be valid not withstanding that such power is exercisable by a resolution passed in the general meeting of such multi-State co-operative bank.
(5) (a) The Reserve Bank may constitute a committee of three or more persons who have experience in law, finance, banking, administration or accountancy to assist the Administrator in discharge of his duties.
(b) The committee shall meet at such times and places and observe such rules of procedure as may be specified by the Reserve Bank.
(6) The salary and allowances to the Administrator and the members of the committee constituted by the Reserve Bank shall be such as may be specified by the Reserve Bank and may be payable by the concerned multi-State co-operative bank.
(7) On and before expiration of period of supersession of the Board of directors as specified in the order issued under sub-section (1), the Administrator of the multi-State co-operative bank shall call the general meeting of the society to elect new directors.
(8) Notwithstanding anything contained in any other law or in any other contract, or bye-laws of a multi-State co-operative bank, no person shall be entitled to claim any compensation for the loss or termination of his office.
(9) The Administrator appointed under sub-section (2) shall vacate office immediately after the board of directors of the multi-State co-operative society has been constituted. ]
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1. Inserted by Act 24 of 2004.
1[Order of winding up of multi-State co-operative bank to be final in certain cases. Where a multi-State co-operative bank, being an eligible co-operative bank, has been registered under section 13A of the Deposit Insurance and Credit Guarantee Corporation Act, 1961, as an insured bank, and subsequently-
(a) in pursuance of a scheme prepared with the previous approval of the Reserve Bank under section 18 of the Multi-State Co-operative Societies Act, 2002, an order sanctioning a scheme of compromise and arrangement or reorganisation or reconstruction has been made; or
(b) on requisition by the Reserve Bank, an order for winding up of the multi-State co-operative bank has been made under section 87 of the Multi-State Co-operative Societies Act, 2002; or
(c) an order for the supersession of the Board the appointment of an administrator therefor has been made under section 36AAA,
Such order for sanctioning the scheme of compromise and arrangement or reorganisation or reconstruction under clause (a) or the winding up of the mult-State Co-operative Bank under clause (b) or any order for the supersession of the Board and the appointment of an administrator under clause (c) shall not be liable to be called in question in any manner.]
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1. Inserted by Act 24 0f 2004.
1[Reimbursement to Deposit Insurance Corporation by liquidator or transferee bank. Where a multi-State co-operative bank, being an insured bank within the meaning of the Deposit Insurance and Credit Guarantee Corporation Act, 1961, is wound up and the Deposit Insurance Corporation has become liable to the depositors’ of the insured bank under subsection (1) or subsection (2) of section 16 of the Act, the Deposit Insurance Corporation shall be reimbursed by the liquidator or such other person in the circumstances, to the extent and in the manner provided in section 21 of the Act.
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1. Inserted by Act 24 of 2004.
(1) If the Reserve Bank is of 1[opinion that in the interest of banking policy or in the public interest or] in the interests of the banking company or its depositors it is necessary so to do, it may, from time to time by order in writing, appoint, with effect from such date as may be specified in the order, one or more persons to hold office as additional directors of the banking company:
2[***]
(2) Any person appointed as additional director in pursuance of this section—
(a) shall hold office during the pleasure of the Reserve Bank and subject thereto for a period not exceeding three years or such further periods not exceeding three years at a time as the Reserve Bank may specify;
(b) shall not incur any obligation or liability by reason only of his being a director or for any thing done or omitted to be done in good faith in the execution of the duties of his office or in relation thereto; and
(c) shall not be required to hold qualification-shares in the banking company.
(3) For the purpose of reckoning any proportion of the total number of directors of the banking company, any additional director appointed under this section shall not be taken into account.
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1. Substituted by Act 58 of 1968, Section 14, for “opinion that” w.e.f. 1-2-1969.
2. Proviso omitted by Act 1 of 1984, Section 31 w.e.f. 15-2-1984.
Any appointment or removal of a director, chief executive officer or other officer or employee in pursuance of section 36AA or section 36AB shall have effect notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956) or any other law for the time being in force or in any contract or any other instrument.]
1[PART IIB: PROHIBITION OF CERTAIN ACTIVITIES IN RELATION TO BANKING COMPANIES
(1) No person shall—
(a) obstruct any person from lawfully entering or leaving any office or place of business of a banking company or from carrying on any business there, or
(b) hold, within the office or place of business of any banking company, any demonstration which is violent or which prevents, or is calculated to prevent, the transaction of normal business by the banking company, or
(c) act in any manner calculated to undermine the confidence of the depositors in the banking company.
(2) Whoever contravenes any provision of sub-section (1) without any reasonable excuse shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.
2[(3) [*****] <![endif]>
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1. Parts IIB and IIC (sections 36 AD to 36 AJ) Inserted by Act 58 of 1968, Section 15 w.e.f. 1-2-1969.
2. Text omitted by Act ——— Previous text was “For the purposes of this section “banking company” includes the Reserve Bank, the Development Bank, the Exim Bank, [the Reconstruction Bank] [the National Housing Bank] the National Bank, [the Small Industries Bank] the State Bank of India, a corresponding new bank, a regional rural bank and a subsidiary bank”
(1) If, upon receipt of a report from the Reserve Bank, the Central Government is satisfied that a banking company—
(a) has, no more than one occasion, failed to comply with the directions given to it in writing under section 21 or section 35A, in so far as such directions relate to banking policy, or
(b) is being managed in a manner detrimental to the interests of its depositors, and that—
(i) in the interests of the depositors of such banking company, or
(ii) in the interest of banking policy, or
(iii) for the better provision of credit generally or of credit to any particular section of the community or in any particular area,
it is necessary to acquire the undertaking of such banking company, the Central Government may, after such consultation with the Reserve Bank as it thinks fit, by notified order, acquire the undertaking of such company (hereinafter referred to as the acquired bank) with effect from such date as may be specified in this behalf by the Central Government (hereinafter referred to as the appointed day):
Provided that no undertaking of any banking company shall be so acquired unless such banking company has been given a reasonable opportunity of showing cause against the proposed action.
Explanation. — In this Part, —
(a) “notified order” means an order published in the Official Gazette;
(b) “undertaking”, in relation to a banking company incorporated outside India, means the undertaking of the company in India.
(2) Subject to the other provisions contained in this Part, on the appointed day, the undertaking of the acquired bank and all the assets and liabilities of the acquired bank shall stand transferred to, and vest in, the Central Government.
(3) The undertaking of the acquired bank and its assets and liabilities shall be deemed to include all rights, powers, authorities and privileges and all property, whether movable or immovable, including, in particular, cash balances, reserve funds, investments, deposits and all other interests and rights in, or arising out of, such property as may be in the possession of or held by, the acquired bank immediately before the appointed day and all books, accounts and documents relating thereto, and shall also be deemed to include all debts, liabilities and obligations, of whatever kind, then existing of the acquired bank.
(4) Notwithstanding anything contained in sub-section (2), the Central Government may, if it is satisfied that the undertaking of the acquired bank and its assets and liabilities should, instead of vesting in the Central Government, or continuing to so vest, vest in a company established under any scheme made under this Part or in any corporation (hereinafter in this Part and in the Fifth Schedule referred to as the transferee bank) that Government may, by order, direct that the said undertaking,
including the assets and liabilities thereof, shall vest in the transferee bank either on the publication of the notified order or on such other date as may be specified in this behalf by the Central Government.
(5) Where the undertaking of the acquired bank and the assets and liabilities thereof vest in the transferee bank under sub-section (4), the transferee bank, shall, on and from the date of such vesting, be deemed to have become the transferee of the acquired bank and all the rights and liabilities in relation to the acquired bank shall, on and from the date of such vesting, be deemed to have been the rights and liabilities of the transferee bank.
(6) Unless otherwise expressly provided by or under this Part, all contracts, deeds, bonds, agreements, powers of attorney, grants of legal representation and other instruments of whatever nature subsisting or having effect immediately before the appointed day and to which the acquired bank is a party or which are in favour of the acquired bank shall be of as full force and effect against or in favour of the Central Government, or as the case may be, of the transferee bank, and may be enforced or acted upon as fully and effectually as if in the place of the acquired bank the Central Government or the transferee bank had been a party thereto or as if they had been issued in favour of the Central Government or the transferee bank, as the case may be.
(7) If, on the appointed day, any suit, appeal or other proceeding of whatever nature is pending by or against the acquired bank, the same shall not abate, be discontinued or be, in any way, prejudicially affected by reason of the transfer of the undertaking of the acquired bank or of anything contained in this Part, but the suit, appeal or other proceeding may be continued, prosecuted and enforced by or against the Central Government or the transferee bank as the case may be.
(1) The Central Government may, after consultation with the Reserve Bank, make a scheme for carrying out the purposes of this Part in relation to any acquired bank.
(2) In particular, and without prejudice to the generality of the foregoing power, the said scheme may provide for all or any of the following matters, namely: —
(a) the corporation, or the company incorporated for the purpose, to which the undertaking including the property, assets and liabilities of the acquired bank may be transferred, and the capital, constitution, name and office thereof;
(b) the constitution of the first Board of management (by whatever name called) of the transferee bank, and all such matters in connection therewith or incidental thereto as the Central Government may consider to be necessary or expedient;
(c) the continuance of the services of all the employees of the acquired bank (excepting such of them as, not being workmen within the meaning of the Industrial Disputes Act, 1947(14 of 1947), are specifically mentioned in the scheme] in the Central Government or in the transferee bank, as the case may be, on the same terms and conditions so far as may be, as are specified in clauses (i) and (j) of sub-section (5) of section 45;
(d) the continuance of the right of any person who, on the appointed day, is entitled to or is in receipt of, a pension or other superannuation or compassionate allowance or benefit, from the acquired bank or any provident, pension or other fund or any authority administering such fund, to be paid by, and to receive from, the Central Government or the transferee bank, as the case may be, or any provident, pension or other fund or any authority administering such fund, the same pension, allowance or benefit so long as he observes the conditions on which the pension, allowance or benefit was granted, and if any question arises whether he has so observed such conditions, the question shall be determined by the Central Government and the decision of the Central Government thereon shall be final;
(e) the manner of payment of the compensation payable in accordance with the provisions of this Part to the shareholders of the acquired bank, or where the acquired bank is a banking company incorporated outside India, to the acquired bank in full satisfaction of their, or as the case may be, its claims;
(f) the provision, if any, for completing the effectual transfer to the Central Government or the transferee bank of any asset or any liability which forms part of the undertaking of the acquired bank in any country outside India;
(g) such incidental, consequential and supplemental matters as may be necessary to secure that the transfer of the business, property, assets and liabilities of the acquired bank to the Central Government or transferee bank, as the case may be, is effectual and complete.
(3) The Central Government may, after consultation with the Reserve Bank, by notification in the Official Gazette, add to, amend or vary any scheme made under this section.
(4) Every scheme made under this section shall be published in the Official Gazette.
(5) Copies of every scheme made under this section shall be laid before each House of Parliament as soon as may be after it is made.
(6) The provisions of this Part and of any scheme made there under shall have effect notwithstanding anything to the contrary contained in any other provisions of this Act or in any other law or any agreement, award or other instrument for the time being in force.
(7) Every scheme made under this section shall be binding on the Central Government or, as the case may be, on the transferee bank and also on all members, creditors, depositors and employees of the acquired bank and of the transferee bank and on any other person having any right, liability, power or function in relation to, or in connection with, the acquired bank or the transferee bank, as the case may be.
(I) Every person who, immediately before the appointed day, is registered as a holder of shares in the acquired bank or, when the acquired bank is a banking company incorporated outside India, the acquired bank, shall be given by the Central Government, or the transferee bank, as the case may be, such compensation in respect of the transfer of the undertaking of the acquired bank as it determined in accordance with the principles contained in the Fifth Schedule.
(2) Nothing contained in sub-section (1) shall affect the rights inter se between the holder of any share in the acquired bank and any other person who may have any interest in such shares and such other person shall be entitled to enforce his interest against the compensation awarded to the holder of such share, but not against the Central Government, or the transferee bank.
(3) The amount of compensation to be given in accordance with the principles contained in the Fifth Schedule shall be determined in the first instance by the Central Government, or the transferee bank, as the case may be, in consultation with the Reserve Bank, and shall be offered by it to all those to whom compensation is payable under sub-section (1) in full satisfaction thereof.
(4) If the amount of compensation offered in terms of sub-section (3) is not acceptable to any person to whom the compensation is payable, such person may, before such date as may be notified by the Central Government in the Official Gazette, request the Central Government in writing, to have the matter referred to the Tribunal constituted under section 36AH.
(5) If, before the date notified under sub-section (4), the Central Government receives requests, in terms of that sub-section, from not less than one-fourth in number of the shareholders holding not less than one-fourth in value of the paid-up share capital of the acquired bank, or, where the acquired bank is a banking company incorporated outside India, from the acquired bank, the Central Government shall have the matter referred to the Tribunal for decision.
(6) If, before the date notified under sub-section (4), the Central Government does not receive requests as provided in that sub-section, the amount of compensation offered ‘ under sub-section (3), and where a reference has been made to the Tribunal, the amount determined by it, shall be the compensation payable under sub-section (!) and shall be final and binding on all parties concerned.
(1) The Central Government may, for the purpose of this Part, constitute a Tribunal which shall consist of a Chairman and two other members.
(2) The Chairman shall be a person who is, or has been, a Judge of a High Court or of the Supreme Court, and, of the two other members, one shall be a person, who, in the opinion of the Central Government, has had experience of commercial banking and the other shall be a person who is a chartered accountant within the meaning of the Chartered Accountants’ Act, 1949 (38 of 1949).
(3) If, for any reason, a vacancy occurs in the office of the Chairman or any other member of the Tribunal, the Central Government may fill the vacancy by appointing another person thereto in accordance with the provisions of sub-section (2), and any proceeding may be continued before the Tribunal, so constituted, from the stage at which the vacancy occurred.
(4) The Tribunal may, for the purpose of determining any compensation payable under this part, choose one or more persons having special knowledge or experience of any relevant matter to assist it in the determination of such compensation.
(1) The Tribunal shall have the powers of a civil court, while trying a suit, under the Code of Civil Procedure, 1908 (5 of 1908) in respect of the following matters, namely :—
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) issuing commissions for the examination of witnesses or documents.
(2) Notwithstanding anything contained in sub-section (1), or in any other law for the time being in force, the Tribunal shall not compel the Central Government or the Reserve Bank, —
(a) to produce any books of account or other documents which the Central Government, or the Reserve Bank, claims to be of a confidential nature;
(b) to make any such books or documents part of the record of the proceedings before the Tribunal; or
(c) to give inspection of any such books or documents to any party before it or to any other person.
(1) The Tribunal shall have power to regulate its own procedure.
(2) The Tribunal may hold the whole or any part of its inquiry in camera
(3) Any clerical or arithmetical error in any order of the Tribunal or any error arising therein from any accidental slip or omission may, at any time, be corrected by the Tribunal either of its own motion or on the application of any of the parties.]
1[2[High Court defined. In this Part and in Part IIIA “High Court”, in relation to a banking company, means the High Court exercising jurisdiction in the place where the registered office of the banking company is situated or, in the case of a banking company incorporated outside India, where its principal place of business in India is situated.]]
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1. Inserted by Act 52 of 1953, Section 3.
2. Section 36A renumbered as section 36B by Act 33 of 1959, Section 24 w.e.f. 1-10-1959.
(1) The 1[High Court] may on the application of a banking company which is temporarily unable to meet its obligations make an order (a copy of which it shall cause to be forwarded to the Reserve Bank) staying the commencement or continuance of all actions and proceedings against the company for a fixed period of time on such terms and conditions as it shall think fit and proper, and may from time to time extend the period so however that the total period of moratorium shall not exceed six months.
(2) No such application shall be maintainable unless it is accompanied by a report of the Reserve Bank indicating that in the opinion of the Reserve Bank the banking company will be able to pay its debts if the application is granted:
Provided that the 1[High Court] may, for sufficient reasons, grant relief under this section even if the application is not accompanied by such report, and where such relief is granted, the 3[High Court] shall call for a report from the Reserve Bank on the affairs of the banking company on receipt of which it may either rescind any order already passed or pass such further orders thereon as may be just and proper in the circumstances.
2[(3) When an application is made under sub-section (1), the High Court may appoint a special officer who shall forthwith take into his custody or under his control all the assets, books, documents, effects and actionable claims to which the banking company is or appears to be entitled and shall also exercise such other powers as the High Court may deem fit to confer on him, having regard to the interests of the depositors of the banking company.]
3[(4) Where the Reserve Bank is satisfied that the affairs of a banking company in respect of which an order under sub-section (1) has been made, are being conducted in a manner detrimental to the interests of the depositors, it may make an application to the High Court for the winding up of the company, and where any such application is made, the High Court shall not make any order extending the period for which the commencement or continuance of all actions and proceedings against the company were stayed under that sub-section.]
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1. Substituted by Act 52 of 1953, Section 4, for “Court”.
2. Inserted by Act 52 of 1953, Section 5.
3. Inserted by Act 33 of 1959, Section 25 w.e.f. 1-10-1959.
1[Winding up by High Court. (1) Notwithstanding anything contained in section 391, section 392, section 433 and section 583 of the Companies Act, 1956 (1 of 1956), but without prejudice to its powers under sub-section (1) of section 37 of this Act, the High Court shall order the winding up of a banking company—
(a) if the banking company is unable to pay its debts; or
(b) if an application for its winding up has been made by the Reserve Bank under section 37 or this section.
(2) The Reserve Bank shall make an application under this section for the winding up of a banking company if it is directed so to do by an order under clause (b) of sub-section (4) of section 35.
(3) The Reserve Bank may make an application under this section for the winding up of a banking company—
(a) if the banking company—
(i) has failed to comply with the requirements specified in section 11; or
(ii) has by reason of the provisions of section 22 become disentitled to carry on banking business in India; or
(iii) has been prohibited from receiving fresh deposits by an order under clause (a) of sub-section (4) of section 35 or under clause (b) of sub-section (3A) of section 42 of the Reserve Bank of India Act, 1934 (2 of 1934); or
(iv) having failed to comply with any requirement of this Act other than the requirements laid in section 11, has continued such failure, or, having contravened any provision of this Act continued such contravention beyond such period or periods as may be specified in that behalf by the Reserve Bank from time to time, after notice in writing of such failure or contravention has been conveyed to the banking company; or
(b) if in the opinion of the Reserve Bank—
(i) a compromise or arrangement sanctioned by a court in respect of the banking company cannot be worked satisfactorily with or without modifications; or
(ii) the returns, statements or information furnished to it under or in pursuance of the provisions of this Act disclose that the banking company is unable to pay its debts; or
(iii) the continuance of the banking company is prejudicial to the interests of its depositors.
(4) Without prejudice to the provisions contained in section 434 of the Companies Act, 1956 (I of 1956) a banking company shall be deemed to be unable to pay its debts if it has refused to meet any lawful demand made at any of its offices or branches within two working days, if such demand is made at a place where there is an office, branch or agency of the Reserve Bank, or within five working days, if such demand is made elsewhere, and if the Reserve Bank certifies in writing that the banking company is unable to pay its debts.
(5) A copy of every application made by the Reserve Bank under sub-section (1) shall be sent by the Reserve Bank to the registrar.]
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1. Substituted by Act 33 of 1959, Section 26, for the former section w.e.f. 1-10-1954.
1[Court liquidator. (1) There shall be attached to every High Court a Court liquidator to be appointed by the Central Government for the purpose of conducting all proceedings for the winding up of banking companies and performing such other duties in reference thereto as the High Court may impose.
2[***]
(4) Where having regard to the number of banking companies wound up and other circumstances of the case, the Central Government is of opinion that it is not necessary or expedient to attach for the time being a Court liquidator to a High Court, it may, from time to time, by notification in the Official Gazette, direct that this section shall not have effect in relation to that High Court.]
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1. Inserted by Act 52 of 1953, Section 6.
2. Sub-sections (2) and (3) omitted by Act 95 of 1956, Section 14 and Schedule w.e.f. 14-1-1957
1[Reserve Bank to be official liquidator. 2[(1)] Notwithstanding anything contained in section 38A of this Act or in section 448 or section 449 of the Companies Act, 1956(1 of 1956), where in any proceeding for the winding up by the High Court of a banking company, an application is made by the Reserve Bank in this behalf, the Reserve Bank, the State Bank of India or any other bank notified by the Central Government in this behalf or any individual, as stated in such application shall be appointed as the official liquidator of the banking company in such proceeding and the liquidator, if any, functioning in such proceeding shall vacate office upon such appointment.]
3[(2) Subject to such directions as may be made by the High Court, the remuneration of the official liquidator appointed under this section, the cost and expenses of this establishment and the cost and expenses of the winding up shall be met out of the assets of the banking company which is being wound up, and notwithstanding anything to the contrary contained in any other law for the time being in force, no fees shall be payable to the Central Government, out of the assets of the banking company.]
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1. Section 39 has successively been amended by Act 52 of 1953, sections. 4 and 7; Act 23 of 1955, Section 53 and Schedule IV; Act 79 of 1956, Section 43 and Schedule II; Act 95 of 1956, Section 14 and Schedule; Act 33 of 1959, Section 27 and Act 37 of 1960, Section 2. to read as above.
2. Section 39 renumbered as sub-section (1) of that section by Act 58 of 1968, Section 16 w.e.f. 1-2-1969.
3. Inserted by Act 58 of 1969, Section 16 with retrospective effect.
1[Application of Companies Act to liquidators. (1) All the provisions of the Companies Act, 1956 (1 of 1956), relating to a liquidator, in so far as they are not inconsistent with this Act, shall apply to or in relation to a liquidator appointed under section 38A or section 39.
(2) Any reference to the “official liquidator” in this Part and Part IIIA shall be construed as including a reference to any liquidator of a banking company.]
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1. Inserted by 33 of 1959, Section 28 w.e.f. 1-10-1959.
Notwithstanding anything to the contrary contained in 1[section 466 of the Companies Act, 1956 (1 of 1956)], the 2[High Court] shall not make any order staying the proceedings in relation to the winding up of a banking company, unless the 2[High Court] is satisfied that an arrangement has been made whereby the company can pay its depositors in full as their claims accrue.
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1. Substituted by Act 95 of 1956, Section 14 and Schedule for “Section 173 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.
2. Substituted by Act 42 of 1953, Section 4, for “Court”.
1[Preliminary report by official liquidator. Notwithstanding anything to for the contrary contained in section 455 of the Companies Act, 1956 (1 of 1956), where a winding up order has been made in respect of a banking company whether before or after the commencement of the Banking Companies (Second Amendment) Act, 1960 (37 of 1960), the official liquidator shall submit a preliminary report to the High Court within two months from the date of the winding up order or where the winding up order has been made before such commencement, within two months from such commencement, giving the information required by that section so far as it is available to him and also stating the amount of assets of the banking company in cash which are in his custody or under his control on the date of the report and the amount of its assets which are likely to be collected in cash before the expiry of that period of two months in order that such assets may be applied speedily towards the making of preferential payments under section 530 of the Companies Act, 1956, and in the discharge, as far as possible, of the liabilities and obligations of the banking company to its depositors and other creditors in accordance with the provisions hereinafter contained; and the official liquidator shall make for the purposes aforesaid every endeavour to collect in cash as such of the assets of the banking company as practicable.
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1. Substituted by Act 37 of 1960, Section 3, for section 41.
Within fifteen days from the date of the winding up order of a banking company or where the winding up order has been made before the commencement of the Banking Companies (Second Amendment) Act, 1960 (37 of 1960), within one month from such commencement, the official liquidator shall, for the purpose of making an estimate of the debts and liabilities of the banking company (other that its liabilities and obligations to its depositors), by notice served in such manner as the Reserve Bank may direct, call upon—
(a) every claimant entitled to preferential payment under section 530 of the Companies Act, 1956(1 of 1956), and
(b) every secured and every unsecured creditor,
to send to the official liquidator within one month from the date of the service of the notice a statement of the amount claimed by him.
(2) Every notice under sub-section (1) sent to a claimant having a claim under section 530 of the Companies Act, 1956 (1 of 1956), shall state that if a statement of the claim is not sent to the official liquidator before the expiry of the period of one month from the date of the service, the claim shall not be treated as a claim entitled to be paid under section 530 of the Companies Act, 1956, in priority to all other debts but shall be treated as an ordinary debt due by the banking company.
(3) Every notice under sub-section (1) sent to a secured creditor shall require him to value his security before the expiry of the period of one month from the date of the service of the notice and shall state that if a statement of the claim together with the valuation of the security is not sent to the official liquidator before the expiry of the said period, then, the official liquidator shall himself value the security and such valuation shall be binding on the creditor.
(4) If a claimant fails of comply with the notice sent to him under sub-section (1), his claim will not be entitled to be paid under section 530 of the Companies Act, 1956 (1 of 1956), in priority to all other debts but shall be treated as an ordinary debt due by the banking company; and if a secured creditor fails to comply with the notice sent to him under sub-section (1), the official liquidator shall himself value the security and such valuation shall be binding on the creditor.]
Notwithstanding anything to the contrary contained in 1[2[section 460] of the Companies Act, 1956 (1 of 1956)], the 3[High Court] may, in the proceedings for winding up a banking company, dispense with any meetings of creditors or contributories 4[***] if it considers that no object will be secured thereby sufficient to justify the delay and expense.
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1. Substituted by Act. 95 of 1956, Section 14 and Schedule, for “sections 178A and 183 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.
2. Substituted by Act 1 of 1984 Section 33, for “sections 460, 464 and 465” w.e.f. 15-2-1984.
3. Substituted by Act 52 of 1953 Section 4, for “Court”.
4. The words “or with the appointment of a committee of inspection” omitted by Act 1 of 1984, Section 33 w.e.f. 15-2-1984.
1[Booked depositors’ credits to be deemed proved. In any proceeding for the winding up of a banking company, every depositor of the banking company shall be deemed to have filed his claim for the amount shown in the books of the banking company as standing to his credit and, notwithstanding anything to the contrary contained in 2[section 474 of the Companies Act, 1956 (1 of 1956)], the High Court shall presume such claims to have been proved, unless the official liquidator shows that there is reason for doubting its correctness.]
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1. Substituted by Act 52 of 1953, Section 8, for section 43.
2. Substituted by Act 95 of 1956, Section 14 and Schedule, for “section 191 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.
1[Preferential payments to depositors. (1) In every proceeding for the winding up of a banking company where a winding up order has been made, whether before or after the commencement of the Banking Companies (Second Amendment) Act, 1960, (37 of 1960) within three months from the date of the winding up order or where the winding up order has been made before such commencement, within three months therefrom, the preferential payments referred to in section 530 of the Companies Act, 1956 (1 of 1956), in respect of which statements of claims have been sent within one month from the date of the service of the notice referred to in section 41 A, shall be made by the official liquidator or adequate provision for such payments shall be made by him.
(2) After the preferential payments as aforesaid have been made or adequate provision has been made in respect thereof, there shall be paid within the aforesaid period of three months—
(a) in the first place to every depositor in the savings bank account of the banking company a sum of two hundred and fifty rupees or the balance at his credit, whichever is less; and thereafter;
(b) in the next place, to every other depositor of the banking company a sum of two hundred and fifty rupees or the balance at his credit, whichever is less,
in priority to all other debts from out of the remaining assets of the banking company available for payment to general creditors:
Provided that the sum total of the amounts paid under clause (a) and clause (b) to any one person who in his own name (and not jointly with any other person) is a depositor in (he savings bank account of the banking company and also a depositor in any other account, shall not exceed the sum of two hundred and fifty rupees.
(3) Where within the aforesaid period of three months full payment cannot be made of the amounts required to be paid under clause (a) or clause (b) of sub-section (2) with the assets in cash, the official liquidator shall pay within that period to every depositor under clause (a) or, as the case may be, clause (b) of that sub-section on a pro rata basis so much of the amount due to the depositor under that clause as the official liquidator is able to pay with those assets; and shall pay the rest of that amount to every such depositor as and when sufficient assets are collected by the official liquidator in cash.
(4) After payments have been made first to depositors in the savings bank account and then to the other depositors in accordance with the foregoing provisions, the remaining assets of the banking company available for payment to general creditors shall be utilised for payment on a pro rata basis of the debts of the general creditors and of the further sums, if any, due to the depositors; and after making adequate provision for payment on a pro rata basis as aforesaid of the debts of the general creditors, the official liquidator shall, as and when the assets of the company are collected in cash, make payment on a pro rata basis as aforesaid, of the further sums, if any, which may remain due to the depositors referred to in clause (a) and clause (b) of sub-section (2).
(5) In order to enable the official liquidator to have in his custody or under his control in cash as much of the assets of the banking company as possible, the securities given to every secured creditor may be redeemed by the official liquidator—
(a) where the amount due to the creditor is more than the value of the securities as assessed by him or, as the case may be, as assessed by the official liquidator, on payment of such value; and
(b) where the amount due to the creditor is equal to or less than the value of the securities as so assessed, on payment of the amount due:
Provided that where the official liquidator is not satisfied with the valuation made by the creditor, he may apply to the High Court for making a valuation,
(6) When any claimant, creditor or depositor to whom any payment is to be made in accordance with 2[the provisions of this section], cannot be found or is not readily traceable, adequate provision shall be made by the official liquidator for such payment.
(7) For the purposes of this section, the payments specified in each of the following clauses shall be treated as payments of a different class, namely: —
(a) payments to preferential claimants under section 530 of the Companies Act, 1956 (1 of 1956);
(b) payments under clause (a) of sub-section (2) to the depositors in the savings bank account;
(c) payments under clause (b) of sub-section (2) to the other depositors;
(d) payments to the general creditors and payments to the depositors in addition to those specified in clause (a) and clause (b) of sub-section (2).
(8) The payments of each different class specified in sub-section (7) shall rank equally among themselves and be paid in full unless the assets are insufficient to meet them, in which case they shall abate in equal proportion.]]
3[(9) Nothing contained in sub-sections (2), (3), (4), (7) and (8) shall apply to a banking company in respect of the depositors of which the Deposit Insurance Corporation is liable under section 16 of the Deposit Insurance Corporation Act, 1961, (47 of 1961).
(10) After preferential payments referred to in sub-section (1) have been made or adequate provision has been made in respect thereof, the remaining assets of the banking company referred to in sub-section (9) available for payment to general creditors shall be utilised for payment on pro rata basis of the debts of the general creditors and of the sums due to the depositors:
Provided (hat where any amount in respect of any deposit is to be paid by the liquidator to the Deposit Insurance Corporation under section 21 of the Deposit Insurance Corporation Act, 1961 (47 of 1961), only the balance, if any, left after making the said payment shall be payable to the depositor.]
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1. Substituted by Act 37 of 1960, Section 4, for section 43A.
2. Substituted by Act 47 of 1961, Section 51 and Schedule II, Pt. II, for “the foregoing provisions” w.e.f. 1-1- 1962.
3. Inserted by Act 47 of 1961, Section 51 and Schedule II, Pt. II w.e.f. 1-1-1962
1[Powers of High Court in voluntary winding up. (1) Notwithstanding anything to the contrary contained in section 484 of the Companies Act, 1956 (1 of 1956), no banking company may be voluntarily wound up unless the Reserve Bank certifies in writing that the company is able to pay in full all its debts to its creditors as they accrue.
(2) The High Court may, in any case where a banking company is being wound up voluntarily, make an order that the voluntary winding up shall continue, but subject to the supervision of the court.
(3) Without prejudice to the provisions contained in sections 441 and 521 of the Companies Act, 1956 (1 of 1956), the High Court may of its own motion and shall on the application of the Reserve Bank, order the winding up of a banking company by the High Court in any of the following cases, namely: —
(a) where the banking company is being wound up voluntarily and at any stage during the voluntary winding up proceedings the company is not able to meet its debts as they accrue; or
(b) where the banking company is being wound up voluntarily or is being wound up subject to the supervision of the court and the High Court is satisfied that the voluntary winding up or winding up subject to the supervision of the court cannot be continued without detriment to the interests of the depositors.]
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1. Substituted by Act 33 of 1959, Section 30, for the former section w.e.f. 1-10-1959.
1[Procedure for amalgamation of banking companies. (1) Notwithstanding anything contained in any law for the time being in force, no banking company shall be amalgamated with another banking company, unless a scheme containing the terms of such amalgamation has been placed in draft before the shareholders of each of the banking companies concerned separately, and approved by a resolution passed by a majority in number representing two-thirds in value of the shareholders of each of the said companies, present either in person or by proxy at a meeting called for the purpose.
(2) Notice of every such meeting as is referred to in sub-section (1) shall be given to every shareholder of each of the banking companies concerned in accordance with the relevant articles of association indicating the time, place and object of the meeting, and shall also be published atleast once a week for three consecutive weeks in not less than two newspapers which circulate in the locality or localities where the registered offices of the banking companies concerned are situated, one of such newspapers being in a language commonly understood in the locality or localities.
(3) Any shareholder, who has voted against the scheme of amalgamation at the meeting or has given notice in writing at or prior to the meeting of the company concerned or to the presiding officer of the meeting that he dissents from the scheme of amalgamation, shall be entitled, in the event of the scheme being sanctioned by the Reserve Bank, to claim from the banking company concerned, in respect of the shares held by him in that company, their value as determined by the Reserve Bank when sanctioning the scheme and such determination by the Reserve Bank as to the value of the shares (o be paid to the dissenting shareholder shall be final for all purposes.
(4) If the scheme of amalgamation is approved by the requisite majority of shareholders in accordance with the provisions of this section, it shall be submitted to the Reserve Bank for sanction and shall, if sanctioned by the Reserve Bank by an order in writing passed in this behalf, be binding on the banking companies concerned and also on all the shareholders thereof.
2[***]
(6) On the sanctioning of a scheme of amalgamation by the Reserve Bank, the properly of the amalgamated banking company shall, by virtue of the order of sanction, be transferred to and vest in, and the liabilities of the said company shall, by virtue of the said order be transferred to, and become the liabilities of, the banking company which under the scheme of amalgamation is to acquire the business of the amalgamated banking company, subject in all cases to 3[the provisions of the scheme as sanctioned.]
4[(6A) Where a scheme of amalgamation is sanctioned by the Reserve Bank under the provisions of this section, the Reserve Bank may, by a further order in writing, direct that on such date as may be specified therein the banking company (hereinafter in this section referred to as the amalgamated banking company) which by reason of the amalgamation will cease to function, shall stand dissolved and any such direction shall take effect notwithstanding anything to the contrary contained in any other law.
(6B) Where the Reserve Bank directs a dissolution of the amalgamated banking company, it shall transmit a copy of the order directing such dissolution to the Registrar before whom the banking company has been registered and on receipt of such order the Registrar shall strike off the name of the company.
(6C) An order under sub-section (4) whether made before or after the commencement of section 19 of the Banking Laws (Miscellaneous Provisions) Act, 1963 (55 of 1963) shall be conclusive evidence that all the requirements of this section relating to amalgamation have been complied with, and a copy of the said order certified in writing by an officer of the Reserve Bank to be a true copy of such order and a copy of the scheme certified in the tike manner to be a true copy thereof shall, in all legal proceedings (whether in appeal or otherwise and whether instituted before or after the commencement of the said section 19), be admitted as evidence to the same extent as the original order and the original scheme.]
5[(7) Nothing in the foregoing provisions of this section shall affect the power of the Central Government to provide for the amalgamation of two or more banking companies 6[***] under section 396 of the Companies Act, 1956 (1 of 1956):
Provided that no such power shall be exercised by the Central Government except after consultation with the Reserve Bank.]
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1. Inserted by Act 20 of 1950, Section 8.
2. Sub-section (5) omitted by Act 55 of 1963, Section 19 w.e.f. 1-2-1964.
3. Substituted by Act 55 of 1963, Section 19, for “the terms of the order sanctioning the scheme” w.e.f. 1-2-1964.
4. Inserted by Act 55 of 1963, Section 19 w.e.f. 1-12-1964.
5. Inserted by Act 37 of 1960, Section 5.
6. The words “in national interest” omitted by Act 7 of 1961, Section 3.
1[2[Restriction on compromise or arrangement between banking company and creditors. 3[(1)] Notwithstanding anything contained in any law for the time being in force, no 4[High Court] shall sanction a compromise or arrangement between a banking company and its creditors or any class of them or between such company and its members or any class of them 5[or sanction any modification in any such compromise or arrangement unless the compromise or arrangement or modification, as the case may be,] is certified by the Reserve Bank 6[in writing as not being incapable of being worked and as not being detrimental to the interests of the depositors of such banking company.]
7[(2) Where an application under 8[section 39 of the Companies Act, 1956 (1 of 1956)], is made in respect of a banking company, the High Court may direct the Reserve Bank to make an inquiry in relation to the affairs of the banking company and the conduct of its directors and when such direction is given, the Reserve Bank shall make such inquiry and submit its report to the High Court.]
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1. Substituted by Act 20 of 1950, Section 9, for section 45 (now renumbered as section 44B).
2. Section 45 renumbered as section 44B by Act 37 of 1960, Section 6.
3. Section 45 (now renumbered as section 44B) renumbered as sub-section (1) of that section by Act 52 of 1953, Section 9.
4. Substituted by Act 52 of 1953, Section 4, for “Court”.
5. Substituted by Act 55 of 1963, Section 20, for “unless the compromise or arrangement” w.e.f. 1-2-1964.
6. Substituted by Act 52 of 1953, Section 9, for “as not being detrimental to the interests of the depositors of such company.”
7. Inserted by Act 52 of 1953, Section 9.
8. Substituted by Act 95 of 1956, Section 14 and Schedule, for “section 153 of the Indian Companies Act, 1913 (7 of 1913) “w..e.f. 14-1-1957.
1[Power of Reserve Bank to apply to Central Government for suspension of business by a banking company and to prepare scheme of reconstitution of amalgamation. (1) Notwithstanding anything contained in the foregoing provisions of this Part or in any other law or 2[any agreement or other instrument], for the time being in force, where it appears to the Reserve Bank that there is good reason so to do, the Reserve Bank may apply to the Central Government for an order of moratorium in respect of 3[a banking company].
(2) The Central Government, after considering the application made by the Reserve Bank under sub-section (1), may make an order of moratorium staying the commencement or continuance of all actions and proceedings against the company for a fixed period of time on such terms and conditions as it thinks fit and proper and may from time to time extend the period so however that the total period of moratorium shall not exceed six months.
(3) Except as otherwise provided by any directions given by the Central Government in the order made by it under sub-section (2) or at any time thereafter the banking company shall not during the period of moratorium make any payment to any depositors or discharge any liabilities or obligations to any other creditors.
4[(4) During the period of moratorium, if the Reserve Bank is satisfied that—
(a) in the public interest; or
(b) in the interests of the depositors; or
(c) in order to secure the proper management of the banking company; or
(d) in the interests of the banking system of the country as a whole,
it is necessary so to do, the Reserve Bank may prepare a scheme—
(i) for the reconstruction of the banking company, or
(ii) for the amalgamation of the banking company with any other banking institution (in this section referred to as “the transferee bank”).
(5) The scheme aforesaid may contain provisions for all or any of the following matters, namely:
(a) the constitution, name and registered office, the capital, assets, powers, rights, interests, authorities and privileges, the liabilities, duties and obligations of the banking company on its reconstruction or as the case may be, of the transferee bank;
(b) in the case of amalgamation of the banking company, the transfer to the transferee bank of the business, properties, assets and liabilities of the banking company on such terms and conditions as may be specified in the scheme;
(c) any change in the Board of directors, or the appointment of a new Board of directors, of the banking company on its reconstruction or, as the case may be, of the transferee bank and the authority of whom, the manner in which, and the other terms and conditions on which, such change or appointment shall be made and in the case of appointment of a new Board of directors or of any director the period for which such appointment shall be made;
(d) the alteration of the memorandum and articles of association of the banking company on its reconstruction or, as the case may be, of the transferee bank for the purpose of altering the capital thereof or for such other purposes as may be necessary to give effect to the reconstruction or amalgamation;
(e) subject to the provisions of the scheme, the continuation by or against the banking company on its reconstruction or, as the case may be, the transferee bank, of any actions or proceedings pending against the banking company immediately before the date of the order of moratorium;
(f) the reduction of the interest or rights which the members, depositors and other creditors have in or against the banking company before its reconstruction or amalgamation to such extent as the Reserve Bank considers necessary in the public interest or in the interest of the members, depositors and other creditors or for the maintenance of the business of the banking company;
(g) the payment in cash or otherwise to depositors and other creditors in full satisfaction of their claim –
(i) in respect of their interest or rights in or against the banking company before its reconstruction or amalgamation; or
(ii) where their interest or rights aforesaid in or against the banking company has or have been reduced under clause (f), in respect of such interest or rights as so reduced;
(h) the allotment to the members of the banking company for shares held by them therein before its reconstruction or amalgamation [whether their interest in such shares has been reduced under clause (f) or not], of shares in the banking company on its reconstruction or, as the case may be, in the transferee bank and where any members claim payment in cash and not allotment of shares, or where it is not possible to allot shares to any members, the payment in cash to those members in full satisfaction of their claim—
(i) in respect of their interest in shares in the banking company before its reconstruction or amalgamation; or
(ii) where such interest has been reduced under clause (f) in respect of their interest in shares as so reduced;
(i) the continuance of the services of all the employees of the banking company (excepting such of them as not being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947), are specifically mentioned in the scheme) in the banking company itself on its reconstruction or, as the case may be, in the transferee bank at the same remuneration and on the same terms and conditions of service, which they were getting, or as the case may be, by which they were being governed, immediately before the date of the order of moratorium:
Provided that the scheme shall contain a provision that—
(i) the banking company shall pay or grant not later than the expiry of the period of three years from the date on which the scheme is sanctioned by the Central Government, to the said employees the same remuneration and the same terms and conditions of service 5[as are, at the time of such payment or grant, applicable] to employees of corresponding rank or status of a comparable banking company to be determined for this purpose by the Reserve Bank (whose determination in this respect shall be final);
(ii) the transferee bank shall pay or grant not later than the expiry of the aforesaid period of three years, to the said employees the same remuner-ation and the same terms and conditions of service5[as are, at the time of such payment or grant, applicable] to the other employees corresponding rank or status of the transferee bank subject to the qualifications and experience of the said employees being the same as or equivalent to those of such other employees of the transferee bank:
Provided further that if in any case under clause (ii) of the first proviso any doubt or difference as to whether the qualification and experience of any of the said employees are the same as or equivalent to the qualifications and experience of the other employees of corresponding rank or status of the transferee bank 6[the doubt or difference shall be referred, before the expiry of a period of three years from the date of the payment or grant mentioned in that clause,] to the Reserve Bank whose decision thereon shall be final;
(j) notwithstanding anything contained in clause (i) where any of the employees of the banking company not being workmen within the meaning of the Industrial Disputes Act, 1947 (14 of 1947), are specifically mentioned in the scheme under clause (i) or where any employees of the banking company have by notice in writing given to the banking company, or, as the case may be, the transferee bank at any time before the expiry of the one month next following the date on which the scheme is sanctioned by the Central Government, intimated their intention of not becoming employees of the banking company on its reconstruction or, as the case may be, of the transferee bank, the payment to such employees of compensation, if any, to which they are entitled under the Industrial Disputes Act, 1947, and such pension, gratuity, provident fund and other retirement benefits ordinarily admissible to them under the rules or authorisations of the banking company immediately before the date of the order of moratorium;
(k) any other terms and conditions for the reconstruction or amalgamation of the banking company;
(l) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation shall be fully and effectively carried out.
(6)(a) A copy of the scheme prepared by the Reserve Bank shall be sent in draft to the banking company and also to the transferee bank and any other banking company concerned in the amalgamation, for suggestions and objections, if any, within such period as the Reserve Bank may specify for this purpose.
(b) The Reserve Bank may make such modifications, if any, in the draft scheme as it may consider necessary in the light of the suggestions and objections received from the banking company and also from the transferee bank, and any other banking company concerned in the amalgamation and from any members, depositors or other creditors of each of those companies and the transferee bank.
(7) The scheme shall thereafter be placed before the Central Government for its sanction and the Central Government may sanction the scheme without any modifications or with such modifications as it may consider necessary, and the scheme as sanctioned by the Central Government shall come into force on such date as the Central Government may specify in this behalf:
Provided that different dates may be specified for different provisions of the scheme.
7[(7A) The sanction accorded by the Central Government under sub-section (7), whether before or after the commencement of section 21 of the Banking Laws (Miscellaneous Provisions) Act, 1963 (55 of 1963) shall be conclusive evidence that all that requirements of this section relating to reconstruction, or, as the case may be, amalgamation have been complied with and a copy of the sanctioned scheme certified in writing by an officer of the Central Government to be a true copy thereof, shall, in all legal proceedings (whether in appeal or otherwise and whether instituted before or after the commencement of the said section 21), be admitted as evidence to the same extent . as the original scheme.]
(8) On and from the date of the coming into operation of the scheme or any provision thereof, the scheme or such provision shall be binding on the banking company, or, as the case may be, on the transferee bank and any other banking company concerned in the amalgamation and also on all the members, depositors and other creditors and employees of each of those companies and of the transferee bank, and on any other person having any right or liability in relation to any of those companies or the transferee bank 8[including the trustees or other persons managing, or connected in any other manner with, any provident fund or other fund maintained by any of those companies or the transferee bank].
(9)9[On and from the date of the coming into operation or, or as the case may be, the date specified in this behalf in, the scheme], the properties and assets of the banking company shall, by virtue of and to the extent provided in the scheme, stand transferred to, and vest in, and the liabilities of the banking company shall, by virtue of and to the extent provided in the scheme, stand transferred to, and become the liabilities of the transferee bank.
(10) If any difficulty arises in giving effect to the provisions of the scheme, the Central Government may by order do anything not inconsistent with such provisions which appears to it necessary or expedient for the purpose of removing the difficulty.
(11) Copies of the scheme or of any order made under sub-section (10) shall be laid before both Houses of Parliament, as soon as may be, after the scheme has been sanctioned by the Central Government, or, as the case may be, the order has been made.
(12) Where the scheme is a scheme for amalgamation of the banking company, any business acquired by the transferee bank under the scheme or under any provision thereof shall, after the coming into operation of the scheme or such provision, be carried on by the transferee bank in accordance with the law governing the transferee bank, subject to such modifications in that law or such exemptions of the transferee bank from the operation of any provisions thereof as the Central Government on the recommendation of the Reserve Bank may, by notification in the Official Gazette, make for the purpose of giving full effect to the scheme:
Provided that no such modification or exemption shall be made so as to have effect for a period of more than seven years from the date of the acquisition of such business.
(13) Nothing in this section shall be deemed to prevent the amalgamation with a banking institution by a single scheme of several banking companies in respect of each of which an order of moratorium has been made under this section.
(14) The provisions of this section and of any scheme made under it shall have effect notwithstanding anything to the contrary contained in any other provisions of this Act or in any other law or any agreement, award or other instrument for the time being in force.
(15) In this section, “banking institution” means any banking company and includes the Stale Bank of India or 10[a subsidiary bank or a corresponding new bank].
11[Explanation. —References in this section of the terms and conditions of service as applicable to an employee shall not be construed as extending to the rank and status of such employee.]
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1. Inserted by Act 37 of 1960, Section 6.
2. Substituted by Act 7 of 1961, Section 4, for “any agreement”.
3. Substituted by Act 7 of 1961, Section 4, for “the banking company”.
4. Substituted by Act 7 of 1961, Section 4, for sub-sections (4) to (9).
5. Substituted by Act 1 of 1984, Section 34 for “as are applicable” w.e.f. 15-2-1984.
6. Substituted by Act 1 of 1984, Section 34 for “the doubt or difference shall be referred” w.e.f. 15-2-1984.
7. Inserted by Act 55 of 1963, Section 21 w.e.f. 1-2-1964.
8. Inserted by Act 1 of 1984, Section 34 w.e.f. 15-2-1984.
9. Substituted by Act 1 of 1984, Section 34 for certain words w.e.f. 15-2-1984.
10. Substituted by Act 1 of 1984, Section 34 for certain words w.e.f. 15-2-1984.
11. Inserted by Act 1 of 1984, Section 34 w.e.f. 15-2-1984.
1[PART IIIA: SPECIAL PROVISIONS FOR SPEEDY DISPOSAL OF WINDING UP PROCEEDINGS
The provisions of this Part and the rules made thereunder shall have effect notwithstanding anything inconsistent therewith contained in the 2[Companies Act, 1956 (1 of 1956)] or the Code of Civil Procedure, 1908 (5 of 1908), or the 3[Code of Criminal Procedure, 1973 (2 of 1974) or any other law for the time being in force or any Instrument having effect by virtue of any such law; but the provisions of any such law or Instrument Insofar as the same are not varied by, or inconsistent with, the provisions of this Part or rules made thereunder shall apply to all proceedings under this Part.
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1. Substituted by Act 53 of 1953 of 1953, Section 10, fro the former Part IIIA which was Inserted by Act 20 of 1950, Section 10.
2. Substituted by Act 95 of 1956, Section 14 and Schedule, “Indian Companies Act 1913 (7 of 1913)” w.e.f. 14-1-1957.
3. Substituted by Act 1 of 1984, Section 35 for “Code of Criminal Procedure, 1898 (5 of 1898)” w.e.f. 15-2-1984.
The High Court shall, save as otherwise expressly provided in section 45C, have exclusive jurisdiction to entertain and decide any claim made by or against a banking company which is being wound up (including claims by or against any of its branches in India) or any application made under 1[section 391 of the Companies Act, 1956 (1 of 1956)] by or in respect of a banking company or any question of priorities or any other question whatsoever, whether of law or fad, which may relate to or arise in the course of the winding up of a banking company, whether such claim or question has arisen or arises or such application has been made or is made before or after the date of the order for the winding up of the banking company or before or after the commencement of the Banking Companies (Amendment) Act, 1953 (52 of 1953).
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1. Substituted by act 1 of 1984, Section 14 and Schedule, for “section 153 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.
(1) Where a winding up order is made or has been made in respect of a banking company, no suit or other legal proceeding, whether civil or criminal, in respect of which the High Court has jurisdiction under this Act and which is pending in any other court immediately before the commencement of the Banking Companies (Amendment) Act, 1953 (52 of 1953), or the date of the order for the winding up of the banking company, whichever is later, shall be proceeded with except in the manner hereinafter provided.
(2) The official liquidator shall, within three months from the date of the winding up order or the commencement of the Banking Companies (Amendment) Act, 1953 (52 of 1953), whichever is later, or such further time as the High Court may allow, submit to the High Court a report containing a list of all such pending proceedings together with particulars thereof.
(3) On receipt of a report under sub-section (2), the High Court may, if it so thinks fit, give the parties concerned an opportunity to show cause why the proceedings should not be transferred to itself and after making an inquiry in such manner as may be provided by rules made under section 45U, it shall make such order as it deems fit transferring to itself all or such of the pending proceedings as may be specified in the order and such proceedings shall thereafter be disposed of by the High Court.
(4) If any proceedings pending in a court is not so transferred to the High Court under sub-section (3), such proceeding shall be continued in the court in which the proceeding was pending.
(5) Nothing in this section shall apply to any proceeding pending in appeal before the Supreme Court or a High Court.
(1) Notwithstanding anything to the contrary contained in any law for the time being in force, the High Court may settle in the manner hereinafter provided a list of debtors of a banking company which is being wound up.
(2) Subject to any rules that may be made under section 52, the official liquidator shall, within six months from the date of the winding up order or the commencement of the Banking Companies (Amendment) Act, 1953 (52 of 1953), whichever is later, from time to time, file to the High Court lists of debtors containing such particulars as are specified in the Fourth Schedule:
Provided that such lists may, with the leave of the High Court, be filed after the expiry of the said period of six months.
(3) On receipt of any list under sub-section (2), the High Court shall, wherever necessary, cause notices to be issued on all persons affected and after making an inquiry in such manner as may be provided by rules made under section 45U, it shall make an order settling the list of debtors:
Provided that nothing in this section shall debar the High Court from settling any such list in part as against such of the persons whose debts have been settled without settling the debts of all the persons placed on the list.
(4) At the time of the settlement of any such list, the High Court shall pass an order for the payment of the amount due by each debtor and make such further orders as may be necessary in respect of the relief claimed, including reliefs against any guarantor or in respect of the realisation of any security.
(5) Every such order shall, subject to the provisions for appeal, be final and binding for all purposes as between the banking company on the one hand and the person against whom the order is passed all persons claiming through or under him on the other hand, and shall be deemed to be a decree in a suit.
(6) In respect of every such order, the High Court shall issue a certificate specifying clearly the reliefs granted and the names and descriptions of the parties against whom such reliefs have been granted, the amount of costs awarded and by whom, and out of what funds and in what proportions, such costs are to be paid; and every such certificate shall be deemed to be a certified copy of the decree for all purposes including execution.
(7) At the time of settling the list of debtors or at any other time prior or subsequent thereto, the High Court shall have power to pass any order in respect of a debtor on the application of the official liquidator for the realisation, management, protection, preservation or sale of any property given as security to the banking company and to give such powers to the official liquidator to carry out the aforesaid directions as the High Court thinks fit.
(8) The High Court shall have power to sanction a compromise in respect of any debt and to order the payment of any debt by Instalments.
(9) In any case in which any such list is settled ex parte as against any person, such person may, within thirty days from the date of the order settling the list, apply to the High Court for an order to vary such list, so far as it concerns him, and if the High Court is satisfied that he was prevented by any sufficient cause from appearing on the date fixed for the settlement of such list and that he has a good defence to the claim of the banking company on merits, the High Court may vary the list and pass such orders in relation thereto as it thinks fit:
Provided that the High Court may, if it so thinks fit, entertain the application after the expiry of the said period of thirty days.
(10) Nothing in this section shall—
(a) apply to a debt which has been secured by a mortgage of immovable property, if a third party has any interest in such immovable property; or
(b) prejudice the rights of the official liquidator to recover any debt due to a banking company under any other law for the time being in force.
Notwithstanding that the list of the contributories has not been settled under 1[section 467 of the Companies Act, 1956 (1 of 1956)], the High Court may, if it appears to it necessary or expedient so to do, at any time after making a winding up order, make a call on and order payment thereof by any contributory under sub-section (1) of 2[section 470 of the Companies Act, 1956 (1 of 1956)], if such contributory has been placed on the list of contributories by the official liquidator and has not appeared to dispute his liability.
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1. Substituted by Act 95 of 1956, Section 14 and Schedule, for “section 184 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.
2. Substituted by Act 95 of 1956, Section 14 and Schedule, for “section 187 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.
(1) Entries in the books of account or other documents of a banking company which is being wound up shall be admitted in evidence in all 1[legal proceedings]; and all such entries may be proved either by the production of the books of account or other documents of the banking company containing such entries or by the production of a copy of the entries, certified by the official liquidator under his signature and stating that it is a true copy of the original entries and that such original entries are contained in the books of account or other documents of the banking company in his possession.
(2) Notwithstanding anything to the contrary contained in the Indian Evidence Act, 1872 (1 of 1872), all such entries in the books of account or other documents of a banking company shall, as against the directors, 2[officers and other employees] of the banking company in respect of which the winding up order has been made 3[***], by prima facie evidence of the truth of all matters purporting to be therein recorded.
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1. Substituted by Act 55 of 1963, Section 22, for “proceedings by or against the banking company” w.e.f. 1-2-1964.
2. Inserted by Act 55 of 1963, Section 22 w.e.f. 1-2-1964.
3. Certain words omitted by Act 55 of 1963, Section 22 w.e.f. 1-2-1964.
(1) Where an order has been made for the winding up of a banking company, the official liquidator shall submit a report whether in his opinion any loss has been caused to the banking company since its formation by any act or omission (whether or not a fraud has been committed by such ‘ act or omission) of any person in the promotion or formation of the banking company or of any director or auditor of the banking company.
(2) If, on consideration of the report submitted under sub-section(1), the High Court is of opinion that any person who has taken part in the promotion or formation of the banking company or has been a director or an auditor of the banking company should be publicly examined, it should hold a public sitting on a date to be appointed for that purpose and direct that such person, director or auditor shall attend there at and shall be publicly examined as to the promotion or formation or the conduct of the business of the banking company, or as to his conduct and dealings, Insofar as they relate to the affairs of the banking company:
Provided that no such person shall be publicly examined unless he has been given an opportunity to show cause why he should not be so examined.
(3) The official liquidator shall take part in the examination and for that purpose may, if specially authorized by the High Court in that behalf, employ such legal assistance as may be sanctioned by the High Court.
(4) Any creditor or contributory may also take part in the examination either personally or by any person entitled to appear before the High Court.
(5) The High Court may put such questions to the person examined as it thinks fit.
(6) The person examined shall be examined on oath and shall answer all such questions as the High Court may put or allow to be put to him.
(7) A person ordered to be examined under this section may, at his own cost, employ any person entitled to appear before the High Court who shall be at liberty to put to him such questions as the High Court may deem just for the purpose of enabling him to explain or qualify any answer given by him:
Provided that if he is, in the opinion of the High Court, exculpated from any charges made or suggested against him, the High Court may allow him such costs in its discretion as it may deem fit.
(8) Notes of the examination shall be taken down in writing, and shall be read over to or by, and signed by, the person examined and may thereafter be used in evidence against him in any proceeding, civil or criminal, and shall be open to the Inspection of any creditor or contributory at all reasonable limes.
(9) Where on such examination, the High Court, is of opinion (whether a fraud has been committed or not)—
(a) that a person, who has been a director of the banking company, is not fit to be a director of a company, or
(b) that a person, who has been an auditor of the banking company or a partner of a firm acting as such auditor, is not fit to act as an auditor of a company or to be a partner of a firm acting as such auditor,
the High Court may make an order that person shall not, without the leave of the High Court, be a director of, or in any way, whether directly or indirectly, be concerned or take part in the management of an company or, as the case may be, act as an auditor of, or be a partner of firm acting as auditors of any company for such period not exceeding five years as may be specified in the order.
(1) Where an application is made to the High Court under 1[section 543 of the Companies Act, 1956(1 of 1956)], against any promoter, director, manager, liquidator or officer of a banking company for repayment or restoration of any money or property and the applicant makes out a prima facie case against such person, the High Court shall make an order against such person to repay and restore the money or property unless he proves that he is not liable to make the repayment or restoration either wholly or in part:
Provided that where such an order is made jointly against two or more such persons, they shall be jointly and severally liable to make the repayment or restoration of the money or property.
(2) Where an application is made, to the High Court under 1[section 543 of the Companies Act, 1956 (I of 1956)], and the High Court has reason to believe that a property belongs to any promoter, director, manager, liquidator or officer of the banking company, whether the property stands in the name of such person or any other person at an ostensible owner, then the High Court may, at any time, whether before or after making an order under sub-section (1), direct the attachment of such property, or such portion thereof, as it thinks fit and the property so attached shall remain subject to attachment unless the ostensible owner can prove to the satisfaction of the High Court that he is the real owner and the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to attachment of property shall, as far as may be, apply to such attachment,
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1. Substituted by Act 95 of 1956, Section 14 and Schedule, for “section 235 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.
Every director or other officer of a banking company which is being wound up shall give such assistance to the official liquidator as he may reasonably require in connection with the realisation and distribution of the property of the banking company.
(1) The High Court may, if it thinks fit, take cognizance of and try in a summary way and offence alleged to have been committed by any person who has taken part in the promotion or formation of the banking company which is being wound , up or by any director, manager or officer thereof:
Provided that the offence is one punished under this Act or under the 1[Companies Act, 1956(1 of 1956)].
(2) When trying any such offence as aforesaid, the High Court may also try any other offence not referred to in sub-section (1) which is an offence with which the accused may, under the 2[Code of Criminal Procedure, 1973 (2 of 1974)], be charged at the same trial.
(3) In any case tried summarily under sub-section (1), the High Court—
(a) need not summon any witness, if it is satisfied that the evidence of such witness will not be material;
(b) shall not be bound to adjourn a trial for any purpose unless such adjournment is, in the opinion of the High Court, necessary in the interests of justice;
(c) shall, before passing any sentence, record judgment embodying the substance of the evidence and also the particulars specified in section 263 of the 2[Code of Criminal Procedure, 1973 (2 of 1974)], so far as that section may be applicable,
and nothing contained in sub-section (2) of section 262 of the [Code of Criminal Procedure, 1973 (2 of 1974)], shall apply to any such trial.
(4) All offences in relation to winding up alleged to have been committed by any person specified in sub-section (1) which are punishable under this Act or under the 1[Companies Act, 1956(1 of 1956)], and which are not tried in a summary way under ‘ sub-section (1) shall, notwithstanding anything to the contrary in that Act or the 2[Code of Criminal Procedure, 1973 (2 of 1974)], or in any other law for the time being in force, be taken cognizance of and tried by a Judge of the High Court other than the Judge for the time being dealing with the proceedings for the winding up of the banking company.
(5) Notwithstanding anything to the contrary contained in the 3[Code of Criminal Procedure, 1973 (2 of 1974)], the High Court may take cognizance of any offence under this section, without the accused being committed to it for trial 4[***].
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1. Substituted by Act 95 of 1956, Section 14 and Schedule, for “Indian Companies Act. 1913 (7 of 1913)” w.e.f. 14-1-1957.
2. Substituted by Act 1 of 1984, Section 35, for “Code of Criminal Procedure, 1898 (5 of 1898)” w.e.f. 15-2-1984.
3. Substituted by Act 1 of 1984, Section 35, for “Code of Criminal Procedure, 1898 (5 of 1898)” w.e.f. 15-2-1984.
4. Certain words omitted by Act 1 of 1984, Section 35 w.e.f. 15-2-1984.
[Rep. by the Banking Companies (Amendment) Act, 1959, Section 31 (w.e.f. 1-10-1959).]
(1) Where an application for sanction a compromise or arrangement in respect of a banking company is made under 1[section 39] of the Companies Act, 1956 (1 of 1956)], or where such sanction has been given and the High Court is of opinion, whether on a report of the Reserve Bank or otherwise, that any ‘ person who has taken part in the promotion or formation of the banking company or has been a director or auditor of the banking company should be publicly examined, it may direct such examination of such person and the provisions of section 45G shall, as far as may be, apply to the banking company as they apply to a banking company which is being wound up.
(2) Where a compromise or arrangement is sanctioned under 1[section 391 of the Companies Act, 1956 (1 of 1956)], in respect of a banking company, the provisions of 2[section 543 of the said Act] and of section 45H of this Act shall, as far as may be, apply to the banking company as they apply to a banking company which is being wound up as if the order sanctioning the compromise or arrangement were an order for the winding up of the banking company.
3[(3) Where 4[a scheme of reconstruction or amalgamation of a banking company] has been sanctioned by the Central Government under section 45 and the Central Government is of opinion that any person who has taken part in the promotion or formation of the banking company or has been a director or auditor of the banking company should be publicly examined, that Government may apply to the High Court for the examination of such person and if on such examination the High Court finds (whether a fraud has been committed or not) that person is not fit to be a director of a company or to act as an auditor of a company or to be a partner of a firm acting as such auditors, the Central Government shall make an order that that person shall not, without the leave of the Central Government, be a director of, or in any way, whether directly or indirectly, be concerned or take part in the management of any company or, as the case may be, act as an auditor of, or be a partner of a firm acting as auditors of, any company for such period not exceeding five years as may be specified in the order.
(4) Where 5[a scheme of reconstruction or amalgamation of a banking company] has been sanctioned by the Central Government under section 45, the provisions of section 543 of the Companies Act, 1956 (1 of 1956), and of section 45H of this Act shall, as far as may be, apply to the banking company as they apply to a banking company which is being wound up as if the order sanctioning the scheme of reconstruction or amalgamation, as the case may be, were an order for the winding up of the banking company; and any reference in the said section 543 to the application of the official liquidator shall be construed as a reference to the application of the Central Government.]
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1. Substituted by Act 95 of 1965, Section 14 and Schedule, for “section 153 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-1-1957.
2. Substituted by Act 95 of 1956, Section 14 and Schedule, for “section 235 of the said Act” w.e.f. 14-1-1957.
3. Inserted by Act 37 of 1960, Section 7.
4. Substituted by Act 7 of 1961, Section 5, for certain words.
5. Substituted by Act 7 of 1961, Section 5, for certain words.
Where any compromise or arrangement sanctioned in respect of a banking company under 1[section 391 of the Companies Act, 1956 (1 of 1956)] is being worked at the commencement of the Banking Companies (Amendment) Act, 1953 (52 of 1953) the High Court may, if it so thinks fit, on the application of such banking company, —
(a) excuse any delay in carrying out any of the provisions of the compromise or arrangement; or
(b) allow the banking company to settle the list of its debtors in accordance with the provisions of section 45D and in such a case, the provisions of the said section shall, as far as may be, apply to the banking company as they apply to a banking company which is being wound up as if the order sanctioning the compromise or arrangement were an order for the winding up of the banking company.
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1. Substituted by Act 95 of 1956, Section 14 and Schedule, for “section 153 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-5-1957.
(1) An Appeal shall lie from any order or decision of the High Court in a civil proceeding under this Act when the amount or value of the subject-matter of the claim exceeds five thousand rupees.
(2) The High Court may by rules provide for an appeal against any order made under section 45J and the conditions subject to which any such appeal would lie.
(3) Subject to the provisions of sub-section (1) and sub-section (2 )and notwithstanding anything contained in any other law for the time being in force, every order or decision of the High Court shall be final and binding for all purposes as between the banking company on the one hand, and all persons who are parties thereto and all persons claiming through or under them or any of them, on the other hand.
(1) Notwithstanding anything to the contrary contained in the Indian Limitation Act, 1908 (9 of 1908) or in any other law for the time being in force, in computing the period of limitation prescribed for a suit or application by a banking company which is being wound up, the period commencing from the date of the presentation of the petition for the winding up of the banking company shall be excluded.
(2) Notwithstanding anything to the contrary contained in the Indian Limitation Act, 1908 (9 of 1908) or 1[section 543 of the Companies Act, 1956(1 of 1956)] or in any other law for the time being in force, there shall be no period of limitation for the recovery of arrears of calls from any director of a banking company which is being wound up or for the enforcement by the banking company against any of its directors of any claim based on a contract, express or implied; and in respect of all other claims by the banking company against its directors, the period of limitation shall be twelve years from the date of the accrual of such claims 2[or five years from the date of the first appointment of the liquidator, whichever is longer].
(3) The provisions of this section, Insofar as they relate to banking companies being wound up, shall also apply to a banking company in respect of which a petition for the winding up has been presented before the commencement of the Banking Companies (Amendment) Act, 1953 (52 of 1953).
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1. Substituted by Act 95 of 1956, Section 14 and Schedule, for “section 235 of the Indian Companies Act, 1913 (7 of 1913)” w.e.f. 14-5-1957.
2. Inserted by Act 33 of 1959, Section 32 w.e.f. 1-10-1959.
Where in any proceeding for the winding up of a banking company in which any person other than the Reserve Bank has been appointed as the official liquidator and the High Court has directed the official liquidator to obtain the advice of the Reserve Bank on any matter (which it is hereby empowered to do), it shall be lawful for the Reserve Bank to examine the record of any such proceeding and tender such advice on the matter as it may think fit.
(1) The Reserve Bank shall, on being directed so to do by the Central Government or by the High Court, cause an Inspection to be made by one or more of its officers of a banking company which is being wound up and its books and accounts.
(2) On such Inspection, the Reserve Bank shall submit its report to the Central Government and the High Court.
(3) If the Central Government, on consideration of the report of the Reserve Bank, is of opinion that there has been a substantial irregularity in the winding up proceedings, it may bring such irregularity to the notice of the High Court for such action as the High Court may think fit.
(4) On receipt of the report of the Reserve Bank under sub-section (2) or on any irregularity being brought to its notice by the Central Government under sub-section (3), the High Court may, if it deems fit, after giving notice to and hearing the Central Government in regard to the report, give such directions as it may consider necessary.
The Reserve Bank may, at any time by a notice in writing, require the liquidator of a banking company to furnish it, within such time as may be specified in the notice or such further time as the Reserve Bank may allow, any statement or information relating to or connected with the winding up of the banking company; and it shall be the duty of every liquidator to comply with such requirements.
Explanation. —For the purposes of this section and section 45Q, a banking company working under a compromise or arrangement but prohibited from receiving fresh deposits, shall, as far as may be, deemed to be banking company which is being wound up.
(1) For the purpose of enabling the official liquidator or the special officer appointed under sub-section (3) of section 37 to take into his custody or under his control, all property, effects and actionable claims to which a banking company 1[***] is or appears to be entitled, the official liquidator or the special officer, as the case may be, may request in writing the 2[Chief Metropolitan Magistrate or the Chief Judicial Magistrate], within whose jurisdiction any property, books of accounts or other documents of such banking company may be situate or be found, to take possession thereof, and the 2[Chief Metropolitan Magistrate or the Chief Judicial Magistrate], as the case may be, shall, on such request being made to him, —
3[(a)take possession of such property, books of accounts or other documents, and
(b) forward them to the official liquidator or the special officer.]
4[(2) Where any such property and effects are in the possession of the 2[Chief Metropolitan Magistrate or the Chief Judicial Magistrate], as the case may be, such Magistrate shall, on request in writing being made to him by the official liquidator or the special officer referred to in sub-section (1), sell such property and effects and forward the net proceeds of the sole to the official liquidator or the special officer:
Provided that such sale shall, as far as practicable, be effected by public auction.
(3) For the purpose of securing compliance with the provisions of sub-section (1), the 2[Chief Metropolitan Magistrate or the Chief Judicial Magistrate] may take or cause to be taken such steps and use of cause to be used such fore as may, in his opinion, be necessary.
(4) No act of the 2[Chief Metropolitan Magistrate or the Chief Judicial Magistrate] done in pursuance of this section shall be called in question in any court or before any authority.]
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1. Certain words omitted by Act 55 of 1963 Section 13 w.e.f. 1-2-1964.
2. Substituted by Act 1 of 1984, Section 36 for certain words w.e.f. 15-2-1984.
3. Substituted by Act 53 of 1963, Section 23 w.e.f. 1-2-1964.
4. Substituted by Act 53 of 1963, Section 23 for sub-section (2) w.e.f. 1-2-1964.
(1) All orders made in any civil proceeding by a High Court may be enforced in the same manner in which decrees of such court made in any suit pending therein may be enforced.
(2)Notwithstanding anything to the contrary contained in the Code of Civil Procedure, 1908(5 of 1908), a liquidator may apply for the execution of a decree by a court, other than the one which made it on production of a certificate granted under subsection (6) of section 45D and on his certifying to such other court in writing the amount remaining due or relief remaining unenforced under the decree.
(3) Without prejudice to the provisions of sub-section (1) or sub-section (2), any amount found due to the banking company by an order or decision of the High Court, may, with the leave of the High Court, be recovered 1[by the liquidator in the same manner as an arrear of land revenue and for the purpose of such recovery the liquidator may forward to the Collector within whose jurisdiction the property of the person against whom any order or decision of the High Court has been made is situate, a certificate under his signature specifying the amount so due and the person by whom it is payable].
2[(4) On receipt of a certificate under sub-section (3), the Collector shall proceed to recover from such person the amount specified therein as if it were an arrear of land revenue:
Provided that without prejudice to any other powers of the Collector, he shall, for the purposes of recovering the said amount, have all the powers which, under the Code of Civil Procedure, 1908 (5 of 1908), a civil court has for the purpose of the recovery of an amount due under a decree.]
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1. Substituted by Act 53 of 1963, Section 24 for “in the same manner as on arrear of land revenue” w.e.f. 1-2-1964.
2. Inserted by Act 53 of 1963, Section 24 w.e.f. 1-2-1964.
The High Court may make rules consistent with this Act and the rules made under section 52 prescribing—
(a) the manner in which inquiries and proceedings under Part III or Part IIIA may be held;
(b) the offences which may be tried summarily;
(c) the authority to which, and the conditions subject to which, appeals may be preferred and the manner in which such appeals may be filed and heard;
(d) any other matter for which provision has to be made for enabling the High Court to effectively exercise its functions under this Act.
For the removal of doubts it is hereby declared that any reference in this Part to a director, manager, liquidator, officer or auditor of a banking company shall be construed as including a reference to any past or present director, manager, liquidator, officer or auditor of the banking company.
Nothing contained in Part II shall apply to a banking company which is being wound up.
Notwithstanding anything contained in section 45B or any other provision of this Part or in section 11 of the Banking Companies (Amendment) Act, 1950 (20 of 1950), no proceeding held, judgment delivered or decree or order made before the commencement of the Banking Companies (Amendment) Act, 1953 (52 of 1953), by any court other than the High Court in respect of any matter over which the High Court has jurisdiction under this Act shall be invalid or be deemed ever to have been invalid merely by reason of the fact that such proceeding, judgment, decree or order was held, delivered or made by a court other man the High Court.]
The Central Government may, after consultation with the Reserve Bank and by notification in the Official Gazette, make rules specifying the periods for which—
(a) a banking company shall preserve its books, accounts and other documents; and
(b) a banking company shall preserve and keep with itself different instruments paid by it.
(1) Where a banking company is required by its customer to return to him a paid instrument before the expiry of the period specified by rules made under section 45 Y, the banking company shall not return the instrument except after making and keeping in its possession a true copy of all relevant parts of such instrument, such copy being made by a mechanical or other process which in itself ensures the accuracy of the copy.
(2) The banking company shall be entitled to recover from the customer the cost of making such copies of the instrument.
Explanation. —In this section, “customer” includes a Government department and a corporation incorporated by or under any law.
(1) Where a deposit is held by a banking company to the credit of one or more persons, the depositor or, as the case may be, all the depositors together, may nominate, in the prescribed manner, one person to whom in the event of the death of the sole depositor or the death of all the depositors, the amount of deposit may be returned by the banking company.
(2) Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, in respect of such deposit, where a nomination made in the prescribed manner purports to confer on any person the right to receive the amount of deposit from the banking company, the nominee shall, on the death of the sole depositor or, as the case may be, on the death of all the depositors, become entitled to all the rights of the sole depositor or, as the case may be, of the depositors, in relation to such deposit to the exclusion of all other persons, unless the nomination is varied or cancelled in the prescribed manner.
(3) Where the nominee is a minor, it shall be lawful for the depositor making the nomination to appoint in the prescribed manner any person to receive the amount of deposit in the event of his death during the minority of the nominee.
(4) Payment by a banking company in accordance with the provisions of this section shall constitute a full discharge to the banking company of its liability in respect of the deposit:
Provided that nothing contained in this sub-section shall affect the right or claim which any person may have against the person to whom any payment is made under this section.
No notice of the claim of any person, other than the person or persons in whose name a deposit is held by a banking company, shall be receivable by the banking company, nor shall the banking company be bound by any such notice though even expressly given to it:
Provided that where any decree, order, certificate or other authority from a court of competent jurisdiction relating to such deposit is produced before a banking company, the banking company shall take due note of such decree, order, certificate or other authority.
(1) Where any person leaves any article in safe custody with a banking company, such person may nominate, in the prescribed manner, on person to whom, in the event of the death of the person leaving the article in safe custody, such article may be returned by the banking company.
(2) Where the nominee is a minor, it shall be lawful for the person making the nomination to appoint in the prescribed manner any person to receive the article deposited in the event of his death during the minority of the nominee.
(3) The banking company shall, before returning any articles under this section to the nominee or the person appointed under sub-section (2), prepare, in such manner as may be directed by the Reserve Bank from time to time, an inventory of the said articles which shall be signed by such nominee or person and shall deliver a copy of the inventory so prepared to such nominee or person.
(4) Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, in respect of such article, where a nomination made in the prescribed manner purports to confer on any person the right to receive the article from the banking company, the nominee shall, on the death of the person leaving the article in safe custody, become entitled to the return of the article to the exclusion of all other persons, unless the nomination is varied or cancelled in the prescribed manner:
Provided that nothing contained in this section shall affect the right or claim which any person may have against the person to whom the article is returned in pursuance of this sub-section.
No notice of the claim of any person, other than the person or persons in whose name any article is held by a banking company in safe custody, shall be receivable by the banking company, nor shall the banking company be bound by any such notice even though expressly given to it:
Provided that where any decree, order, certificate or other authority from a court of competent jurisdiction relating to such article is produced before a banking company, the banking company shall take due note of such decree, order, certificate or other authority.
(1) Where an individual is the sole hirer of a locker from a banking company, whether such locker is located in the safe deposit vault of such banking company or elsewhere, such individual may nominate one person to whom, in the event of the death of such individual, the banking company may give access to the locker and liberty to remove the contents of the locker.
(2) Where any such locker is hired from a banking company by two or more individuals jointly and under the contract of hire, the locker is to be operated under the joint signatures of two or more of such hirers, such hirers may nominate one or more persons to whom, in the event of the death of such joint hirer or hirers, the banking company may give, jointly with the surviving joint hirer or joint hirers, as the case may be, access to the locker and liberty to remove the contents of such locker.
(3) Every nomination under sub-section (1) or sub-section (2) shall be made in the prescribed manner
(4) The banking company shall, before permitting the removal of the contents of any locker by any nominee or jointly by any nominee and survivors as aforesaid, prepare, in such manner as may be directed by the Reserve Bank from time to time, an inventory of the contents of the locker which shall be signed by such nominee or jointly by such nominee and survivors and shall deliver a copy of the inventory so prepared to such nominee or nominee and survivors.
(5) On the removal of the contents of any locker by any nominee or jointly by any nominee and survivors as aforesaid, the liability of the banking company in relation to the contents of the locker shall stand discharged.
(6) No suit, prosecution or other legal proceedings shall lie against a banking company for any damage caused or likely to be caused, for allowing access to any locker, and liberty to remove the contents of such locker, in pursuance of the provisions of subsection (1) or sub-section (2) as the case may be.
No notice of the claim of any person, other than hirer or hirers of a locker, shall be receivable by a banking company nor shall the banking company be bound by any such notice even though expressly given to it:
Provided that where any decree, order, certificate or other authority from a court of competent jurisdiction relating to the locker or its contents is produced before the banking company, the banking company shall take due note of such decree, order, certificate or other authority.]
(1) Whoever in any return, balance-sheet or other document 1[or in any information required or furnished] by or under or for the purposes of any provision of this Act, wilfully makes a statement which is false in any material particular, knowing it to be false, or wilfully omits to make a material statement, shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine.
(2) If any person fails to produce any book, account or other document or to furnish any statement or information which under sub-section (2) of section 35 it is his duty to produce or furnish, or to answer any question relating to the business of a banking company which is asked by 2[an officer making an inspection or scrutiny under that section.] he shall be punishable with a fine which may extend to 3[two thousand rupees] in respect of each offence, and if he persists in such refusal, to a further fine which may extend to 4[one hundred rupees] for every day during which the offence continues.
(3) If any deposits are received by a banking company in contravention of an order under clause (a)of sub-section (4) of section 35, every director or other officer of the banking company, unless he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent it shall be deemed to be guilty of such contravention and shall be punishable with a fine which may extend to twice the amount of the deposits so received.
5[6[7[(4) If any other provision of this Act is contravened or if any default is made in—
(i) complying with any requirement of this Act or of any order, rule or direction made or condition imposed thereunder, or
(ii) carrying out the terms of, or the obligations under, a scheme sanctioned under sub-section (7) of section 45,
by any person, such person shall be punishable with fine which may extend to 8[fifty thousand rupees or twice the amount involved in such contravention or default where such amount is quantifiable, whichever is more, and where a contravention or default is a continuing one, with a further fine which may extend to two thousand and five hundred rupees] for every day, during which the contravention or default continues.]
(5) Where a contravention or default has been committed by a company, every person who, at the time the contravention or default was committed, was in charge of, and was responsible to, the company, for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the contravention or default and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act if he proves that the contravention or default was committed without his knowledge or that he exercised all due diligence to prevent the contravention or default.
(6) Notwithstanding anything contained in sub-section (5), where a contravention or default has been committed by a company, and it is proved that the same was committed with the consent or connivance of, or is attributable to any gross negligence on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that contravention or default and shall be liable to be proceeded against and punished accordingly.
Explanation. —For the purposes of this section, —
(a) “company” means any body corporate and includes a firm or other association of individuals, and
(b) “direction”, in relation to a firm, means a partner in the firm.]
9[***]
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1. Substituted by Act 95 of 1956, Section 9, for “required” w.e.f. 14-1-1957.
2. Substituted by Act 1 of 1984, Section 38, for “an officer making an imspection under that section” w.e.f. 15-2-1984.
3. Substituted by Act 33 of 1959, Section 33, for “five hundred rupees” w.e.f. 1-10-1959.
4. Substituted by Act 33 of 1959, Section 33, for “fifty rupees” w.e.f. 1-10-1959.
5. Sub-sections (4) Substituted by Act 33 of 1959 w.e.f. 1-10-1959.
6. Sub-section (4), (5) and (6) Substituted by Act 55 of 1963, sec 25, for sub-section (4) w.e.f. 1-2-1964.
7. Substituted-section (4) Substituted by Act 1 of 1984, sec .38 w.e.f. 15-2-1984.
8. Substituted by Act20 of 1994, Section 8 w.e.f. 31-1-1994.
9. Original sub-section (5) omitted by Act 33 of 1959, Section 33 w.e.f. 1-10-1959.
1[Chairman, director, etc., to be public servants for the purposes of Chapter IX of the Indian Penal Code. 2[Every Chairman who is appointed on a whole-time basis, managing director, director, auditor] liquidator, manager and any other employee of a banking company shall be deemed to be a public servant for the purposes of Chapter IX of the Indian Penal Code (45 of 1860).]
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1. Inserted by Act 95 of 1956, Section10 w.e.f.
2. Substituted by Act 20 of 1994, Section 9 w.e.f. 31-1-1994.
No court shall take a cognizance of any offence punishable under 1[sub-section (5)of section 36AA or] section 46 except upon complaint in writing made by an officer of 2[the Reserve Bank or, as the case may be, the National Bank] generally or specially authorised in writing in this behalf by 3[the Reserve Bank, or as the case may be, the National Bank] and 4[no court other than that of a Metropolitan Magistrate or a Judicial Magistrate of the first class or any court superior thereto] shall try any such offence.
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1. Inserted by Act 55 of 1963, Section 26 w.e.f. 1-2-1964.
2. Substituted by Act 61 of 1981, Section 61 and second Schedule, Pt. II, for “the Reserve Bank”
3. Substituted by Act 61 of 1981, Section 61 and second Schedule, Pt. II, for “the Reserve Bank”
4. Substituted by Act 1 of 1984, Section 39, for certain words w.e.f. 15-2-1984.
1[Power of Reserve Bank to impose penalty. (1)Notwithstanding anything contained in section 46, if a contravention or default of the nature referred to in subsection (3) or sub-section (4) of section 46, as the case may be, is made by a banking company, then, the Reserve Bank may impose on such banking company—
(a) where the contravention is of the nature referred to in sub-section (3) of section 46, a penalty not exceeding twice the amount of the deposits in respect of which such contravention was made;
(b) where the contravention or default is of the nature referred to in sub-section (4) of section 46, a penalty not exceeding 2[five lakh rupees or twice the amount involved in such contravention or default where such amount is quantifiable, whichever is more, and where such the contravention or default is a continuing one, a further penalty which may extend to twenty-five thousand rupees] for every day, after the first, during which the contravention of default continues.
3[(2) For the purpose of adjudging the penalty under sub-section (1), the Reserve Bank shall serve notice on the banking company requiring it to show cause why the amount specified in the notice should not be imposed and a reasonable opportunity of being heard shall also be given to such banking company.]
(4) No complaint shall be filed against any banking company in any court of law in respect of any contravention or default in respect of which any penalty has been imposed by the Reserve Bank under this section.
(5) Any penalty imposed by the Reserve Bank under this section shall be payable within a period of fourteen days from the date on which notice issued by the Reserve Bank demanding payment of the sum is served on the banking company and in the event of failure of the banking company to pay the sum within such period, may be levied on a direction made by the principal civil court having jurisdiction in the area where the registered office of the banking company is situated; or, in the case of a banking company incorporated outside India, where its principal place of business in India is situated:
Provided that no such direction shall be made except on an application made to the court by the Reserve Bank or any officer authorised by that Bank in this behalf.
(6) The court which makes a direction under sub-section (5) shall issue a certificate specifying the sum payable by the banking company and every such certificate shall be enforceable in the same manner as if it were a decree made by the court in a civil suit.
(7) Where any complaint has been filed against any banking company in any court in respect of the contravention or default of the nature referred to in sub-section (3) or, as the case may be, sub-section (4) of section 46, then, no proceedings for the imposition of any penalty on the banking company shall be taken under this section.]
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1. Inserted by Act 58 of 1968, Section 17 w.e.f. 1-2-1969.
2. Substituted by Act 20 of 1994, Section 10 w.e.f. 31-1-1994.
3. Substituted by Act 20 of 1994, Section 10, for sub-sections (2) and (3) w.e.f. 31-1-1994.
A court imposing any fine under this Act may direct that the whole or any part thereof shall be applied in or towards payment of the costs of the proceedings, or in or towards the rewarding of the person on whose information the fine is recovered.
The exemptions, whether express or implied, in favour of a private company in 1[sections 90, 165, 182, 204 and 255, clauses (a) and (b) of sub-section (1) of section 293 and sections 300, 388A and 416 of the Companies Act, 1956 (1 of 1956)], shall not operate in favour of a private company which is a banking company.
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1. The words and figures “sections. 17, 77, 83B, 86H, 91B and 91D and sub-section (5) of section 144 of the Indian Companies Act, 1913 (7 of 1913)” have successively been amended by Act 95 of 1956, Section 11, Act 33 of 1959, Section 34 and Act 55 of 1963, Section 27 to read as above.
1[Restriction on acceptance of deposits withdrawable by cheque. No person other than a banking company, the Reserve Bank, the State Bank of India or any other 2[banking institution, firm or other person notified by the Central Government in this behalf on the recommendation of the Reserve Bank] shall accept from the public deposits of money withdrawable by cheque:
Provided that nothing contained in this section shall apply to any savings bank scheme run by the Government.
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1. Inserted by Act 33 of 1959, Section 35 w.e.f. 1-10-1959.
2. Substituted by Act 55 of 1963, Section 28, for certain words w.e.f. 1-2-1964.
Notwithstanding anything contained in section 21 of the Companies Act, 1956 (1 of 1956), the Central Government shall not signify its approval to the change of name of any banking company unless the Reserve Bank certifies in writing that it has no objection to such change.
Notwithstanding anything contained in the Companies Act, 1956 (1 of 1956), no application for the confirmation of the alteration of the memorandum of a banking company shall be maintainable unless the Reserve Bank certifies that there is no objection to such alteration.]
No person shall have any right, whether in contract or otherwise, to any compensation for any loss incurred by reason of the operation of any of the provisions 1[contained in sections 10, 12A, 16, 35A, 35B, 2[36, 43A and 45] or by reason of the compliance by a banking company with any order or direction given to it under this Act].
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1. Substituted by Act 95 of 1956, Section 12, for certain words w.e.f. 14-1-1957.
2. Substituted by act 37 of 1960, Section 8, for “and 36”.
1[Application of certain provisions to the State Bank of India and other notified banks. 2[(1)] Without prejudice to the provisions of the State Bank of India Act, 1955(23 of 1955) or any other enactment, the provisions of sections 10, 13 to 15, 17, 3[19 to 21A, 23 to 28, 29] excluding sub-section (3) 4[sub-section (1B), (1C) and (2) of sections 30, 31,] 34, 35, 35A, 36 [excluding clause(a) of sub-section(1)] 45Y to 45ZF, 46 to 48] 50, 52 and 53 shall also apply; so far as may be, to and in relation to the State Bank of India 5[or any corresponding new bank or a Regional Rural Bank or any subsidiary bank] as they apply to and in relation to banking companies:
6[Provided that—
(a) nothing contained in clause (c) of sub-section (1) of section 10 shall apply to the chairman of the State Bank of India or to a 7[managing director] of any subsidiary bank insofar as the said clause precludes him from being a director of, or holding an office in, any institution approved by the Reserve Bank;
8[(b) nothing contained in sub-clause (iii) of clause (b) of sub-section (!) of section 20 shall apply to any bank referred to in sub-section (1), insofar as the said sub-clause (iii) of clause (b) precludes that bank from entering into any commitment for granting any loan or advance to or on behalf of a company (not being a Government company) in which not less than forty per cent of the paid-up capital is held (whether singly or taken together) by the Central Government or the Reserve Bank or a corporation owned by that bank; and
(c) nothing contained in section 46 or in section 47A shall apply to, —
(i) an officer of the Central Government or the Reserve Bank, nominated or appointed as director of the State Bank of India or any corresponding new bank or a Regional Rural Bank or any subsidiary bank or a banking company; or
(ii) an officer of the State Bank of India or a corresponding new bank or a Regional Rural Bank or a subsidiary bank nominated or appointed as director of any of the said banks (not being the bank of which he is an officer) or of a banking company.;]
9[***]
10[(2) References to a banking company in any rule or direction relating to any provision of this Act referred to in sub-section (1) shall, except where such rule or direction provides otherwise, be construed as referring also to the State Bank of India, a corresponding new bank, a Regional Rural Bank and a subsidiary bank.]
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1. Substituted by Act 79 of 1956, Section 43 and ScheduleII, for section 51 w.e.f. 22-10-1956.
2. Section 51 renumbered as sub-section (1) thereof by Act 1 of 1984, Section 40 w.e.f. 15-2-1984.
3. Substituted by Act 1 of 1984, Section 40, for certain words and figures w.e.f. 15-2-1984.
4. Substituted by Act 66 of 16988, Section 10, for “31”w.e.f. 30-12-1988.
5. Substituted by Act 1 of 1984, Section 40, for certain words w.e.f. 15-2-1984.
6. Substituted by Act 38 of 1959, Section 64 and Schedule III, for the proviso w.e.f. 10-9-1959.
7. Substituted by Act 1 of 1984, Section 40, for “general manager w.e.f. 15-2-1984.
8. Clauses (b) and (c) Substituted by Act 1 of 1984, Section 40 w.e.f. 15-2-1984.
9. Explanation omitted by Act 58 of 1968, Section 18 w.e.f. 1-2-1969.
10. Inserted by Act 1 of 1984, Section 40 w.e.f. 15-2-1984.
(1) The Central Government may, after consultation with the Reserve Bank, make rules to provide for all matters for which provision is necessary or expedient for the purpose of giving effect to the provisions of this Act and all such rules shall be published in the Official Gazette.
(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for the details to be included in the returns required by (his Act and the manner in which such returns shall be submitted 1[and the form in which the official liquidator may file lists of debtors to the court having jurisdiction under Part III or Part IIIA and the particulars which such lists may contain and any other matter which has to be, or may be, prescribed].
2[***]
1[(4) The Central Government may by rules made under this section annul, alter or add to, all or any of the provisions of the Fourth Schedule.]
3[(5) Every rule made by the Central Government under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.]
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1. Added by Act 52 of 1953, Section 11.
2. Sub-section (3) omitted by Act 1 of 1984, Section 4 w.e.f. 15-2-1984.
3. Inserted by Act 1 of 1984, Section 41 w.e.f. 15-2-1984.
The Central Government may, on the recommendation of the Reserve Bank, declare, by notification in the Official Gazette, that any or all of the provisions of this Act shall not apply to any banking company 1[or institution] or to any class of banking companies either generally or for such period as may be specified.
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1. Inserted by Act 55 of 1963, Section 29 w.e.f. 1-2-1964.
(1) No suit or other legal proceeding shall be lie against the Central Government, the Reserve Bank or any officer for anything which is in good faith done or intended to be done in pursuance of this Act.
(2) Save as otherwise expressly provided by or under this Act, no suit or other legal proceeding shall lie against the Central Government, the Reserve Bank or any officer for any damage caused or likely to be caused by anything in good faith done or intended to be done in pursuance of this Act.
The Reserve Bank of India Act, 1934 shall be amended in the manner specified in the fourth column of the First Schedule, and the amendments to section 18 thereof as specified in the said Schedule shall be deemed to have had effect on and from the 20th day of September, 1947.
1[Power to remove difficulties. If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order, as occasion requires, do anything (not inconsistent with the provisions of this Act) which appears to it to be necessary for the purpose of removing the difficulty:
Provided that no such power shall be exercised after the expiry of a period of three years from the commencement of section 20 of the Banking Laws (Amendment) Act, 1968 (58 of 1968).]
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1. Inserted by Act 58 of 1968, Section 20 w.e.f. 1-2-1969.
The provisions of this Act, as in force for the time being, shall apply to, or in relation to, cooperative societies as they apply to, or in relation to banking companies subject to the following modifications, namely:—
(a) throughout this Act, unless the context otherwise requires,—
(i) references to a “banking company” or “the company” or “such company” shall be construed as references to a co-operative bank;
(ii) reference to “commencement of this Act” shall be construed as reference to commencement of the Banking Laws(Application to Co-operative Societies) Act, 1965 (23 of 1965);
(b) in section 2, the words and figures “the Companies Act, 1956 (1 of 1956) and” shall be omitted;
(c) in section 5,—
1[(i) after clause (cc), the following clauses shall be inserted, namely:—
(cci) “Co-operative bank” means a state co-operative bank, a central co-operative bank and a primary co- operative bank;
(ccii) “co-operative credit society” means a co-operative society, the primary object of which is to provide financial accommodation to its members and includes a co-operative land mortgage bank;
36(cciia) “co-operative society” means a society registered or deemed to have been registered under any Central Act for the time being in force relating to the multi-State Co-operative Societies, or any other Central or State law relating to Co-operative Societies for the time being in force;’;
(cciii) “director” in relation to a co-operative society, includes a member of any committee or body for the time being vested with the management of the affairs of that society;
37(cciiia) “multi-State co-operative bank” means a multi-State co-operative society which is a primary co-operative bank;
38(cciiib) “multi-State co-operative society” means a multi-State co-operative society registered as such under any Central Act for the time being in force relating to the multi-State co-operative societies but does not include a national co-operative society and a federal co-operative;’;
(cciv) “primary agricultural credit society” means a co-operative society,—
(1) the primary object or principal business of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities (including the marketing of crops); and
(2) the bye-laws of which do not permit admission of any other co-operative society as member:
Provided that this sub-clause shall not apply to the admission of a co-operative bank as a member by reason of such co-operative bank subscribing to the share capital of such co-operative society out of funds provided by the State Government for the purpose;
(ccv) “primary co-operative bank” means a co-operative society, other than a primary agricultural credit society,-
(1) the primary object or principal business of which is the transaction of banking business;
(2) the paid-up share capital and reserves of which are not less than one lakh of rupees; and
(3) the bye-laws of which do not permit admission of any other co-operative society as a member:
Provided that this sub-clause shall not apply to the admission of a co-operative bank as a member by reason of such co-operative bank subscribing to the share capital of such co-operative society out of funds provided by the State Government for the purpose;
(ccvi) “primary credit society” means a co-operative society, other than a primary agricultural credit society,—
(1) the primary object or principal business of which is the transaction of banking business;
(2) the paid-up share capital and reserves of which are less than one lakh of rupees; and
(3) the bye-laws of which do not permit admission of any other co-operative society as a member;
Provided that this sub-clause shall not apply to the admission of a co-operative bank as a member by reason of such co-operative bank subscribing to the share capital of such co-operative society out of funds provided by the State Government for the purpose.
Explanation. —If any dispute arises as to the primary object or principal business of any co-operative society referred to in clauses (cciv), (ccv) and (ccvi), a determination thereof by the Reserve Bank shall be final;
(ccvii) “central co-operative bank”, “39[***]”, “primary rural credit society” and “state co-operative bank” shall have the meaning respectively assigned to them in the National Bank for Agriculture and Rural Development Act, 1981;]
2[(ii) clauses (ff), (h) and (nb) shall be omitted;]
(d) for section 5A, the following section shall be substituted, namely:—
“5A. Act to override bye-laws, etc.—(1) The provisions of 3[this Act] shall have effect, notwithstanding anything to the contrary contained in the bye-laws of a co-operative society, or in any agreement executed by it, or in any resolution passed by it in general meeting, or by its Board of Directors or other body entrusted with the management of its affairs, whether the same be registered, executed or passed; as the case may be before or after the commencement of the Banking Laws (Application to Co-operative Societies Act, 1965 (23 of 1965).
(2) Any provision contained in the bye-laws, agreement or resolution aforesaid shall, to the extent to which it is repugnant to the provisions of 2[this Act,] become or be void, as the case may be.”;
(e) in section 6, in sub-section (1),—
(i) in clause (b), the words, “but excluding the business of a managing agent or secretary and treasurer of company” shall be omitted;
(ii) in clause (d), after the word “company”, the words “co-operative society” shall be inserted;
(iii) in clause (m), after the word “company”, the words “or co-operative society” shall be inserted;
4[(f) for section 7, the following section shall be substituted, namely: —
“7. Use of words “bank”, “banker” or “banking”. —(1)No co-operative society other than a co-operative bank shall use as part of its name or in connection with its business any of the words “bank”, “banker” or “banking”, and no co-operative society shall carry on the business of banking in India unless it uses as part of its name at least of such words.
(2) Nothing in this section apply to—
(a) a primary credit society, or
(b) a co-operative society formed for the protection of the mutual interest of co-operative banks or co-operative land mortgage banks, or
(c) any co-operative society, not being a primary credit society, formed by the employees of—
(i) a banking company or the State Bank of India or a corresponding new bank or a subsidiary bank of such banking company, State Bank of India or a corresponding new bank, or
(ii) a co-operative bank or a primary credit society or a co-operative land mortgage bank, insofar as the word “bank”, “banker” or “banking” appears as part of the name of the employer bank, or as the case may be, of the bank whose subsidiary the employer bank is.”];
5[(fi) in section 8, for the proviso, the following proviso shall be substituted, namely:
“Provided that this section shall not apply—
(a) to any such business as aforesaid which was in the course of being transacted on the commencement of clause (iii) of section 42 of the Banking Laws (Amendment) Act, 1983, so, however, that the said business shall be completed before the expiry of one year from such commencement; or
(b) to any business as is specified in pursuance of clause (o) of sub-section (1) of section 6;”;
(fii) in section 9, for the second proviso, the following provisos shall be substituted, namely:—
“Provided further that in the case of a primary credit society which becomes a primary co-operative bank after the commencement of clause (iii) of section 42 of the Banking Laws (Amendment) Act, 1983, the period of seven years shall commence from the day it so becomes a primary co-operative bank:
Provided also that the Reserve Bank may, in any particular case, extend the aforesaid period of seven years by such period as it may consider necessary where it is satisfied that such extension would be in the interests of the depositors of the co-operative bank.”];
(g) 6[sections 10, 10A, 7[10B, 10BB, 10C], and 10D] shall be omitted;
(h) for section 11, the following section shall be substituted, namely:—
“11. Requirement as to minimum paid-up capital and reserves. — (1) Notwithstanding any law relating to co-operative societies for the time being in force, no co-operative bank shall commence or carry on the business of banking in India unless the aggregate value of its paid-up capital and reserves is not less than one lakh of rupees:
Provided that nothing in this sub-section shall apply to—
(a) any such bank which is carrying on such business at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), for a period of three years from such commencement; or
(b) to a primary credit society which becomes a primary co-operative bank after such commencement, for a period of two years from the date it so becomes a primary co-operative bank or for such further period not exceeding one year, the Reserve Bank, having regard to the interests of the depositors of the primary co-operative bank, may think fit in any particular case to allow.
(2) For the purpose of this section, “value” means the real or exchangeable value and not the nominal value which may be shown in the books of the co-operative bank concerned.
(3) If any dispute arises in computing the aggregate value of the paid-up capital and reserves of any co-operative bank, a determination thereof by the Reserve Bank shall be final for the purposes of this section;]
(i) sections 12, !2A, 13 and 15 to 17 shall be omitted;
6[(j)) For section 18, the following section shall be substituted, namely: —
18. Cash reserve. —(1) Every co-operative bank, not being a State cooperative bank for the time being included in the Second Schedule to the Reserve Bank of India Act, 1934 (hereinafter referred to as a “scheduled State Co-operative Bank”), shall maintain in India by way of cash reserve with itself or by way of balance in a current account with the Reserve Bank or the State co-operative bank of the State concerned or by way of net balance in current accounts, or, in the case of a primary co-operative bank, with the central cooperative bank of the district concerned, or in one or more of the aforesaid ways, a sum equivalent to at least three per cent of the total of its demand and time liabilities in India, as on the last Friday of the second preceding fortnight and shall submit to the Reserve Bank before the fifteenth day of every month a return showing the amount so held on alternate Fridays during a month with particulars of its demand and time liabilities in India on such Fridays or if any such Friday is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881) at the close of business on the preceding working day.
Explanation. —In this section and in section 24—
(a) “liabilities in India” shall not include—
(i) the paid-up capital or the reserves or any credit balance in the profit and loss account of the co-operative bank;
(ii) any advance taken from a State Government, the Reserve Bank, the Development Bank, the Exim Bank, 7[the Reconstruction Bank,] 8[the National Housing Bank] the National Bank 9[the Small Industries Bank] or from the National Co-operative Development Corporation established under section 3 of the National Co-operative Development Corporation Act, 1962 (26 of 1962), by the bank;
(iii) in the case of a State or Central co-operative bank, also any deposit of money with it representing the reserves fund or any part thereof maintained with it by any other co-operative society within its area of operation, and in the case a Central co-operative bank, also an advance taken by it from the State co-operative bank of the State concerned;
(iv) in the case of a primary co-operative bank, also any advance taken by it from the State co-operative bank of the State concerned or the Central cooperative bank of the district concerned;
(v) in the case of any co-operative bank, which has granted an advance against any balance maintained with it, such balance to the extent of the amount outstanding in respect of such advance; and
(vi) in the case of any co-operative bank, the amount of any advance or other credit arrangement drawn and availed of against approved securities;
(b) “fortnight” shall mean the period from Saturday to the second following Friday, both days inclusive;
(c) “net balance in current accounts” shall, in relation to a co-operative bank, mean the excess, if any, of the aggregate of the credit balances in current account maintained by that co-operative bank with the State Bank of India or a subsidiary bank or a corresponding new bank, over the aggregate of the credit balances in current accounts held by the said banks with such co-operative bank;
(d) for the purpose of computation of liabilities, the aggregate of the liabilities of a co-operative bank to the State Bank of India, a subsidiary bank, a corresponding new bank, a Regional Rural bank, a banking company or any other financial institution notified by the Central Government in this behalf shall be reduced by the aggregate of the liabilities of all such banks and institutions to the cooperative bank;
(e) any cash with a co-operative bank or any balance held by a co-operative bank with another bank, shall not, to the extent such cash or such balances represents the balance in, or investment of, Agricultural Credit Stabilisation Fund of such co-operative bank, be deemed to be cash maintained in India.
(2) The Reserve Bank may, for the purposes of this section and section 24, specify from time to time, with reference to any transaction or class of transactions, that such transaction or transactions shall be regarded as liability in India of a co-operative bank, and, if any question arises to whether any transaction or class of transactions shall be regarded for the purposes of this section and section24, as liability in India of a co-operative bank, the decision of the Reserve Bank thereon, shall be final.”];
(k) for section 19, the following section shall be substituted, namely:—
“19. Restriction on holding shares in other co-operative societies. —No co-operative bank shall hold shares in any other co-operative society except to such extent and subject to such conditions as the Reserve Bank may specify in that behalf:
Provided that nothing contained in this section shall apply to—
(i) shares acquired through funds provided by the State Government for that purpose;
(ii) in the case of a Central co-operative bank, the holding of shares in the State co-operative bank to which it is affiliated;
(iii) in the case of a primary co-operative bank, the holding of shares in the Central co-perative bank to which it is affiliated or in the State cooperative bank of the State in which it is registered:
Provided further that where any shares are held by a co-operative bank in contravention of this section at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), the co-operative bank shall without delay report the matter to the Reserve Bank and shall, notwithstanding anything contained in this section, be entitled to hold the shares for such period and on such conditions as the Reserve Bank may specify”
10[(1) for section 20 of the principal Act, the following section shall be substituted, namely:
“20. Restrictions on loans and advances. — (1) No co-operative bank shall—
(a) make any loans or advances on the security of its own shares; or
(b) grant unsecured loans or advances—
(i) to any of its directors; or
(ii) to firms or private companies in which any of its directors is interested as partner of managing agent or guarantor or to individuals in cases where any of its directors is a guarantor; or
(iii) to any company in which the chairman of the Board of directors of the co-operative bank (where the appointment of a chairman is for a fixed term) is interested as its managing agent, or where there is no managing agent, as its chairman or managing director:
Provided that nothing in clause (b) shall apply to the grant of unsecured loans or advances—
(a) made by a co-operative bank—
(i) against bills for supplies or services made or rendered to government or bills of exchange arising out of bona fide commercial or trade transactions, or
(ii) in respect whereof trust-receipts are furnished to the co-operative bank;
(b) made by a primary co-operative bank to any of its directors or to any other person within such limits and on such terms and conditions as may be approved by the Reserve Bank in this behalf.
(2) Every co-operative bank shall, before the close of the month succeeding that to which the return relates, submit to the Reserve Bank a return in the prescribed form and manner showing all unsecured loans and advances granted by it to companies in cases [other than those in which the co-operative bank is prohibited under sub-section (1) to make unsecured loans and advances] in which any of its directors is interested as director or managing agent or guarantor.
(3) If, on examination of any return submitted under sub-section (2), it appears to the Reserve Bank that any loans or advances referred to in that subsection are being granted to the detriment of the interests of the depositors of the co-operative bank, the Reserve Bank may, by order in writing prohibit the co-operative bank from granting any such further loans or advances or impose such restrictions on the grant thereof as it thinks fit, and may by like order direct the co-operative bank to secure the re-payment of such loans or advance within such time as may be specified in the order”;
11[(m) in section 20A, in sub-section (1). —
(i) the words and figures “Notwithstanding anything to the contrary contained in section 293 of the Companies Act, 1956 (1 of 1956),” shall be omitted;
(ii) in clause (a), for the words “any of its directors”, the words “any of its past or present directors” shall be substituted;]
(n) in section 21, in sub-section (2), in clauses (c) and (d), for the words “any one company, firm, association of persons or individuals”, the words “any one party” shall be substituted;
(o) in section 22,—
(i) for sub-sections(1) and (2) the following sub-sections shall be substituted, namely:—
“(1) Save as hereinafter provided, no co-operative society shall carry on banking business in India unless—
(a) it is a primary credit society, or
(b) it is a co-operative bank and holds a licence issued in that behalf by the Reserve Bank, to such conditions, if any, as the Reserve Bank may deem fit to impose:
Provided that nothing in this sub-section shall apply to a co-operative society, not being a primary credit society or a co-operative bank carrying on banking business at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), for a period of one year from such commencement.
12[(2) Every co-operative society carrying on business as a co-operative bank at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965) shall before the expiry of three months from the commencement, every co-operative bank which comes into existence as a result of the division of any other co-operative society carrying on business as a co-operative bank, or the amalgamation of two or more co-operative societies carrying on banking business shall, before the expiry of three months from its so coming into existence, every primary credit society which becomes a primary co-operative bank after such commencement shall before the expiry of three months from the date on which it so becomes a primary co-operative bank and every co-operative society other than a primary credit society shall before commencing banking Business in India, apply in writing to the Reserve Bank for a licence under this section:
Provided that nothing in clause (b) of sub-section (1) shall be deemed to prohibit—
(i) a co-operative society carrying on business as a co-operative bank at the commencement of the Banking Law (Application to Co-operative Societies) Act, 1965 (23 of 1965); or
(ii) a co-operative bank which has come into existence as a result of the division of any other co-operative society carrying on business as a cooperative bank, or the amalgamation of two or more co-operative societies carrying on banking business at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965) or at any time thereafter; or
(iii) a primary credit society which becomes a primary Co-operative bank after such commencement,
from carrying on banking business until it is granted a licence in pursuance of this section or is, by a notice in writing notified by the Reserve Bank that the licence cannot be granted to it.]”
13[(ii) sub-section (3A) shall be omitted;
(iii) in sub-section (4) in clause (iii)the words, brackets, figures and letter “and sub-section (3A)” shall be omitted;]
22A Validation of licences granted by Reserve Bank to multi-State co-operative societies.– Notwithstanding anything contained in any law or, judgment delivered or decree or order of any court made,–
(a) no licence, granted to a multi-
14[(p) in section 23, —
(i) for sub-section (1), the following sub-section shall be substituted, namely:—]
“(1) Without obtaining the prior permission of the Reserve Bank, no co-operative bank shall open a new place of business or change otherwise than within the same city, town or village, the location of an existing place of business:
Provided that nothing in this sub-section shall apply to—
(a) the opening for a period not exceeding one month of temporary place of business within a city, town or village or the environs thereof within which the co-operative bank already has a place of business, for the purpose of affording banking facilities to the public on the occasion of an exhibition, a conference or a mela or any like occasion;
(b) the 15[opening or changing the location of branches] by a Central cooperative bank within the area of its operation”;
16(ii) after sub-section (4), the following sub-section shall be inserted, namely:—
“(4A) Any co-operative bank other than a primary co-operative bank requiring the permission of the Reserve Bank under this section shall forward its application to the Reserve Bank through the National Bank which shall give its comments on the merits of the application and sent it to the Reserve Bank:
Provided that the co-operative bank shall also send an advance copy of the application directly to the Reserve Bank.”];
17[(q) in section 24, —
(i) in sub-section (1) the words “After the expiry of two years from the commencement of this Act” shall be omitted;
(ii) for sub-section (2) and (2A), the following sub-sections shall be substituted, namely:—
“(2) In computing the amount for the purposes of sub-section (1),—
(a) any balances maintained in India by a co-operative bank in current account with the Reserve Bank or by way of net balance in current accounts, and in the case of a scheduled State Co-operative Bank, also the balance required under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934), to be so maintained,
(b) any balances maintained by a Central co-operative bank with the State co-operative bank of the State concerned, and
(c) any balances maintained by a primary co-operative bank with Central co-operative bank of the district concerned or with the State cooperative bank of the State concerned,
shall be deemed to be cash maintained in India.
(2A)(a) Notwithstanding anything contained in sub-section (1) or in sub-section (2), after the expiry of two years from the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965(23 of 1965), or of such further period not exceeding one year as the Reserve Bank, having regard to the interests of the co-operative bank concerned, may think fit in any particular case to allow: —
(i) a scheduled State co-operative bank, in addition to the average daily balance which it is or may be, required to maintain under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934), and
(ii) every other co-operative bank, in addition to the cash reserve which is required to maintain under section 18,
shall maintain in India, in cash, or in gold valued at a price not exceeding the current market price or in unencumbered approved securities valued at a price determined in accordance with such one or more of, or combination of, the following methods of valuation namely, valuation with reference to cost price, market price, book value or face value, as may be specified by the Reserve Bank from time to time, an amount which shall not, at the close of business on any day, be less than twenty-five per cent or such other percentage not exceeding four per cent as the Reserve Bank may, from time to time, by notification in the Official Gazette, specify, of the total of its demand and time liabilities in India, as on the last Friday of the second preceding fortnight.
(b) In computing the amount for the purpose of clause (a), the following shall be deemed to be cash maintained in India, namely: —
(i) any balance maintained by scheduled State co-operative bank with the Reserve Bank in excess of the balance required to be maintained by it under section 42 of the Reserve Bank of India Act, 1934 (2 of 1934);
(ii) any cash or balances maintained in India by a co-operative bank, other than a scheduled State co-operative bank, with itself or with the State co-operative bank of the State concerned, or in current account with the Reserve Bank or by way of net balance in current accounts and, in the case of a primary co-operative bank, also any balances maintained with the Central co-operative bank of he district concerned, in excess of the aggregate of the cash or balances required to be maintained under section 18;
(iii) any net balance in current accounts.
Explanation. —For the purposes of this sub-section—
(a) approved securities or a portion thereof, representing investment of monies of Agricultural Credit Stabilisation Fund of a co-perative bank shall not be deemed to be unencumber approved securities;
(b) in case a co-operative bank has taken an advance against any balance maintained with the State co-operative bank of the State concerned or with the Central co-operative bank of the district concerned, such balance to the extent to which it has been drawn against or availed of shall not be deemed to be cash maintained in India.
(c) for the purpose of clause (a), the market price of an approved security shall be the price as on the date of the issue of the notification or as on any earlier or later date as may be notified from time to time by the Reserve Bank in respect of any class or classes of securities;”
(iii) in sub-section (3) for the proviso, the following proviso shall be substituted, namely:—
“Provided that every co-operative bank, other than a primary cooperative bank, shall also furnish within the said period, a copy of the said return to the National Bank.”;
(iv) in sub-section (6), in clause (a), for the words “fourteen days”, the words “the thirty days” shall be substituted;]
18[(qq) after section 24, the following section shall be inserted, namely: —
“24A. Power to exempt. —Without prejudice to the provisions of section 53, the Reserve Bank may, by notification in the Official Gazette, declare that, for such period and subject to such conditions as may be specified in such notification the whole or any part of the provisions of section 18 or section 24, as may be specified therein, shall not apply to any co-operative bank or class of co-operative banks, with reference to all or any of the offices of such co-operative bank or banks, or with reference to the whole or any part of the assets and liabilities of such co-operative bank or banks.”]
(r) section 25 shall be omitted;
19[(ri) in the second proviso to section 26, for the expression “regional rural Bank” the expression “co-operative bank, other than a primary co-operative bank” shall be substituted;
(rii) in section 27, for sub-section (3)the following sub-section shall be substituted, namely:—
“(3) Every co-operative bank, other than a primary co-operative bank, shall submit a copy of the return which it submits to the Reserve Banks, under sub-section (1) also to the National Bank and the powers exercisable by the Reserve Bank under sub-section (2) may also be exercised by the National Bank in relation to co-operative banks, other than primary co-operative banks.]
(s) for sections 29 and 30, the following section shall be substituted namely:—
“29. Accounts and Balance Sheet. —(1) At the expiration of each year ending with the 30th days of June, 20[or at the expiration of a period of twelve months ending with such date as the Central Government may, by notification in the Official Gazette, specify in this behalf] every co-operative bank, in respect of all business transacted by it, shall prepare with reference to that year 20[or the period] a balance sheet and profit and loss account as on the last working day of the year 20[or the period] in the Forms set out in the Third Schedule as near there to as circumstances admit:
20[Provided that with a view to facilitating the transition from one period of accounting to another period of accounting under this sub-section, the Central Government may, by order published in the Official Gazette, make such provisions as it considers necessary or expedient for me preparation of, or for other matters relating to, the balance-sheet or profit and loss account in respect of the concerned year or period, as the case may be].
(2) The balance-sheet and profit and loss account shall be signed by the manager or the principal officer of the bank and where there are more than three directors of the bank, by at least three of those directors, or where there are not more than three directors, by all the directors.
(3) The Central Government, after giving not less than there months’ notice of its intention so to do by a notification in the Official Gazette, may from time to time by a like notification amend the Forms set out in the Third Schedule.”
21[(t) in section 31, —
(i) for the words “within three months” and “of three months’, the words “within six months” and “of six months” shall, respectively, be substituted;
(ii) for the second proviso, the following proviso shall be substituted, namely:
“Provided further that a co-operative bank, other than a primary cooperative bank, shall furnish such returns also to the National Bank.”;]
(u) sections 32 to 34 shall be omitted;
(v) in section 34A, sub-section (3) shall be omitted;
(w) in section 35,—
(i) in sub-section (1),—
(a) for the words and figures “section 235 of the Companies Act, 1956(1 of 1956)”, the words “any law relating to co-operative societies for the time being in force” shall be substituted;
22[(b) the following proviso shall be inserted at the end, namely: —
“Provided that the Reserve Bank may, if it considers it necessary or expedient so to do, cause an inspection to be made of a primary co-operative bank under this sub-section by one or more officers of a State co-operative bank in the State in which such primary cooperative bank is registered.”];
(ii) in sub-section (4), clause (b) shall be omitted.
23[(iii) after sub-section (4), the following sub-section shall be inserted, namely:—
“(4A) Without prejudice to the provisions of sub-section (4), the Reserve Bank may, if it considers it necessary or expedient so to do supply a copy of the report on any inspection or scrutiny to the State co-operative bank and the Registrar of co-operative societies of the State in which the bank which has been inspected or whose affairs have been scrutinised is registered.”];
24[(iv) in sub-section (6), for the expressions “regional rural banks’ and “regional rural bank”, wherever they occur, the expressions “co-operative banks other than primary cooperative bank” shall, respectively, be substituted.]
25[(v)] the Explanation shall be omitted;
(x) in section 35A, in sub-section (1), in clause (c), for the words “any banking company”, the words “the banking business of any co-operative bank” shall be substituted;
(y) section 35B shall be omitted;
26[(z) in section 36, in sub-section (1), —
(a) clause (b) shall be omitted;
(b) for clause (d), the following clause shall be substituted, namely:—
(d) at any time, if it is satisfied that for the reorganisation or expansion of co-operative credit on sound lines it is necessary so to do by an order in writing and on such terms and conditions as may be specified therein,—
(i) depute one or more of its officers to watch the proceedings at any meeting of the Board of directors of the co-operative bank or of any other body constituted by it and require the co-operative bank to give an opportunity to the officer so deputed to be heard at such meetings and to offer such advice on such matters as the officer may consider necessary or proper for the reorganisation and expansion of co-operative credit on sound lines, and also require such officer to send a report of such proceedings to the Reserve Bank;
(ii) appoint one or more of its officers to observe the manner in which the affairs of the co-operative bank or its offices or branches are being conducted and make a report thereon;”];
(za) in section 36A,—
(i) for sub-section (1), the following sub-section shall be substituted, namely:—
“(1) The provisions of section 11, section 18 and section 24 shall not apply to a co-operative bank which has been refused a licence under section 22 of whose licence has been cancelled under that section or which is or has been prohibited or precluded from accepting deposits by virtue of any order made under this Act or of any alteration made in its bye-laws.”;
(ii) after sub-section (2), the following sub-section shall be inserted, namely:—
“(3) Subject to the provisions of sub-sections (1) and (2), a co- operative society carrying on business as a primary co-operative bank at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), or a co-operative society which becomes a primary co-operative bank after such commencement shall, notwithstanding that it does not at any time thereafter satisfy the requirements of the definition of primary co-operative bank 27[in clause (ccv) of section 5], continue to be a primary co-operative bank within the meaning of this Act, and may, with the approval of the Reserve Bank and subject to such terms and conditions as the Reserve Bank may specify in that behalf, continue to carry on the business of banking.”;
28[(zaa)in section 35AD, sub-section (3) shall be omitted;”]
(zb)
40[Part II A except sections 36AAA, 36AAB and 36AAC], 29[Part IIC], Part III, except sub-sections (1), (2) and (3) of section 45,and Part IIIA except section 45W shall be omitted;
30[(zc) in section 46, —
(i) in sub-section (4) the word “or” occurring at the end of clause (i) and clause (ii) shall be omitted;
(ii) in clause (a) of the Explanation, after the words “includes a”, the words “co- operative society” shall be inserted;]
(zd) in section 47, the words brackets, figures and letters “sub-section (5) of section 36AA or” shall be omitted;
(ze) section 49 shall be omitted;
(zf) in section 49A, for the proviso, the following proviso shall be substituted, namely:—
“Provided that nothing contained in this section shall apply to—
(a) a primary credit society—
(b) any other co-operative society accepting such deposits at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965), for a period of one year from the date of such commencement; and
(c) any savings bank scheme run by the Government”;
(zg) sections 49B and 49C shall be omitted;
(zh) in section 50, the figures and letters “10,12A, 16″, “35B”, and “43A” shall be omitted;
(zi) section 51 shall be omitted;
(zj) in section 52,—
(i) in sub-section (2) the words, figures and letter “and the form in which official liquidator may file lists of debtors to the court jurisdiction under Part III or Part IIIA and the particulars which such lists may contain” shall be omitted;
(ii) sub-section (4) shall be omitted;
31[(zji) in section 54, after the expression “Reserve Bank”, wherever it occurs, the expression “or the National Bank” shall be inserted;]
(zk) For section 65 and the First Schedule, the following section shall be substituted, namely:—
“55, Act 18 of 1891 and Act 46 of 1949 to apply in relation to co-operative banks.—(1) The Bankers’ Books Evidence Act, 1891 shall apply in relation to a co-operative bank as it applies in relation to a bank as defined in section 2 of that Act.
(2) The Banking Companies (Legal Practitioners’ Clients’ Accounts) Act, 1949 shall apply in relation to a co-operative bank as it applies in relation to a banking company as defined in section 2 of that Act.”;
(zl) for the third Schedule and the Fourth Schedule, the following Schedule shall be substituted, namely:—
(See section 55)
AMENDMENTS
|
Year |
No. |
Short title |
Amendments |
|
1 |
2 |
3 |
4 |
|
1934 |
2 |
The reserve Bank |
(1) In section 17, to clause (15A), thefollowing shall be added, namely :—”and under the Banking Companies Act, 1949.” (2) (a) Section 18 shall be renumbered as sub- section (1) of that section and in sub-section (1) as so renumbered,— (i) in clause (3) after the words “of that section”, the following worlds shall be added, namely: “or when the loan or advance, is made to banking company as defined in the Banking Companies Act, 1949, against such other form of security as the Bank may consider sufficient”;(ii) for the worlds “under thissection” wherever the occur, thewords “under this sub-section” shall be substituted;
(b) after sub-section (1) as so
renumbered, the following sub-
section shall be inserted,
namely:—
“(2) Where a banking company to |
| which a loan or advance has been made under the provisions of clause (3) of sub-section (1) is wound up, any sums due to the Bank in respect of such loan or advance, shall subject only to the claims, if any, of any other banking company in respect of any prior loan or advance made by such banking company against any security, be a first charge on the assets of the banking company.”(3) In section 42, for sub-section (6) the following sub-section shall be substituted, namely:—“(6) The bank shall, save as hereinafter provided, by notification in the Gazette of India,—(a) direct the inclusion in the Second Schedule of any bank not already so included which carries on the business of banking in any Province of India and which—(i) has a paid-up capital and reserves of an aggregate value of not less than five lakhs of rupees, and(ii) satisfies the Bank that its affairs are not being conducted in a manner detrimental to the interests of its depositors; and(iii) is a company as defined in clause (2) of section 2 of the Indian Companies Act, 1913 (7 of 1913) or a corporation or a company incorporated by or under any law in force in any place outside the Provinces of India;
(b) direct the exclusion from that Schedule of any scheduled bank—
(i) the |
|||
| aggregate value of whose paid-up capital and reserves becomes at any time less than five lakhs of rupees, or(ii) which is, in the opinion of the Bank after making an inspection under section 35 of the Banking Companies Act, 1949, conducting its affairs to the detriment of the interests of its depositors, or(iii) which goes into liquidation or otherwise ceases to carry on banking business:Provided that the Bank may, on application of the scheduled bank concerned and subject to such conditions, if any, as it may impose, defer the making of a direction under sub-clause (i) or sub-clauses (ii) of clause (b) for such period as the bank considers reasonable to give the scheduled bank and opportunity of increasing the aggregate value of its paid-up capital and reserves to not less than five lakhs of rupees or, as the case may be, of removing the defects in the conduct of its affairs;(c) alter the description is that Schedule whenever any scheduled bank changes its name.Explanation—In this sub-section the expre-ssion ‘value’ means the real or exchangeable value and not the nominal value which may be shown in the books of the bank concerned; and if any dispute arises in computing the aggregate value of the paid up capital and reserves of a bank, a determination thereof by the Bank shall be final for the purposes of this sub-section. |
Repeals.—[Rep. by Repealing and Amending Act, 1957 (36 of 1957), Section 52 and Schedule 1]
(see section 29)
FORM A
Form of Balance-sheet
| CAPITAL AND LIABILITIES |
PROPERTY AND ASSETS |
|
Rs. P. Rs. P.
|
Rs. P. Rs. P. |
| 1. CAPITAL: (i) AuthorisedCapital…..shares of Rs…..each …..shares of Rs….. each ………………… (ii) Subscribed Capital …..shares of Rs….. each …..shares of Rs….. each____________(iii) Amount called upOn…..shares of Rs….. eachless class unpaid On….. shares of Rs…..
each less calls unpaid
of (iii) above, held by
(a) Individuals
(b) Co-operative institutions
(c) State Government
|
1. CASH:In hand and with Reserve Bank31[National Bank] State Bank ofIndia, State Co-operative Bankand Central Co-operative Bank2. BALANCES WITH OTHERBANKS:
(i) Current deposits
(ii) Savings bank deposits
(iii) Fixed deposits
3. MONEY AT CALL AND
SHORT NOTICE:
4. Investments:
(i) In Central and State
Government securities
(at book value) |
|
___________ __________ |
Face value Rs. Market value Rs.(ii) Other Trustee securities(iii) Shares in co-operativeinstitutions otherthan in item (5) below(iv) other investments (to be specified)
|
| 2. RESERVE FUND AND OTHER RESERVES(i) Statutory Reserve(ii) Agricultural (Creditstabilization fund)(iii) Building Fund (iv) Dividend Equalization Fund
(v) Special Bad Debts Reserve
(vi) Bad and Doubtful Debts
Reserve
(vii) Investment and Depreciation
Reserve
|
5. INVESTMENT OUT OF THE PRINCIPAL SUB-SIDIARY STATEPARTNERSHIP FUNDSIn shares of:(i) Central Co-operative Banks (ii) Primary agricultural
credit societies
(iii) Other societies
6. ADVANCES : |
| (viii) Other Funds and Reserves (to be specified) |
(i) Short-term loans, cash credits, overdrafts andbills discountedOf which secured against:(a) Government and other |
| 3. PRINCIPAL/SUBSIDIARY STATE PARTNERSHIPFUND ACCOUNT:For share capital of:(i) Central co-operative banks(ii) Primary agricultural creditsocieties(iii) other societies
|
approved securities (b) Other tangible securities @Of the advances, amount duefrom individualsOf the advances, amount overdueConsidered bad and doubtfulof recovery(ii) Medium-term loans Of which secured against: |
| 4. DEPOSITS AND OTHER ACCOUNTS:(i) Fixed deposits*(a) Individuals**(b) Central co-operative banks(c) Other societies(ii) Savings Bank Deposits(a) Individuals** (b) Central co-operative
banks
|
(a) Government and other approved securities(b) Other tangible securities @Of the advances, amountdue from individualsOf the advances, amount overdueconsidered bad and doubtfulof recovery (ii) Long-term loans
Of which secured against |
| (c) Other societies (iii) Current deposits(a) individuals**(b) Central co-operativebank(c) Other societies(iv) Money at call and short notice____________ |
(a) Government and otherapproved securities(b) Other tangible securities @ |
| 5. BORROWINGS: (i) From the Reserve Bank ofIndia 32[the National Bank]State/Central co-operative Bank:(a) Short-term loans,cash, credits and overdrafts(A) Government and otherapproved secu rities (B) Other tangible securities @
(b) Medium term loans
Of which secured against
(A) Government and other
approved securities
(B) Other tangible Securities @
|
Of the advances, amount due from individualsOf the advances, amountover dueConsidered bad and doubtfulof recovery____________ 7. INTEREST RECEIVABLE
Of which overdue
Considered bad and doubtful
of recovery |
| (c) Long-term loansOf which securedagainst:(A) Government and otherapproved securities(B) Other tangible securities @(ii) From the State Bank
of India
(a) Short-term loans, cash-
credits and over drafts
Of which secured against:
(A) Government and other
approved securities
(B) Other tangible securities @
(b) Medium term- loans
Of which secured against:
(A) Government and other
approved securities:
(B) Other tangible securities @
(c) Long-term loans:
Of which secured against:
(A) Government and other
approved securities
(B) Other tangible securities @
|
8. BILLS RECEIVABLEBEING BILLS FORCOLLECTIONAs per contra _____________
9. BRANCH ADJUST-
MENT ___________
10. PREMISES LESS _____________
DEPRECIATION
11. FURNITURE AND
FIXTURES LESS
DEPRECIATION _____________
12. OTHER ASSETS
(to be specified)
13. NON-BANKING ASSETS
ACQUIRED IN SATIS-
FACTION OF CLAIMS
(standing mode of
valuation) _____________
|
| (iii) From the State Government(a) Short-term loansOf which secured against:(A) Government and otherapproved securities(B) Other tangible securities @(d) Medium term loans
Of which secured against:
(A) Government and other approved
securities
(B) Other tangible securities @
(c) Long-term loans
Of which secured against:
(A) Government and other
approved securities
(B) Other tangible securities @
(iv) Loans from other sources
(source and security to
be specified rule)
|
14. PROFIT AND LOSS |
| 6. BILL FOR COLLECTIONBEING BILLSRECEIVABLEAs per contra ____________7. BRANCH ADJUSTMENTS ____________8. OVERDUE INTEREST RESERVE____________ 9. INTEREST PAYABLE
____________
10. OTHER LIABILITIES
(i) Bills payable
11. PROFIT AND LOSS
Profit as per last
balance-sheet
Less appropriations
Add profit for the year brought from
the Profit and Loss Account
____________
Total
_________________
|
___________
|
| CONTINGENT LIABILITIES (i) Outstanding liabilities for guarantees issued(ii) Others ___________Total ___________ |
____________ Total ____________ |
FORM B
Form of Profit and Loss Account
Profit and Loss Account for the year ended—
| EXPENDITURE | INCOME |
| Rs. P. Rs. P. | Rs. P. Rs. P. |
| 1. Interest on deposits, borrowings, etc. |
2. Salaries and allowances and provident fund
3. Directors and local committee members’ fees
and allowances
4. Rent, taxes, insurance, lighting, etc.
5. Law charges
6. Postage, telegrams and telephonic charges
7. Auditor’s fees
8. Depreciation on and repairs in property
1. Interest and discount
2. Commission, exchange and brokerage
3. Subsidies and donations
4. Income from non-banking assets and profit from
sale of or dealing with such assets
5. Other receipts
6. Loss (if any)9. Stationery, printing and advertisement, etc.
10. Loss from sale of or dealing with non-banking
assets
11. Other expenditure
12. Balance of profit ___________
Total ___________
____________
Total ____________
The Third Schedule A
(See section 29)
33[Form A
Form of Balance Sheet
| Balance Sheet of________________(here enter name of the Banking Company) | |||
| Balance Sheet as on 31st March______________(Year) | |||
| (000’somitted) | |||
| Capital and Liabilities | Schedule | As on 31-3-…. current year) |
As on 31-3-…. (previous year) |
| Capital Reserves and surplusDeposits |
|||
Borrowings
Other liabilities and provisions1
23
4
5
__________ __________
Total __________ __________ASSETS
Cash and Balances with ReserveBank of India
Balances with Banks and money at
call and short notice
Investments
Advances
Fixed Assets
Other Assets
Total
Contingent liabilities 12 Bill for collection
6
7
8
9
10
11
__________ ___________
__________ ___________
SCHEDULE I
Capital
| As on 31-3…. (current year) |
As on 31-3…. (previous year) |
|
| I. For Nationalised Banks Capital (Fully owned by CentralGovernment) |
||
II. For Banks incorporated outside India
Capital
(i) (The amount brought in by banks
by way of Start-up capital as prescribed
by RBI should be shown under this head)
(ii) Amount of deposit kept with the RBI
Under section 11(2) of the Banking
Regulation Act, 1949.
__________ __________
Total ____________ ___________
III. For other BanksAuthorised Capital (Shares of Rs…..
each)
Issued Capital (Shares of Rs….. each)
Subscribed Capital (Shares of Rs….. each)
Called-up Capital (Shares of Rs….. each)
Less : Calls unpaid
Add : Forfeited shares
Schedule 3A – I.
SCHEDULE I
Capital
| As on 31-3…. (current year) |
As on 31-3…. (previous year) |
|
| I. For Nationalised Banks Capital (Fully owned by CentralGovernment) |
||
II. For Banks incorporated outside India
Capital
(i) (The amount brought in by banks
by way of Start-up capital as prescribed
by RBI should be shown under this head)
(ii) Amount of deposit kept with the RBI
Under section 11(2) of the Banking
Regulation Act, 1949.
__________ __________
Total ____________ ___________
III. For other BanksAuthorised Capital (Shares of Rs…..
each)
Issued Capital (Shares of Rs….. each)
Subscribed Capital (Shares of Rs….. each)
Called-up Capital (Shares of Rs….. each)
Less : Calls unpaid
Add : Forfeited shares
Schedule 3A – II.
SCHEDULE 2
Reserves and Surplus
| As on 31-3…. (current year) |
As on 31-3…. (previous year) |
|
| I. Statutory ReservesOpening Balance | ||
Additions during the year
Deductions during the year
II. Capital Reserves
Opening Balance
Additions during the year
Deductions during the year
III. Share premium
Opening Balance
Additions during the year
Deductions during the year
IV. Revenue and other Reserves
Opening Balance
Additions during the year
Deductions during the year
V. Balance of Profit and Loss Account
__________ __________
Total (I, II, III, IV and V) __________ __________
Schedule 3A – III.
SCHEDULE 3
Deposits
| As on 31-3…. (current year) |
As on 31-3…. (previous year) |
|
| A.I. Demand Deposits(i) From Banks | ||
(ii) From others
II. Savings Bank Deposits
III. Term Deposits
(i) From Banks
(ii) From others
___________ ___________
Total (I, II, III) ___________ ___________
B. (i) Deposits of branches in India
(ii) Deposits of branches outside India
___________ ___________
Total ___________ ___________
Schedule 3A – IV.
SCHEDULE 4
Borrowings
| As on 31-3…. (current year) |
As on 31-3…. (previous year) |
|
| I. Borrowing in India(i) Reserve Bank of India | ||
(ii) Other Banks
(iii) Other institutions and agencies
II. Borrowings outside India
___________ ___________
Total: (I and II) ___________ ___________
Secured borrowings included in 1 and
II above—Rs.
Schedule 3A – IX.
SCHEDULE 9
Advances
| As on 31-3…. (current year) |
As on 31-3…. (previous year) |
|
| A. (i) Bills purchased and discounted(ii) Cash credits, overdrafts and loans | ||
repayable on demand
(iii) Term loans
___________ ___________
Total: ___________ ___________
B. (i) Secured by tangible assets
(ii) Covered by Bank/Government
Guarantees
(iii) Unsecured
Total: ___________ ___________
C.I. Advances in India
(i) Priority sectors
(ii) Public sector
(iii) Banks
(iv) Others
Total: ___________ ___________
II. Advances Outside India
(i) Due from banks
(ii) Due from others
(a) Bills purchased and discounted
(b) Syndicated loans
(c) Others
Total: ___________ ___________
___________ ___________
Grand Total; (C.I. & C.II) ___________ ___________
Schedule 3A – V.
SCHEDULE 5
Other Liabilities and Provisions
| As on 31-3…. (current year) |
As on 31-3…. (previous year) |
|
| I. Bills payable | ||
II. Inter-office adjustments (net)
III. Interests accrued
IV. Others (Including provisions)
___________ ___________
Total: ___________ ___________
Schedule 3A – VI.
SCHEDULE 6
Cash and Balances with Reserve Bank of India
| As on 31-3…. (current year) |
As on 31-3…. (previous year) |
|
| I. Cash in hand(Including foreign currency notes) | ||
II. Balance with Reserve Bank of India
(i) in Current Account
(ii) in other Accounts
___________ ___________
Total: ___________ ___________
(I and II)
Schedule 3A – VII.
SCHEDULE 7
Balances with banks and Money at Call and short Notice
| As on 31-3…. (current year) |
As on 31-3…. (previous year) |
|
| I. In India(i) Balances with banks | ||
(a) In Current Accounts
(b) In Other Deposit Accounts
(ii) Money at call and short notice
(a) With banks
(b) With other institutions
___________ ___________
Total: ___________ ___________
(I and II)
II. Outside India
(i) in Current Accounts
(ii) in Other Deposit Accounts
(iii) Money at call and short notice
___________ ___________
Total: ___________ ___________
(I, II and III)
___________ ___________
Grant Total: ___________ ___________
(I and II)
Schedule 3A – VIII.
SCHEDULE 8
Investments
| As on 31-3…. (current year) |
As on 31-3…. (previous year) |
|
| I. Investments in India in | ||
(i) Government Securities
(ii) Other approved securities
(iii) Shares
(iv) Debentures and Bonds
(v) Subsidiaries and/or joint ventures
(vi) Others (to be specified)
_____________ _____________
Total: _____________ _____________
II. Investments outside India in
(i) Government securities (Including local
authorities)
(ii) Subsidiaries and/or joint ventures abroad
(iii) Other investments (to be specified)
___________ ___________
Total: ___________ ___________
Grand Total (I and II)
Schedule 3A – X.
SCHEDULE 10
Fixed Assets
| As on 31-3…. (current year) |
As on 31-3…. (previous year) |
|
| I. PremisesAt cost as on 31st March of the preceding year | ||
Additions during the year
Deductions during the year
Depreciation to date
II. Other Fixed Assets (including furniture and
fixtures)
At cost as on 31st March of the preceding year
Additions during the year
Deductions during the year
Depreciation to date
___________ ___________
Total: (I and II) ___________ ___________
Schedule 3A – XI.
SCHEDULE 11
Other Assets
| As on 31-3…. (current year) |
As on 31-3…. (previous year) |
|
| I. Inter-office adjustment (net) | ||
II. Interest accrued
III. Tax paid in advance/tax deducted at source
IV. Stationery and stamps
V. Non-banking assets acquired
in satisfaction of claims
VI. Others*
_____________ _____________
Total: ___________ ___________
Schedule 3A – XII.
SCHEDULE 12
Contingent Liabilities
| As on 31-3…. (current year) |
As on 31-3…. (previous year) |
|
| I. Claims against the bank not acknowledged as debts |
||
II. Liability for partly paid investments
III. Liability on account of outstanding forward exchange contracts
IV. Guarantees given on behalf of constituents
(a) In India
(b) Outside India
V. Acceptances, endorsements and other obligations
VI. Other items for which the bank is contingently liable
___________ ___________
Total: ___________ ___________
FORM ‘B’
Form of Profit and Loss Account for the year ended 31st March (year)
| Schedule No. |
Year ended 31-3 ….. (current year) |
Year ended 31-3 ….. (previous year) |
|
| I. IncomeInterest earned 13 | |||
Other Income 14
___________ ___________
Total: ___________ ___________
II. Expenditure
Interest expended 15
Operating expenses 16 Provisions and contingencies
___________ ___________
Total: ___________ ___________
III. Profit/Loss
Net Profit/Loss (-) for the year
Profit/Loss (-) brought forward
___________ ___________
Total: ___________ ___________
IV. Appropriations
Transfer to statutory reserves
Transfer to other reserves
Transfer to Government/proposed dividend
Balance carried over to balance sheet
___________ ___________
Total: ___________ ___________
Schedule 3A – XIII.
SCHEDULE 13
Interest Earned
| Year ended on 31-3 …….. (current year) |
Year ended on 31-3 ………. (previous year) |
|
| I. Interest/discount on advance/bills | ||
II. Income on investments
III. Interest on balances with Reserve Bank
of India and other inter-bank funds
IV. Others
___________ ___________
Total: ___________ __________
Schedule 3A – XIV.
SCHEDULE 14
Other Income
| Year ended on 31-3 …….. (current year) |
Year ended on 31-3 ………. (previous year) |
|
| I. Commission, exchange and brokerageII. Profit on sale of investments | ||
Less : Loss on sale of investments
III. Profit on revaluation of investments
Less : Loss on revaluation of investments
IV. Profit on sale of land, buildings and other assets
Less : Loss on sale of land, buildings and other assets
V. Profit on exchange transactions
Less : Loss on exchange transactions
VI. Income earned by way of dividends etc.
from subsidiaries/companies and/or joint
ventures abroad/in India
VII. Miscellaneous Income
___________ ___________
Total: ___________ ___________
Schedule 3A – XV.
SCHEDULE 15
Interest Expended
| Year ended on 31-3 …….. (current year) |
Year ended on 31-3 ………. (previous year) |
|
| I. Interest on deposits | ||
II. Interest on Reserve Bank of India/
Inter-back borrowings
III. Others
___________ ___________
Total: ___________ ___________
Schedule 3A – XVI.
SCHEDULE 16
Operating Expenses
| Year ended on 31-3 …….. (current year) |
Year ended on 31-3 ………. (previous year) |
|
| I. Payments to and provisions for employees | ||
II. Rent, taxes and lighting
III. Printing and stationery
IV. Advertisement and publicity
V. Depreciation on Bank’s property
VI. Director’s fees, allowances and expenses
VII. Auditors’ fees and expenses (Including branch auditors)
VIII. Law charges
IX. Postages. Telegrams, Telephones, etc.
X. Repairs and maintenance
XI. Insurance
XII. Other expenditure
___________ ___________
Total: ___________ ___________
1[THE FOURTH SCHEDULE
[See section 45D(2)]
List of Debtors
1. The official liquidator shall from time to time submit list of debtors to the High Court, each list being verified by an affidavit.
2. Every such list shall contain the following particulars:
(a) names and addresses of the debtors;
(b) amount of debt due to the banking company by each debtor;
(c) rate of interest, if any, and the date up to which such interest has been calculated in the case of each debtor;
(d) description of papers, writings, and documents, if any, relating to each debt;
(e) relief or reliefs claimed against each debtor.
3. (a) In every such list, the official liquidator shall distinguish between the debts for which the banking company holds and security other than a personal security and the debts for which no security or only a personal security is given;
(b) In the case of secured debts, particulars of the securities claimed by the ban king company, and whenever possible their estimated value, and the names and addresses of person or persons, if any, having an interest in the securities or the right of redemption therein;
(c) In case the debt is guaranteed by any person or persons, the name and address of the guarantor or guarantors with particulars as to the extent to which the debt is guaranteed and description of documents, papers or writings in support of such guarantee.
4. If the debtor is adjudged insolvent either before or after he has been included in any such list, but before such list is settled, the name and address of the assignee or the receiver of his estate, as the case may be, should be stated in, or added to, the list.
5. If the original debtor dies either before or after he has been included in any such list, but before such list is settled, there shall be substituted in his place the names and addresses of his legal representatives as far as the official liquidator is able to ascertain.]
——————–
1. Inserted by Act 58 of 1968, Section 22 w.e.f. 1-2-1969.
1[THE FIFTH SCHEDULE
(See section 36AG)
Principles of Compensation
1. The compensation to be given under section 36AG shall be an amount equal to the value of the assets of the acquired bank as on the day immediately before the appointed day, computed in accordance with the provisions of Part I of this Schedule less the total amount of liabilities thereof computed in accordance with the provisions of Part II of this Schedule.
Part I-Assets
For the purposes of this Part “assets” means the total of the following: —
(a) the amount of cash in hand and with the Reserve Bank and the State Bank of India (including foreign currency notes which shall be converted at the market rate of exchange);
(b) the amount of balances with any bank, whether on deposit or current account, and money at call and short notice, balance held outside India being converted at the market rate of exchange:
Provided that any balance which are not realisable in full shall be deemed to be debts and valued accordingly; –
(c) the market value, as on the day immediately before the appointed day, of any securities, shares debentures, bonds and other investments, held by the bank concerned.
Explanation.—For the purposes of this clause,—
(i) securities of the Central and State Governments [other than the securities specified in sub-clauses (ii) and (iii) of this Explanation] maturing for redemption, within five years from the appointed day shall be valued at the face value or the market value, whichever is higher;
(ii) securities of the Central Government, such as Post Office Certificates and Treasury Savings Deposit Certificates and any other securities or certificates issued or to be issued under the Small Savings Scheme of the Central Government, shall be valued at their face value or the encashable value of the market value, as on the day immediately before the appointed day, whichever is higher;
(iii) where the market value of any Government security such as the zamindari abolition bonds or other similar security in respect of which the principal is payable in instalment, is not ascertain able or is, for any reason, not considered as reflecting the fair value thereof or as otherwise appropriate, the security shall be valued at such an amount as is considered reasonable having ‘ regard to the instalments of principal and interest remaining to be paid, the period during which such instalments are payable, the yield of any security, issued by the Government to which the security pertains and having the same or approximately the same maturity, and other relevant factors;
(iv) where the market value of any security, share, debenture, bond or other investment is not considered reasonable by reason of its having been affected by abnormal factors, the investment may be valued on the basis of its average market value over any reasonable period;
(v) where the market value of any security, share, debenture, bond or other investment is not ascertainable, only such value, if any, shall be taken into account as is considered reasonable having regard to the financial position of the issuing concern, the dividend paid by it during the preceding five years and other relevant factors;
(d) the amount of advances (including loans, cash, credits, overdrafts, bills purchased and discounted), and other debts, whether secured or unsecured, to the extent to which they are reasonably considered recoverable, having regard to the value of the security, if any, the operations on the account, the reported worth and respectability of the borrower, the prospects of realisation and other relevant considerations;
(e) the value of any land or buildings;
(f) the total amount of premia paid, in respect of all leasehold properties, reduced in the case of each such premium by an amount which bears to such premium the same proportion as the expired term of the lease in respect of which such premium shall have been paid bears to the total term of the lease;
(g) the written down value as per books, or the realisable value, as may be considered reasonable, of all furniture, fixture and fittings;
(h) the market or realisable value, as may be a appropriate, of the other assets appearing on the books of the bank, no value being allowed for capitalised expenses, such as share selling commission, organisational expenses and brokerage, losses incurred and similar other items.
Part II—Liabilities
For the purpose of the Part “liabilities” means the total amount of all outside liabilities existing on the appointed day, and all contingent liabilities which the Central Government or the transferee bank may reasonably be expected to be required to be out of its own resources on or after the appointed day and where the acquired bank is a banking company incorporated outside India, includes the liabilities of the offices and branches in India of the acquired bank to its offices and branches outside India.
2. If the acquired bank is not incorporated in India, the assets or, as the case may be, the liabilities of the bank shall be, for the purposes of Part 1 and Part 11, and subject to the other provisions therein, the assets and liabilities of the offices of the bank situated in India.
COMPENSATION PAYABLE TO SHAREHOLDERS
3. Every shareholder of the acquired bank to whom the compensation is payable, shall be given such amount as compensation, as bears to the total compensation, calculated in accordance with the provisions of paragraph 1, the same proportion as the amount of paid-up capital of the shares held by the shareholder bears to the total-up capital of the acquired bank.
CERTAIN DIVIDENDS NOT TO BE TAKEN INTO ACCOUNT
4. No separate compensation shall be payable for any profits or any dividends in respect of any period immediately preceding the appointed day, for which, in the ordinary course, profits would have been transferred or dividend declared after the appointed day.]
——————–
1. Inserted by Act 58 of 1968, Section 22 w.e.f. 1-2-1969.
An Act to provide legal recognition for transactions carried out by means of electronic date interchange and other means of electronic communication, commonly referred to as “electronic commerce”, which involve the use of alternative to paper-based methods of communication and storage of information to facilitate electronic filing of documents with the Government agencies and further to amend the Indian Penal Code, the India Evidence Act, 1872, the Banker’s Books Evidence Act, 1891 and the Reserve Bank of India Act, 1934 and for matters connected therewith or incidental thereto;
WHEREAS the General Assembly of the United Nations by resolution A/RES/ 51/162, date 30th January 1997 has adopted the Model Law on Electronic Commerce adopted by the United Nations Commission on International Trade Law;
AND WHREAS the said resolution recommends, inter alia, that all States give favourable consideration to the said Model Law when they enact or revise their laws, in view of the need for uniformity of the law applicable to alternatives to paper based methods of communication and storage of information;
AND WHEREAS it is considered necessary to give effect to the said resolution and to promote efficient delivery of Government services by means of reliable electronic records;
BE it enacted by Parliament in the Fifty-first Year of the Republic of India as follows:-
(1) This Act may be called the Information Technology Act, 2000.
(2) It shall extend to the whole of India and, save as otherwise provided in this Act, it applies also to any or contravention thereunder committed outside India by any person.
(3) It shall come into force on such date as the Central Government may, by notification, appoint and different dates may be appointed for different provisions of this Act and any reference in any such provision to the commencement of this Act shall be construed as a reference to the commencement of that provision.
(4) Nothing in this Act shall apply to-
(a) a negotiable instrument as defined in section 13 of the Negotiable Instruments Act, 1881 (26 of 1881);
(b) a power-of-attorney as defined in section 1A of the Powers-of-Attorney Act, 1882 (7 of 1882);
(c) a trust as defined in section 3 of the Indian Trusts Act, 1882 (2 of 1882);
(d) a will as defined in clause (h) of section (2) of the Indian Succession Act, 1925 (39 of 1925), including any testamentary disposition by whatever name called;
(e) any contract for the sale or conveyance of immovable property or any interest in such property;
(f) any such class of documents or transactions as may be notified by the Central Government in the Official Gazette.
(1) In this Act, unless the context otherwise requires,- (a) “access”, with its grammatical variation and cognate expressions, means gaining entry into, instructing or communicating with the logical, arithmetical or memory function resources of a computer, computer system or computer network;
(b) “addressee” means a person who is intended by the originator to receive the electronic record but does not include any intermediary;
(c) “adjudicating officer” means an adjudicating officer appointed under sub-section (1) of section 46;
“affixing digital signature”, with its grammatical variations and cognate expressions means adoption of any methodology or procedure by a person for the purpose of authenticating an electronic record by means of digital signature;
“appropriate Government ” means as respects any matter- enumerated in List II of the Seventh Schedule to the Constitution;
relating to any State law enacted under List III of the Seventh Schedule to the Constitution,
the State Government and in any other case, the Central Government;
“asymmetric crypto system” means a system of a secure key pair consisting of a private key for creating a digital signature and a public key to verify the digital signature;
“Certifying Authority” means a person who has been granted a licence to issue a Digital Signature Certificate under section 24;
“certification practice statement” issued by a Certifying Authority to specify the practices that the Certifying Authority employs in issuing Digital Signature Certificates;
“computer” means electronic, magnetic, optical or other high-speed date processing device or system which performs logical, arithmetic and memory functions by manipulations of electronic, magnetic or optical impulses, and includes all input, output, processing, storage, computer software or communication facilities which are connected or relates to the computer in a computer system or computer network;
“computer network” means the inter-connection of one or more computers through-
(i) the use of satellite, microwave, terrestrial lime or other communication media; and
(ii) terminals or a complex consisting of two or more interconnected computers whether or not the interconnection is continuously maintained;
“computer resources” means computer, computer system, computer network, data, computer database or software;
“computer system” means a device or collection of devices, including input and output support devices and excluding calculators which are not programmable and capable being used in conjunction with external files which contain computer programmes, electronic instructions, input data and output data that performs logic, arithmetic, data storage and retrieval, communication control and other functions;
“Controller” means the Controller of Certifying Authorities appointed under sub-section (1) of section 17’
“Cyber Appellate Tribunal” means the cyber Regulations Appellate Tribunal established under sub-section (1) of section 48;
“data” means a representation of information, knowledge, facts, concepts or instruction which are being prepared or have been prepared in a formalised manner, and is intended to be processed, is being processed or has been processed in a computer system or computer network, and may be in any form (including computer printouts magnetic or optical storage media, punched cards, punched tapes) or stored internally in the memory of the computer.
“digital signature” means authentication of any electronic record by a subscriber by means of an electronic method or procedure in accordance with the provisions of section 3;
“Digital Signature Certificate ” means a Digital Signature Certificate issued under sub-section (4) of section 35;
“electronic from”, with reference to information. Means, any information generated, sent, received or stored in media, magnetic, optical, computer memory, micro film, computer generated micro fiche or similar device;
“Electronic Gazette” means Official Gazette published in the electronic form;”electronic record” means date, record or date generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro fiche;
“function”, in relation to a computer, includes logic, control, arithmetical process, deletion, storage and retrieval and retrieval and communication or telecommunication from or within a computer;
“information’ includes data, taxt, images, sound, voice, codes, computer programmes, software and databases or micro film or computer generated micro fiche;
“intermediary” with respect to any particular electronic message, means any person who on behalf of another person receives, stores or transmits that message or provides any service with respect to that message;
“key pair”, in an asymmetric crypto system, means a private key and its mathematically related public key., which are so related that the public key can verify a digital signature created by the private key;
“law” includes any Act of Parliament or of a State Legislature, Ordinances promulgated by the President under article 240, Bills enacted as President’s Act under sub-clause (a) of clause (1) of article 375 of the Constitution and includes rules, regulations, bye-laws and order issued or made thereunder;
“licence” means a licence granted to a Certifying Authority under section 24;
(za) “originator” means a licence granted to a Certifying Aauthority under section 24;
(zb) “prescribed” means prescribed by rules made under the Act;
(zc) “private key” means the key of a key pair used to create a digital signature;
(zd) “public key” means the key of a key pair used to verify a digital
signature and listed in the Digital Signature Certificate;
(ze) “secure system” means computer hardware, software and procedure that-
(a) are reasonably secure from unauthorised access and misuses;
(b) provide a reasonable level of reliability and correct operation;
(c) are reasonably suited to performing the intended functions; and
(d) adhere to generally accepted security procedures;
(zf) “security procedure” means the security procedure prescribed under section 16 by the Central Government;
(zg) “subscriber” means a person in whose name the Digital Signature Certificate is issued;
(zh) “verify”, in relation to a digital signature, electronic record or public key, with its grammatical variations and cognate expressions, means to determine whether- (a) the initial electronic record was affixed with the digital signature by the sue of private key corresponding to the public key of the subscriber;
(b) the initial electronic record is retained intact or has been altered since such electronic record was so affixed with the digital signature.
(2) Any reference in this Act to any enactment or any provision thereof shall, in relation to an area in which such enactment or such provision is not in force, be construed as a reference to the corresponding law or the relevant provision of the corresponding law, if any, in force in that area.
(1) Subject to the provisions of this section, any subscriber may authenticate an electronic record by affixing his digital signature.
(2) The authentication of the electronic record shall be effected by the use of asymmetric crypto system and hash function which envelop and transform the initial electronic record into another electronic record.
Explanation.- For the purposes of this sub-section, “hash function” means an algorithm mapping or translation of one sequence of bits into another, generally smaller, set known as “hash result” such that an electronic record yields the same hash result every time the algorithm is executed with the same electronic record as its input making it computationally infeasible-
(a) to derive or reconstruct the original electronic record from the hash result produced by the algorithm;
(b) that two electronic records can produce the same hash result using algorithm.
(3) Any person by the use of a public key of the subscriber can verify the electronic record.
(4) The private key and the public key are unique to the subscriber and constitute a functioning key pair.
Where any law provides that information or any other matter shall be in writing or in the typewritten or printed form, then, notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied if such information or matter is-
(a) rendered or made available in an electronic form; and
(b) accessible so as to be usable for a subsequent reference.
Where any lay provides that information or any other matter shall be authenticated by affixing the signature or any document shall be signed or bear the signature of any person, then, notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied if such information or matter is authenticated by means of digital signature affixed in such manner as may be prescribed by the Central Government.
Explanation.- For the purposes of this section, “signed”, with its
grammatical variations and cognate expressions, shall, with reference to a person, means affixing of his hand written signature or any mark on any document and the expression “signature” shall be construed accordingly.
(a) the filing of any form, application or any other document with any office authority, body for agency owned or controlled by the appropriate Government in a particular manner;
(b) the issue or grant of any licence, permit. Sanction or approval by whatever name called in a particular manner;
(c) the receipt or payment of money in a particular manner, the, notwithstanding anything contained in any other law for the time being in force, such requirement shall be deemed to have been satisfied if such filing, issue, grant, receipt or payment, as the case be, is effected by means of such electronic form as may be prescribed by the appropriate Government.
(2) The appropriate Government may, for the purposes of sub-section (1), by rules, prescribe-
(a) the manner and format in which such electronic records shall be filed, created or issued;
(b) the manner or method of payment of any fee or charges for filing, creation or issue any electronic record clause (a).
(1) Where any law provides that documents, records or information shall be retained for any specific period, the, that requirement shall be deemed to have been satisfied if such documents, records or information are retained in the electronic form, if-
(a) the manner and format therein remains accessible so as to be usable for a subsequent reference;
(b) the electronic record is retained in the format in which it was originally generated, sent or received or in a format which can be demonstrated to represent accurately the information originally generated, sent or received;
(c) the details which will facilitate the identification of the origin,
destination, date and time of dispatch or receipt of such electronic record:
Provided that this clause does not apply to any information which is automatically generated solely for the purpose of enabling a record to be dispatched or received.
(2) Nothing in this section shall apply to any law that expressly provides for the retention of documents, records or information in the form of electronic records.
Where any law provides that any rule, regulation, order, bye-law, notification or any6 other matte shall be published in the Official Gazette, then, such requirement shall be deemed to have been satisfied if such rule, regulation, order bye-law, notification or any other matter is published in the Official Gazette or Electronic Gazette:
Provided that where any rule, regulation, order, by-law, notification or any other matter is published in the Official Gazette or Electronic Gazette, the date of publication shall be deemed to be the date of the Gazette which was first published in any form.
Nothing contained in section 6, 7 and 8 shall be confer a right upon any person to insist that any Ministry or Department of the Central Government or the State Government or any authority or body established by or under any law or controlled or funded by the Central or State Government should accept, issue, create, retain and preserve any document in the form of electronic records or effect any monetary transaction in the electronic form.
The Central Government may, for the purposes of this Act, by rules, prescribe-
(a) the type of digital signature;
(b) the manner and format in which the digital signature shall be affixed;
(c) the manner or procedure which facilitates identification of the person
affixing the digital signature;
(d) control processes and procedures to ensure adequate integrity, security and confidentiality of electronic records or payments; and
(e) any other matter which is necessary to give legal effect to digital signatures.
An electronic record shall be attributed to the originator,-
(a) if it was sent by the originator himself;
(b) by a person who had the authority to act on behalf of the originator in respect of that electronic record; or
(c) by an information system programmed by or on behalf of the originator to operate automatically.
(1) Where the originator has not agreed with the addressee that the acknowledgement of receipt of electronic record be given in a particular form or by a particular method, an acknowledgement may be given by-
(a) any communication by the addressee, automated or otherwise; or
(b) any conduct of the addressee, sufficient to indicate to the originator that the electronic record has been received.
Where the originator has stipulated that the electronic record shall be binding only on receipt of an acknowledgement of such electronic record by him, then, unless acknowledgement has been so received, the electronic record shall be deemed to have been never sent by the originator.
Where the originator has not stipulated that the electronic record shall be binding only on receipt of such acknowledgment, and the acknowledgement has not been received by the originator within the time specified or agreed or, if no time has been specified or agreed to within a reasonable time, then, the originator may give notice to the addressee stating that no acknowledgement has been received by him and specifying a reasonable time by which he acknowledgement must be received by him and if no acknowledgement is received within the aforesaid time limit he may after giving notice to the addressee, treat the electronic record as tough it has never been sent.
(1) Save as otherwise agreed to between the originator and the addressee, the despatch of an electronic record occurs when it enters a computer resources outside the control of the originator.;
Save as otherwise agreed between the originator and the addressee, the time of receipt of an electronic record shall be determined as follows, namely:- the addressee has designated a computer resource for the purpose of receiving electronic record,- receipt occurs at the time when the electronic record enters the designated computer resources; or
if the electronic record is spent to a computer resources of the addressee that is not the designated computer resource, receipt occurs at the time when the electronic record is retrieved by the addressee;
if the addressee has not designated a computer resource along with specified timings, if any, receipt occurs when the electronic record enters the computer resource of the addressee.
Save as otherwise agreed to between the originator and the addressee, an electronic record is deemed to be received at the place where the addressee has his place of business.
The provisions of sub-section (2) shall apply notwithstanding that the place where the computer resource is located may be different from the place where the electronic record is deemed to have been received under sub-section (3).
For the purpose of this section.- if the originator or the addressee has more than one place of business, the principal place of business, shall be the place of business;
if the originator or the addressee does not have a place of business, his usual place of residence shall be deemed to be the place of business;
“usual place of residence “, in relation to a body corporate, means the place where it is registered.
Where any security procedure has been applied to an electronic record at a specific point of time, then such record shall be deemed to be a secure electronic record from such point of time to the time of verification.
If, by application of a security procedure agreed to by the parties concerned, it can be verified that a digital signature, at the time it was affixed, was –
(a) unique to the subscriber affixing it;
(b) capable of identifying such subscriber;
(c) created in a manner or using a means under the exclusive control of the subscriber and is linked to the electronic record to which related in such a manner that if the electronic record was altered the digital signature would be invalidated, then such digital signature shall be deemed to be a secure digital signature.
The Central Government shall, for the purpose of this Act, prescribe the security procedure having regard to commercial circumstances prevailing at the time when the procedure was used, including-
(a) the nature of the transaction;
(b) the level of sophistication of the parties with reference to their technological capacity;
(c) the volume of similar transactions engaged in by other parties;
(d) the availability of alternatives offered to but rejected by any party;
(e) the cost of alternative procedures; and
(f) the procedures in general use for similar types of transaction or communications.
(1) The Central Government may, by notification in the Official Gazette, appoint a Controller of Certifying Authorities for the purposes of this Act and may, also by the same or subsequent notification, appoint such number of Deputy Controllers and Assistant Controllers as it deems fit.
(2) The Controller shall discharge his functions under this Act subject to the general control and directions of the Central Government.
(3) The Deputy Controllers and Assistant Controllers shall perform functions assigned to them by the Controller under the general superintendence and control of the Controller.
(4) The qualifications, experience and terms and conditions of service of Controller, Deputy Controllers and Assistant Controller shall be such as may be prescribed by the Central Government.
(5) The Head Office and Branch Officer of the officer of the Controller shall be at such places as the Central Government may specify, and these may be established at such places as the Central Government may think fit.
(6) There shall be a seal of the Office of the Controller.
The Controller may perform all or any of the following function, namely:-
(a) exercising supervision over the activities of Certifying Authorities;
(b) certifying public keys of the Certifying Authorities;
(c) laying down the standards to be maintained by Certifying Authorities;
(d) specifying the qualifications and experience which employees of the Certifying Authorities should possess;
(e) specifying the conditions subject to which the Certifying Authority shall conduct their business;
(f) specifying the contents of written, printed or visual materials and advertisements that may be distributed or used in respect of a Digital Signature Certificate and the public key;
(g) specifying the form and content of a Digital Signature Certificate and the key;
(h) specifying the form the manner in which accounts shall be maintained by the Certifying Authorities;
(i) specifying the terms and conditions subject to which auditors may be appointed and the remuneration to be paid to them;
(j) facilitating the establishment of any electronic system by a Certifying Authority either solely or jointly with other Certifying Authorities and regulation of such system;
(k) specifying the manner in which the Certifying Authorities shall conduct their dealings with the subscribers;
(l) resolving any conflict of interests between the Certifying Authorities and the subscribers;
(m) laying down the duties of the Certifying Authorities;
(n) maintaining a data-base containing the disclosure record of ever Certifying Authority containing such particulars as may be specified by regulations which shall be accessible to public.
(1) Subject to such conditions and restrictions as may be specified, by regulations, the Controller may, with the previous approval of the Central Government, and by notification in the Official Gazette, recognise any Certifying Authority as a Certifying Authority for the purposes of this Act.
(2) Where any Certifying Authority is recognised under sub-section (1), the Digital Signature Certificate issued by such Certifying Authority shall be valid for the purposes of this Act.
(3) The Controller may if he is satisfied that any Certifying Authority has contravened any of the conditions and restrictions subject to which it was granted recognition under sub-section (1), he may, for reasons to be recorded in writing, by notification in the Official Gazette, revoke such recognition.
(1) The Controller shall be the repository of all Digital Signature Certificates issued under this Act.
(2) The Counter shall- (a) make use of hardware, software and procedures that are secure from intrusion and misuse;
(b) observe such other standards as may be prescribed by the Central Government.
To ensure that the secrecy and security of the digital signatures are assured.
(3) The Controller shall maintain a computerised data-base of all public keys in such a manner that such database and the public keys are available to any member of the public.
(1) Subject to the provisions of sub-section (2), any person may make an application to the Controller for a licence to issue Digital Signature Certificates.
(2) No licence shall be issued under sub-section (1), unless the applicant fulfills such requirements with respect to qualification, expertise, manpower, financial resources and other infrastructure facilities, which are necessary to issue Digital Signature Certificates as may be prescribed by the Central Government.
(3) A licence granted under this section shall- (a) be valid for such period as may be prescribed by the Central Government;
(b) not be transferable or heritable;
(c) be subject to such terms and conditions as may be specified by the regulations.
(1) Every application for issue of a licence shall be in such form as may be prescribed by the Central Government.
(2) Every application for issue of a licence shall be accompanied by- (a) a certification practice statement;
(b) a statement including the procedures with respect to identification of the applicant;
(c) payment of such fees, not exceeding twenty-five thousand rupees as may be prescribed by the Central Government;
(d) such other documents, as may be prescribed by the Central Government.
An application for renewal of a licence shall be- (a) in such form;
(b) accompanied by such fees, not exceeding five thousand rupees, as may be prescribed by the Central Government and shall be made not less than forty-five days before the date of expiry of the period of validity of the licence.
The Controller may, on receipt of an application under sub-section (1) of section 21, after considering the documents accompanying the application and such other factor, as he deems fit, grant the licence or reject the application:
Provided that no application shall be rejected under this section unless the applicant has been given a reasonable opportunity of presenting his case.
(1) The Controller may, if he is satisfied after making such inquiry, as he may think fit, that a Certifying Authority has-
(a) made a statement in, or in relation to, the application for the issue or renewal of the licence, which is incorrect or false in material particulars;
(b) failed to comply with the terms and conditions subject to which the licence was granted;
(c) failed to maintain the standards specified under clause (b) of sub-section (2) of section 20;
(d) contravened any provisions of this Act, rule, regulations or order made revoke the licence;
Provided that no licence shall be revoked unless the Certifying Authority has been given a reasonable opportunity of showing cause against the proposed revocation.
(2) The Controller may, if he has reasonable cause to believe that there is any ground for revoking a licence pending the completion of any enquiry ordered by him:
Provided that no licence shall be suspended for a period exceeding ten days unless the Certifying Authority has been given a reasonable opportunity of showing cause against the proposed suspension:
(1) Where the licence of the Certifying Authority is suspended or revoked, the Controller shall publish notice of such suspension or revocation, as the case may be, in the database maintained by him.
(2) Where one or more repositories are specified, the Controller shall publish notices of such repositories:
Provided that the database containing the notice of such suspension or revocation, as the case may be, shall be made available through a web site which shall be accessible round the clock:
Provided further that the Controller may, if he considers necessary, publicise the contents of database in such electronic or other media, as the may consider appropriate.
The Controller may, in writing, authorise the Deputy Controller, Assistant Controller or any officer to Controller may, in writing, authorise the Deputy Controller, Assistant Controller or any officer to exercise any of the provisions of this Act, rules or regulations made thereunder.
(1) The Controller or any officer authrised by him in this behalf shall take up for investigation any contravention of the provisions of this Act, rules or regulations made thereunder.
(2) The controller or any officer authorised by him in this behalf shall exercise the like powers which are conferred on Income-tax authorities under Chapter XIII of the Income-tax Act, 1961, (43 of 1961), and shall exercise such powers, subject to such limitations laid down under that Act.
(1) Without prejudice to the provisions of sub-section (1) of section 68, the Controller or any person authorised by him shall, if he has reasonable cause to suspect that any contravention of the provisions of this Act, rules or regulations made thereunder their has been committed, have access to any computer system, any apparatus, data or any other material connected with such system, for the purpose of searching or causing a search to be made for obtaining any information or data contained in or data contained in or available to such computer system.
(2) For the purposes of sub-section (1), the Controller or any person authorised by him may, by order, direct any person in charge of, or otherwise concerned with the operation of, the computer system, data apparatus or material, to provide him with such reasonable technical and other assistance as he may consider necessary.
Every Certifying Authority shall,-
(a) make use of hardware, software, and procedures that the secure from intrusion and misuse;
(b) provide a reasonable level of reliability in its services which are reasonably suited to the performance of intended functions;
(c) adhere to security procedures to ensure that the secrecy and privacy of the digital signatures are assured; and
(d) observe such other standards as may be specified by regulations.
Every Certifying Authority shall ensure that every person employed or otherwise engaged by it complies in the course of his employment or engagement, with the provisions of this Act, rules regulations or orders made thereunder.
Every Certifying Authority shall display its licence at a conspicuous place of the premises in which it carries on its business.
(1) Every Certifying Authority whose licence is suspended or revoked shall immediately after such suspension or revocation, surrender the licence to the Controller.
(2) Where any certifying authority fails to surrender a licence under sub-section (1), the person in whose favour a licence is issued, shall be guilty of an offences and shall be punished with imprisonment which may extend upto six months or a fire which may extend upto ten thousand rupees or with both
(1) Every Certifying Authority shall disclose in the manner specified by regulations.-
(a) Its Digital Signature Certificate which contains the public key corresponding to the private key used by that Certifying Authority to digitally sign another Digital Signature Certificate;
(b) and certification practice statement relevant thereto;
(c) notice of the revocation or suspension of its Certifying Authority certificate if any; and
(d) any other fact that materially and adversely affects either the reliability of a Digital Signature Certificate, which that Authority has issued, or the Authority’s ability to perform its services.
(2) Where in the opinion of the Certifying Authority any event has occurred or any situation has arisen which may materially and adversely affect the integrity of its computer system or the conditions subject to which a Digital Signature Certificate was granted, then, the Certifying Authority shall-
(a) use reasonable efforts to notify any person who is likely to be affected by that occurrence: or
(b) act in accordance with the procedure specified in its certification practice statement to deal with such event or situation.
(1) Any person may make an application to the Certifying Authority for the issue of a Digital Signature Certificate in such form as may be prescribed by the Central Government.
(2) Every such application shall be accompanied by such fee not exceeding twenty-five thousand rupees as may be prescribed by the Central Government, to be paid to the Certifying Authority:
Provided that while prescribing fees under sub-section (2) different fees may be prescribed for different classes of applicants.
Every such application shall be accompanied by a certification practice statement or where there is no such statement, a statement containing such particulars, as may be specified by regulations.
On receipt of an application under sub-section (1), the Certifying Authority may, after consideration of the certification practice statement or the other statement under sub-section (3) and after making such enquiries as it may deem fit, grant the Digital Signature Certificate or for reasons to be recorded in writing, reject the application:
Provided that no Digital Signature Certificate shall be granted unless the Certifying Authority is satisfied that-
the applicant holds the private key corresponding to the public key to be listed in the Digital Signature Certificate;
the applicant holds a private key, which is capable of creating a digital signature;
the public key to be listed in the certificate can be used to verify a digital signature affixed by the private key held by the applicant:
Provided further that no application shall be rejected unless the applicant has been given a reasonable opportunity of showing cause against the proposed rejection.
A Certifying Authority while issuing a Digital Signature Certificate shall certify that- it has complied with the provisions of this Act and the rules and regulations made there under;
it has published the Digital Signature Certificate or otherwise made it available to such person relying on it and the subscriber has accepted it;
the subscriber holds the private key corresponding to the public key, listed in the Digital Signature Certificate;
the subscriber’s public key and private key constitute a functioning key pair;
the information contained in the Digital Signature Certificate is accurate; and
it has no knowledge of any6 material fact, which if it had been included in the Digital Signature Certificate would adversely affect the reliability of the representations in clauses (a) to (d).
(1) Subject to the provisions of sub-section (2), the Certifying Authority which has issued a Digital Signature Certificate may suspend such Digital Signature Certificate.- on receipt of a request to that effect from-
the subscriber listed in the Digital signature Certificate; or
any person duly authorised to act on behalf of that subscriber;
if it is of opinion that the Digital Signature Certificate should be suspended in public interest.
A Digital Signature Certificate shall not be suspended for a period exceeding fifteen days unless the subscriber has been given an opportunity of being heard in the matter.
On suspension of a Digital Signature Certificate under this section, the Certifying Authority shall communicate the same to the subscriber.’
(1) A Certifying Authority may revoke a Digital Signature Certificate issued by it-
where the subscriber or any other person authorised by him makes a request to that effect; or
upon the death of the subscriber; or
upon the dissolution of the firm or winding up of the company where the subscriber is a firm or a company.
Subject to the provisions of sub-section (3) and without prejudice to the provisions of sub-section (1), a Certifying Authority may revoke a Digital Signature Certificate which has been issued by it at any time, if it is of opinion that-
a material fact represent in the Digital Signature Certificate is false or had been concealed;
a requirement for issuance of the Digital Signature Certificate was not satisfied;
the Certifying Authority’s private key of security system was compromised in a manner materially affecting the Digital Signature Certificate’s reliability;
the subscriber has been declared insolvent or dead or where a subscriber is a firm or a company, which has been dissolved, wound-up or otherwise ceased to exist.
A Digital Signature Certificate shall not be revoked unless the subscriber has been given an opportunity of being heard in the matter.
On revocation of a Digital Signature Certificate under this section, the Certifying Authority shall communicate the same to the subscriber.
(1) Where a Digital Signature Certificate is suspended or revoked under section 37 or section 38, the Certifying Authority shall publish a notice of such suspension or revocation, as the case may be, in the repository specified in the Digital Signature Certificate for publication of such notice.
Where one or more repositories are specified the Certifying Authority shall publish notices of such suspension or revocation, as the case may be, in all such repositories.
Where any Digital Signature Certificate the public key of which corresponds to the private key of that subscriber which is to be listed in the Digital Signature Certificate has been accepted by a subscriber, the, the subscriber shall generate the key pair by applying the security procedure.
(1) A subscriber shall deemed to have accepted a Digital Signature Certificate is the publishes or authorises the publication of a Digital Signature Certificate- to one or more person;
in a repository; or otherwise demonstrates his approval of the Digital Signature Certificate in any manner.
By accepting a Digital Signature Certificate the subscriber certifies to all who reasonable rely on the information contained in the Digital Signature Certificate that—
the subscriber holds the private key corresponding to the public key listed in the Digital Signature Certificate and is entitled to h old the same;
all representations made by the subscriber to the Certifying Authority and all material relevant to the information contained in the Digital Signature Certificate are true;
all information in the Digital Signature Certificate that is writing the knowledge of the subscriber is true.
(1) Every subscriber shall exercise reasonable care to retain control of the private key corresponding to the public key listed in his Digital Signature Certificate and take all steps to prevent its disclosure to a person not authorised to affix the digital signature of the subscriber.
If the private key corresponding to the public key listed in the Digital Signature Certificate has been compromised, then, the subscriber shall communicate the same without any delay to the Certifying Authority in such manner as may be specified by the regulations.
Explanation:- For removal of doubts, it is hereby declared that the subscriber shall be liable till he has informed the certifying Authority that the private key has been compromised.
If any person without permission of the owner or any other person who is in charge of a computer, computer system or computer network,- accesses or secures access to such computer, computer system or computer network downloads, copies or extracts any data, computer data base information from such computer, computer system or computer network including information or data held or stored in any removable storage medium.
Introduces or causes to be introduced any computer contaminant or computer virus into any computer, computer system or computer network;
damages or causes to be damaged and computer, computer system or computer network, data, computer database or any other programmes residing in such computer, computer system or computer network;
disrupts or causes disruption of any computer, computer system or computer network;
denies or causes the denial of access to any person authorised to access any computer, computer system or computer network by any means;
provides any assistance to any person to facilitate access to a computer, computer system or computer network in contravention of the provisions of this Act, rules or regulations made thereunder;
charges the services availed of by a person to the account of another person by tampering with or manipulating any computer, computer system or compute network he shall be liable to pay damages by way of compensation not exceeding one crore rupees to the person so affected.
Explanation.-For the purposes of this section.- (i) “computer contaminant” means any set of computer instructions that are designed –
(a) to modify, destroy, record, transmit date or programme residing within a computer, computer system or computer network; or
(b) by any means to usurp the normal operation of the computer, compute system, or computer network;
(ii) “computer database” means a representation of information,
knowledge, facts, concepts or instructions in text, image, audio, video that are being prepared or have been prepare in a formalised manner or have been produced by a computer, computer system or computer network and are intended for use in a computer, computer system or computer network;
(iii) “computer virus” means any computer instruction, information, data or programme that destroys, damages, degrades adversely affects the performance of a computer resources or attaches itself to another itself to another computer resources and operates when a programme, date or instruction is executed or some other even takes place in that computer resource;
(iv) “damage” means to destroy, alter, delete, add, modify or re-arrange any computer resource by any means.
If any person who is required under this Act or any rules or regulations made thereunder to- (a) furnish any document, return or report to the Controller or the Certifying Authority fails to furnish the same, he shall be liable to a penalty not exceeding one lakh and fifty thousand rupees for each such failure;
(b) file any return or furnish any information, books or other documents within the time specified therefor in the regulations fails to file return or furnish the same within the time specified therefor in the regulations, he shall be liable to a penalty not exceeding five thousand rupees for every day during which such failure continues;
(c) maintain books of account or records fails to maintain the same, he shall be liable to a penalty no exceeding ten thousand rupees for every day during which the failure continues.
Whoever contravenes any rules or regulations made under this Act, for the contravention of which no penalty has been separately provided, shall be liable to pay a compensation not exceeding twenty-five thousand rupees to the person affected by such contravention or a penalty not exceeding twenty-five thousand rupees.
(1) For the purpose of adjudging under this Chapter whether any person has committed a contravention of any of the provisions of this Act or of any rule, regulation, direction or order made thereunder the Central
Government shall, subject to the provisions of sub section (3), appoint any officer not below the rank of a Director to the Government of India or an equivalent officer of a State Government to be an adjudicating officer for holding an inquiry in the manner prescribed by the Central Government .
(2) The adjudicating officer shall, after giving the person referred to in sub-section (1) a reasonable opportunity for making representation in the matter and if, on such inquiry, he is satisfied that the person has committed the contravention, he may impose such penalty or award such compensation as he thinks fit in accordance with the provisions of that section.
(3) No person shall be appointed as an adjudicating officer unless he possesses such experience in the filed of Information Technology and legal or judicial experience as may be prescribed by the Central Government.
(4) Where more than one adjudicating officers are appointed, the Central Government shall specify by order the matters and places with respect to which such officers shall exercise their jurisdiction.
(5) Every adjudicating officer shall have the powers of a civil court which are conferred on the Cyber Appellate Tribunal under sub-section (2) of section (2) of section 58, and-
(a) all proceedings before it shall be deemed to be judicial proceedings within the meaning of section 193 and 228 of the Indian Penal Code (45 of 1860);
(b) shall be deemed to be a civil court for the purpose of section 345 and 346 of the Code of Criminal Procedure, 1973 (2 of 1974).
While adjudging the quantum of compensation under this Chapter, the adjudicating officer shall have due regard to the following factors, namely:-
(a) the amount of gain of unfair advantage, whenever quantifiable, made as a result of the default;
(b) the amount of loss caused to any person as a result of the default;
(c) the repetitive nature of the default.
(1) The Central Government shall, by notification, establish one or more appellate tribunals to be known as the Cyber Regulations Appellate Tribunal.
(2) The Central Government shall also specify, in the notification referred to in sub-section (1), the matters and places in relation to which the Cyber Appellate Tribunal may exercise jurisdiction.
A cyber Appellate Tribunal shall consist of one person only (hereinafter referred to as the Presiding Officer of the Cyber Appellate Tribunal) to be appointed, by notification, by the Central Government.
A person shall not be qualified for appointment as the Presiding Officer of a Cyber Appellate Tribunal unless he-
(a) is, or has been, or is qualified to be, a Judge of a High Court; or
(b) is, or has been, a member of the Indian Legal Service and is holding or has held a post in Grade I of that Service for at least three years.
The Presiding Officer of a Cyber Appellate Tribunal shall hold office for a term of five years from the date on which he enters upon his office or until he attains the age of sixty-five years whichever is earlier.
The salary and allowances payable to, and the other terms and conditions of service including pension, gratuity and other retirement benefits of, the Presiding Officer of a Cyber Appellate Tribunal shall be such as may be prescribed:
Provided that neither the salary and allowances nor the other terms and conditions of service of the Presiding Officers shall be varied to his disadvantage after appointment.
If, for reason other than temporary absence, any vacancy occurs in the office of the Presiding Officer of a Cyber Appellate Tribunal, then the Central Government shall appoint another person in accordance with the provisions of this Act to fill the vacancy and the proceedings may be continued before the Cyber appellate Tribunal from the state at which the vacancy is filled.
(1) The Presiding Officer of a Cyber Appellate Tribunal may, by notice in writing under his hand addressed to the Central Government, resign his office:
Provided that the said Presiding Officer shall, unless he is permitted by the Central Government to relinquish his office sooner, continue to hold office until the expiry of three months from the date of receipt of such notice or until a person duly appointed as his successor enters upon his office or until the expiry of his term of office, whichever is the earliest.
(2) The Presiding Officer of a Cyber Appellate Tribunal shall not be removed from his office except by an order by the Central Government on the ground of proved misbehaviour or incapacity after an inquiry made by a Judge of the Supreme Court in which the Presiding Officer concerned has been informed of the charges against him and given a reasonable opportunity of being heard in respect of these charges.
(3) the Central Government may, by rules, regulate the procedure for the investigation of misbehaviour or incapacity of the aforesaid Presiding Officer.
No order of the Central Government appointing any person as the Presiding Officer of a Cyber Appellate Tribunal shall be called in question in any manner and no act or proceeding before a Cyber Appellate Tribunal shall be called in question in any manner on the ground merely of any defect in the constitution of Cyber Appellate Tribunal.
(1) The Central Government shall provide the Cyber Appellate Tribunal with such officers and employees as that Government may think fit.
(2) The officers and employees of the Cyber Appellate Tribunal shall discharge their functions under general superintendence of the Presiding Officer.
(3) The salaries any allowances and other conditions of service of the officers and employees of the Cyber Appellate Tribunal shall be such as may be prescribed by the Central Government.
(1) Save as provided in sub-section (2), any person aggrieved by an order made by controller or an adjudicating officer under this Act may prefer an appeal to a Cyber Appellate Tribunal having jurisdiction in the matter.
(2) No appeal shall lie to the Cyber Appellate Tribunal from an order made by an adjudicating officer with the consent of the parties.
(3) Every appeal under sub-section (1) shall be filed within a period of forty-five days from the date on which a copy of the order made by the Controller or the adjudicating officer is received by the person aggrieved and it shall be in such form and be accompanied by such fee as may be prescribed;
Provided that the Cyber Appellate Tribunal may entertain an appeal after the expiry of the said period of forty-five days if it is satisfied that there was sufficient cause for not filing it within that period.
(4) On receipt of an appeal under sub-section (1), the Cyber Appellate Tribunal may, after giving the parties to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming, modifying or setting aside the order appealed against.
(5) the Cyber Appellate Tribunal shall send a copy of every order made by it to the parties tot he appeal and to the concerned controller or adjudicating officer.
(6) The appeal filed before the Cyber Appellate Tribunal under sub-section (1) shall be dealt with by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within sic months from the date of receipt of the appeal.
(1) The Cyber Appellate Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908), but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and of any rules, the Cyber Appellate Tribunal shall have powers to regulate its own procedure including the place at which it shall have its sittings.
(2) The Cyber Appellate Tribunal shall have, for the purposes of discharging its functions under this Act, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit, in respect of the following matters, namely:
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents or other electronic records;
(c) receiving evidence on affidavits;
(d) issuing commissions for the examination of witnesses or documents;
(e) reviewing its decisions;
(f) dismissing an application for default or deciding it ex parte;
(g) any other matter which may be prescribed.
(3) Every proceeding before the Cyber Appellate Tribunal shall be deemed to be a judicial proceeding within the meaning of section 193 and 228, and for the purposes of section 196 of the Indian Penal Code(45 of 1860) and the Cyber Appellate Tribunal shall be deemed to be a civil court for the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).
The appellant may either appear in person or authorise one or more legal practitioners or any of its officers to present his or its case before the Cyber Appellate Tribunal.
The provisions of the Limitation Act, 12963f (36 of 1963), shall, as far as may be, apply to an appeal made to the Cyber Appellate Tribunal.
No court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which an adjudicating officer appointed under this Act or the Cyber Appellate Tribunal constituted under this Act is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.
Any person aggrieved by any decision or order of the Cyber Appellate Tribunal may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Cyber Appellate Tribunal to him on any question of fact or law arising out of such order:
Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to filed within a further period not exceeding sixty days.
(1) Any contravention under this Chapter may, either before or after the institution of adjudication proceedings, be compounded by the Controller or such other officer as may be specially authorised by him in this behalf or by the adjudicating officer, as the case may be, subject to such conditions as the Controller or such other officer or the adjudicating officer, as the case may be, subject to such conditions as the Controller or such other officer or the adjudicating officer may specify.
Provided that such sum shall not, in any case, exceed the maximum amount of the penalty which may be imposed under this Act for the contravention so compounded.
(2) Nothing in sub-section (1) shall apply to a person who commits the same or similar contravention within a period of three years form the date on which the first contravention, committed, by him, was compounded.
Explanation:- For the purposes of this sub-section, any second or subsequent contravention committed after the expiry of a period of three years from the date on which the contravention was previously compounded shall be deemed to be a first contravention.
(3) Where any contravention has been compounded under sub-section(I), no proceeding or further proceeding, or further proceeding, as the case may be, shall be taken against the person guilty of such contravention in respect of the contravention so compounded.
A penalty imposed under this Act, if it is not paid shall be recovered as an arrear of land revenue and the licence or the Digital Signature Certificate, as the case may be, shall be suspended till the penalty is paid.
Whoever knowingly or intentionally conceals, destroy, or alter any computer source code used for a computer, computer programme, computer system or computer network, when the computer source code is required to be kept or maintained by law for the time being in force, shall be punishable with imprisonment up to three years, or with fine which may extend up to two lakh rupees, or with both.
Explanation – For the purposes of this section, “computer source code” means the listing of programmes, compute commands, design and layout and programme analysis of computer resource in any form.
(1) Whoever with the intent of cause or knowing that is likely to cause wrongful loss or damage to the public or any person destroys or deletes or alters any information residing in a computer resource or diminishes its value or utility or affects it injuriously by any means, commits hacking.
(2) Whoever commits hacking shall be punished with imprisonment up to three years, or with fine which may extend up to two lakh rupees, or with both.
( Introduced vide ITAA 2008)
Any person who sends, by means of a computer resource or a communication device,
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a) any information that is grossly offensive or has menacing character; or
b) any information which he knows to be false, but for the purpose of causing annoyance, inconvenience, danger, obstruction, insult, injury, criminal intimidation, enmity, hatred, or ill will, persistently makes by making use of such computer resource or a communication device,
c) any electronic mail or electronic mail message for the purpose of causing annoyance or inconvenience or to deceive or to mislead the addressee or recipient about the or igin of such messages (Inserted vide ITAA 2008) shall be punishable with imprisonment for a term which may extend to two three years and with fine.
Explanation: For the purposes of this section, terms “Electronic mail” and “Electronic Mail Message” means a message or information created or transmitted or received on a computer, computer system, computer resource or communication device including attachments in text, image, audio, video and any other electronic record, which may be transmitted with the message]
Whoever publishes or transmits or causes to be published in the electronic form, any material which is lascivious or appeal to the prurient interest or if its effect is such as to tend to deprave and corrupt persons who are likely, having regard to all relevant circumstances, to read, see or hear the matter contained or embodied in it, shall be punished on first conviction with imprisonment of either description for a term which may extend to five years and with fine which may extend to one lakh rupees and in the event of a second or subsequent conviction with imprisonment of either description for a term which may extend to ten years and also with fine which may extend to two lakh rupees.
(1) The Controller may, by order, direct a Certifying Authority or any employee of such Authority to take such measures or cease carrying on such activities as specified in the order if those are necessary to ensure compliance with the provisions of this Act, rules or any regulations made thereunder.
(2) Any person who fails to comply with any order under sub-section (1) shall be guilty of an offence and shall be liable on conviction to imprisonment for a term not exceeding three years or to a fine not exceeding two lakh rupees or to both.
(1) If the Controller is satisfied that it is necessry or expedient so to do in the interest of the sovereignty or integrity of India, the security of the State, friendly relations with foreign States or public order or for preventing incitement to the commission of any cognizable offence, for reasons to be recorded in writing, by order, direct any agency of the Government to intercept any information transmitted through any computer resource.
(2) The subscriber or any person in charge of the computer resource shall, when called upon by any agency which has been directed under sub-section (1), extend all facilities and technical assistance to decrypt the information.
(3) The subscriber or any person who fails to assist the agency referred to in sub-section (2) shall be punished with an imprisonment for a term which may extend to seven years.
(1) The appropriate Government may, by notification in the Official Gazette, declare that any computer, computer system or computer network to be a protected system.
(2) The appropriate Government may, by order in writing, authorise the persons who are authorised to access protected systems notified under sub-section.
(3) Any person who secures access or attempts to secure access to a protected system in contravention of the provisions of this section shall be punished with imprisonment of either description for a term which may extend to ten years and shall also be liable to fine.
Whoever makes any misrepresentation, to, or suppresses any material fact from, the Controller or the Certifying Authority for obtaining any licennce or Digital Signature Certificate, as the case may be, shall be punished with imprisonment for a terms which may extend to two years, or with fine which may extend to one lakh rupees, or with both.
Save as otherwise provided in this Act or any other law for the time being in force, if any person who, in pursuance of any of the powers conferred under this Act, rules or regulations made thereunder, has secured access to any electronic record, book, register, correspondence, information, document or other material without the consent of the person concerned discloses such electronic record, book, register, correspondence, information, document or other material to any other person shall be punished with imprisonment for a term which may extend to two years, or with fine which may extend to one lakh rupees, or with both.
(1) No person shall publish a Digital Signature Certificate or otherwise make it available to any other person with the knowledge that-
(a) the Certifying Authority listed in the certificate has not issued it; or
(b) the subscriber listed in the certificate has not accepted it; or
(c) the certificate has been revoked or suspended, unless such publication is for the purposes of verifying a digital signature created prior to such suspension or revocation.
(2) Any person who contravenes the provisions of sub-section (1) shall be punished with imprisonment for a term which may extend to two years, or with fine which may extend to one lakh rupees, or with both.
Whoever knowingly creates, publishes or otherwise makes available a Digital Signature Certificate for any fraudulent or unlawful purpose shall be punished with imprisonment for a term which may extend to two years, or with fine which may extend to one lakh rupees, or with both.
(1) Subject to the provision of sub-section (2), the provisions of this Act shall apply also to any offence or contravention committed outside India by any person irrespective of his nationality.
(2) For the purposes of sub-section(1), this act shall apply to an offence or contravention committed outside India by any person if the act or conduct constituting located in India.
Any computer, computer system, floppies, compact disks, tape drives or nay other accessories related thereto, in respect of the if which any provision of this Act, rule, orders or regulations made thereunder has been or is being contravened, shall be liable to confiscation:
Provided that where it is established to the satisfaction of the court adjudicating the confiscation that the person in whose possession, power or control of any such computer, computer system, floppies, compact disks, tape drives or any other accessories relating thereto is found is not responsible for the contravention of the provisions of this Act, rules, orders or regulations made thereunder, the court may, instead of making an order for confiscation of such computer, computer system, floppies, compact disks, tape drives or any other accessories related thereto, make such other order authorised by this Act against the person contravening of the provisions of this Act, rules, orders or regulations made thereunder as it may think fit.
No penalty imposed or confiscation made under this Act shall prevent the imposition of any other punishment to which the person affected thereby is liable under any other law for the time being in force.
Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), a police officer not below the rank of Deputy Superintendent of Police shall investigate any offence under this Act.
For the removal of doubts, it is hereby declared that no person providing any service as a network service provider shall be liable under this Act, rules or regulations made thereunder for any third party information or data made available by him if he proves that the offence or contravention was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence for contravention.
Explanation- For the purposes of this section,- (a) “network service provider” means an intermediary;
(b) “third party information” means any information dealt with by a network service provider in his capacity as an intermediary.
(1) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 any police officer, not below the rank of a Deputy Superintendent of Police or any other officer of the Central Government or a State
Government auithorised by the Central Government in this behalf may enter any public place and search and the Central Government in this behalf may enter any public place and search and arrest without warrant any person found therein who is reasonably suspected of having committed or of committing or of being about to commit any offence under this Act.
Explanation:- For the purposes of this sub-section, the expression “public place” includes any public conveyance, any hotel, any shop or any other place intended for use by, or accessible to the public.
(2) Where any person is arrested under sub-section (1) by an officer other than a police officer, such officer shall, without unnecessary delay, take or sent the person arrest before a magistrate having jurisdiction in the case or before the officer-in-charge of a police station.
(3) The provisions of the Code of Criminal Procedure, 1973 shall, subject to the provisions of this section, apply, so far as may be, in relation to any entry, search or arrest, made under this section.
The provisions of this Act shall have effect notwithstanding anything consistent therewith contained in any other law for the time being in force.
The Presiding Officer and other officer and employees of a Cyber appellate Tribunal, the Controller, the Deputy Controller and the Assistant Controllers shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code (45 of 1860).
The Central Government may give directions to any State Government as to the carrying into execution in the State of any of the provisions of this Act or of any rule, regulation or order made thereunder.
No suit, prosecution or other legal proceeding shall lie against the Central Government, the State government, the Controller or any person acting on behalf of him, the Presiding Officer , adjudicating officers and the staff of the Cyber Appellate Tribunal for anything which is in good faith done or intended to be done in pursuance of this Act or any rule, regulation or order made thereunder.
(1) Where a person committing a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder is a company, every person who, at the time the contravention was committed, was in charge of, and was responsible to, the company for the conduct of business of the company as well as the company, shall be guilty of the contravention and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention.
(2) Notwithstanding anything contained in sub-section (1), where a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder has been committed by a company and it is proved that the contravention has taken place with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly.
Explanation.-For the purposes of this section- (a) “company” means and body corporate and includes a firm or other association of individuals; and
(b) “directors”, in relation to a firm, means a partner in the firm.
(1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order published in the Official Gazette, make such provisions not inconsistent with the provisions of this Act as appear to it to be necessary or expedient for removing the difficulty;
Provide that no order shall be made under this section after the expiry of a period of two years from the commencement of this Act.
(2) Every order made under this section shall be laid, as soon as may be after it is made, before each House of Parliament.
(1) The Central Government may, by notification in the Official Gazette and in the Electronic Gazette, make rules to carry out the provisions of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matter, namely:-
(a) the manner in which any information or matter may be authenticated by means of digital signature under section 5;
(b) the electronic form in which filing, issue, grant or payment shall be effected under sub-section (1) of section 6
(c) the manner and format in which electronic records shall be filed, or issued and the method of payment under sub-section (2) of section 6;
(d) the matters relating to the type of digital signature, manner and format in which it may be affixed under section 10;
(e) the security procedure for the purpose of creating secure electronic record and secure digital signature under section 16;
(f) the qualifications, experience and terms and conditions of service of controller, Deputy Controllers and Assistant Controller under section 17;
(g) other standards to be observed by the Controller under clause (b) of sub-section (2) of section 20;
(h) the requirements which an applicant must fulfil under sub-section (2) of section 21;
(i) the period of validity of licence granted under clause (a) of sub-section (3) of section 21;
(j) the form in which an application for licence may be made under sub-section 22;
(k) the amount of fees payable under clause (c)of sub-section (2)o of section 22;
(l) such other documents which shall accompany an application for licence under clause (d) of sub-section (2) of section 22;
(m) the form and the fee for renewal of a licence and the fee payable thereof under section 23;
(n) the amount of late fee payable under the proviso to section 23;
(o) the form in which application for issue of a Digital Signature Certificate my be made under sub-section (1) of section35;
(p) the fee to be paid to the Certifying Authority for issue of a Digital Signature Certificate under sub-section (2) of section 35;
(q) the manner in which the adjudicating officer shall hold inquiry under sub-section (1) of section 46;
(r) the qualification and experience which the adjudicating officer shall possess under sub-section (2) of section 46;
(s) the salary, allowances and the other terms and conditions of service of the Presiding Officer under section 52;
(t) the procedure for investigation of misbehaviour or incapacity of the Presiding Officer under sub-section (3) of section 54;
(u) the salary and allowances and other conditions of service of other officers and employees under sub-section (3) of section 56;
(v) the form in which appeal may be filed and the fee thereof under sub-section (3) of section 57;
(w) any other power of a civil court required to be prescribed under clause (g) of sub-section (2) of section 58; and
(x) any other matter which is required to be, or may be, prescribed.
(3) Every notification made by the Central Government under clause (f) of sub-section (4) of section 1 and every rule made by it shall be laid, as soon as may be after it is made, before each House of Parliament , while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the session or the successive sessions aforesaid, both Houses agree in making any modification in the notification or the rule or both Houses agree that the notification or the rule should not be made, the notification or the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be, so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.
(1) The Central Government shall, as soon as may be after the commencement of this Act, constitute a Committee called the Cyber Regulations Advisory Committee.
(2) The Cyber Regulations Advisory Committee shall consist of a Chairperson and such number of other official and non-official members representing the interests principal affected or having special knowledge of the subject-matter as the Central Government may deem fit.
(3) The Cyber Regulations Advisory Committee shall advise-
(a) the Central Government either generally as regards any rules or for any other purpose connected with this Act.
(4) There shall be paid to the non-official members of such Committee such traveling and other allowances as the Central Government may fix.
(1) The Controller may, after consultation with the Cyber Regulations Advisory Committee and with the previous approval of the Central Government, by notification in the Official Gazette, make regulations consistent with this Act and the rules made thereunder to carry out the purposes of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, such regulations may provide for all or any of the following matters, namely:-
(a) the particulars relating to maintenance of data-base containing the disclosure record of every Certifying Authority under clause (m) of section 18;
(b) the conditions and restrictions subject to which the Controller may recoginse any foreign Certifying Authority under sub-section (1) of section 19;
(c) the terms and conditions subject to which a licence may be granted under clause (c) of sub-section (3) of section 21;
(d) other standards to be observed by a Certifying Authority under clause (d) of section 30;
(e) the manner in which the Certifying shall disclose the matters specified in sub-section (1) of section 34;
(f) the particulars of statement which shall accompany an application under sub-section (3) of section 35.
(g) the manner by which the subscriber communicate the compromise of private key to the Certifying Authority under sub-section (2) of section 42.
(3) Every regulations made under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the regulation or both Houses agree that the regulation should not be made, the regulation shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that regulation.
(1) The State Government may, by notification in the Official Gazette, make rules to carry out the provisions of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:-
(a) the electronic form in which filing, issue, grant, receipt or payment shall be effected under sub-section (1) of section 6;
(b) for matters specified in sub-section (2) of section 6;
(c) any other matter which is required to be provided by rules by the State Government.
(3) Every rule made by the State Government under this section shall be laid , as soon as may be after it is made, before each House of the State Legislature where it consists of two Houses, or where such Legislature consists of one House, before that House.
The Indian Penal Code shall be amended in the manner specified in the First Schedule to this Act.
The Indian Evidence Act, 1872 shall be amended in the manner specified in the Second Schedule to this Act.
The Bankers’ Books Evidence Act, 1891 shall be amended in the manner specified in the Third Schedule to this Act.
The Reserve Bank of India Act, 1934 shall be amended in the manner specified in the Fourth Schedule to this Act.
AMENDMENTS TO THE INDIAN PENAL CODE
1. After section 29, the following section shall be inserted, namely:- “29 A. Electronic record.- The words “electronic record” shall have the meaning assigned to them in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000″.
2. In section 167, for the words “such public servant, charged with the preparation or translation of any document, frames or translates that document”, the words “such public servant, charged with the preparation or translation of any document or electronic record, frames, prepares or translates that document or electronic record” shall be substituted.
3. In section 172, for the words “produce a document in a Court of Justice”, the words “produce a document or an electronic record in a court of Justice” shall be substituted.
4. In section 173, for the words “to produce a document in a Court of Justice” , the words “to produce a document or electronic record in Court of Justice” shall be substituted.
5. In section 175, for the word “document” at both the places where it occurs, the words “document or electronic record” shall be substituted.
6. In section 192, for the words “makes any false entry in any book or record, or makes any document containing a false statement”, the words “makes any false entry in any book or record, or electronic record or makes any document or electronic recording containing a false statement ” shall be substituted.
7. In section 204, for the word “document” at both the places where it occurs, the words “document or electronic record” shall be substituted.
8. In section 463, for the words “Whoever makes any false documents or part of a document with intent to cause damage or injury”, the words “Whoever makes any false documents or false electronic record or party of a document or electronic record, with intent to cause damage or injury” shall be substituted.
9. In section 464,- (a) for the portion beginning with the words “A person is said to make a false document” and ending with the words “by reason of deception practised upon him, he does not know the contents of the documents or the nature of the alteration”, the following shall be substituted, namely:-
(a) makes, sign, seals or executes a document or part of a document;
(b) makes or transmits any electronic record or part of any electronic record;
(c) affixes any digital signature on any electronic record;
(d) makes any mark denoting the execution of a document or the authenticity of the digital signature, with the intention of causing it to be believed that such document or part of document, electronic record or digital signature was made, signed, sealed, executed, transmitted or affixed by or by the authority or a person by whom or by whose authority he knows that it was not made, signed, sealed, executed or affixed; or
Secondly-who, without lawful authority, dishonestly or fraudulently, by cancellation or otherwise, alters a document or an electronic record in any material part thereof, after it has been made, executed or affixed with digital signature either by himself or by any other person, whether such person be living or dead at the time of such alteration; or
Thirdly:- Who dishonestly or fraudulently causes any person, sign, seal, execute or alter a document or an electronic record or to affix his digital signature on any electronic record knowing that such person by reason of unsoundness of mind or intoxication cannot, or that by reason of deception practised upon him, he does not know the contents of the document or electronic record or the nature of the alteration”.
(b) after Explanation 2, the following Explanation shall be inserted at the end, namely:-
‘Explantion 3.- For the purposes of this section, the expression “affixing digital signature’ shall have the meaning assigned to it in clause (d) of sub-section (1) of section 2 of the Information Technology Act, 2000.
10. In section 466,-
(a) for the words “Whoever forges a document”, the words “Whoever forges a document or an electronic record” shall be substituted.
(b) the following Explanation shall be inserted at the end, namely:-
Explanation-For the purposes of this section, “register” includes any list, data or record of nay entries maintained in the electronic for as defined in clause ( r) of sub-section (1) of section2 of the Information Technology Act, 2000.
11. In section 468, for the words “document forged” , the words “document or electronic record forged” shall be substituted.
12. In section 469, for the words “intending that the document forged”, the words “intending that the document or electronic record forge” shall be substituted.
13. In section 470, for the word “document” in both the places where it occurs, the words “document or electronic record” shall be substituted.
14. In section 471, for the word “document” whenever it occurs, the words “document or electronic record” shall be substituted
15. In section 474, for the portion beginning with the words “Whoever has in his possession any document” and ending with the words ” if the document is one of the description mentioned in section 466 of this Code” the following shall be substitute, namely:-
“Whoever has in his possession any document or electronic record, knowing the same to be forged and intending that the same shall fraudulently or dishonestly be used as a genuine, shall, if the document or electronic record is one of the description mentioned in section 466 of this Code.”
16. In section 476, for the words ” any document”, the words “any document or electronic record” shall be substituted.
17. In section 477a, for the words “book, paper, writing” at both the places where they occur, the words “book, electronic record, paper, writing ” shall be substituted.
AMENDMENTS TO THE INDIAN EVIDENCE ACT, 1872
1. In section 3,-
(a) in the definition of “Evidence’, for the words “all document produced for the inspection of the Court”, the words “all documents including electronic records produced for the inspection of the Court” shall be substituted ;
(b) after the definition of “India, the following shall be inserted, namely:-
‘the expressions “Certifying Authority”, digital signature”, “Digital Signature Certificate”, “electronic form”, “electronic records”, “information”, “secure electronic record”, “secure digital signature” and “subscriber’ shall have the meanings respectively assigned to them in the Information Technology Act, 2000.
2. IN section 17, for the words “oral or documentary,” words “oral or documentary or contained in electronic form’ shall be substituted.
3. After section 22, the following section shall be inserted, namely:- “22A”. When oral admission as to contents of electronic records are relevant.-
Oral admission as to contents of electronic records are not relevant, unless the genuineness of the electronic record produced is in question”.
4. In section 34, for the words “Entries in the books of account”, the words “Entries in the books of account, including those maintained in an electronic form” shall be substituted.
5. In section 35, for the word “record”, in both the places where it occurs, the words “record or an electronic record” shall be substituted.
6. For section 39, the following section shall be substituted, namely:- “39. What evidence to be given when statement forms part of a conversation, documents, electronic record, book or series of letters or papers.-When any statement of which evidence is given forms part of longer statement, or of a conversation or part of an isolated documents, or is contained in a document which forms part of a book, or is contained in part of electronic record or of a connected series of letters or papers, evidence shall be given of so much and no more of the statement, conversation, document, electronic record, book or series of letters or papers as the Court considers necessary in that particular case to the full understanding of the nature and effect of the statement, and of the circumstances under which it was made.”
7. After section 47, the following section shall be inserted, namely:- “47A. Opinion as to digital signature when relevant.- When the court has to form an opinion as to the digital signature of any person, the opinion of the Certifying Authority which has issued the digital signature Certificate is a relevant fact”
8. In section 59, for the words “contents of documents “the words” contents of documents or electronic records” shall be substituted.
9. After section 65, the following shall be inserted, namely:- “65A. Special provisions as to evidence relating to electronic record.-the contents of electronic records may be proved in accordance with the provisions of section 65B.
65B. Admissibility of electronic records.-(1) Notwithstanding anything contained in this Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copies in optical or magnetic media produced by a computer (hereinafter referred to as the computer output) shall be deemed to be also a document, if the conditions mentioned in this section are satisfied in relation to the information and computer in question and shall be admissible in any proceedings, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible.
(2) The conditions referred to in sub-section (1) in respect of a computer output shall be the following, namely:- (a) the computer output containing the information was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer;
(b) during the said period, information of the kind contained in the electronic record or of the kind from which the information so contained is derived was regularly fed into the computer in the ordinary course of the said activities;
(c) throughout the material part of the said period, the computer was operating properly or, if not; then in respect of any period in which it was not operating properly or was out of operation during that part of the period, was not such as to affect the electronic record or the accuracy of its contents;
(d) the information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities.
(3) Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that the period as mentioned in clause (a) of sub-section (2) was regularly performed by computers, whether- (a) by a combination of computers operating over that period; or
(b) by different computer operating in succession over that period; or
(c) by different combinations of computers operating in succession over that period; or
(d) in any other manner involving the successive operation over that period, in whatever order, of one or more computers and one or more combinations of computers, all the computers used for that purpose during that period shall be treated for the purposes of this section as constituting single computer, and references in this section to a computer shall be construed accordingly.
(4) In any proceedings where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say-
(a) identifying the electronic record containing the statement and describing the manner in which it was produced;
(b) giving such particulars of any device involved in the production of that electronic record as may be appropriate for the purpose of showing that the electronic record was produced by a computer;
(c) dealing with any of the matters to which the conditions mentioned in sub-section (2) relate, and purporting to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities (whichever is appropriate) shall be evidence of any matter sufficient for a matter to be stated to the best of knowledge and belief of the person stating it.
(5) For the purposes of this section,-
(a) information shall be taken to be supplied to a computer if it is supplied thereto in any appropriate form and whether it is so supplied directly or (with or without intervention) by means of any appropriate equipment;
(b) whether in the course of activities carried on by any official, information is supplied with a view to its being stored or processed for the purposes of those activities by a computer operated otherwise than in the course of those activities, that information, in duly supplied to that computer shall be taken to be supplied to it those activities;
(c) a computer output shall be taken to have been produced by a computer whether it was produced by it directly or (with or without human intervention) by means of any appropriate equipment.
Explanation.-For the purposes of this section any reference to information being derived from other information shall be a reference to its being derived therefrom by calculation, comparison or any other process;
10. After section 67, the following section shall be inserted , namely:- “67. Proof as to digital signature.- Except in the case of a secure digital signature, if the digital signature of any subscriber is alleged to have been affixed to an electronic record the fact that such digital signature is the digital signature of the subscriber must be proved.’
11. After section 73, the following section shall be inserted, namely:- “73A. Proof as to verification of digital signature.-In order to ascertain whether a digital signature is that of the person by whom it purports to have been affixed, the Court may direct-
(a) that person or the Controller or the Certifying Authority to produce the Digital Signature Certificate;
(b) any other person to apply the public key listed in the Digital Signature Certificate and verify the digital signature purported to have been affixed by that person.”
Explanation .-For the purposes of this section, “Controller” means the Controller appointed under sub-section (1) of section 17 of the Information Technology Act, 2000.”
12. After section 81, the following section shall be inserted, namely:- “81A. Presumption as to Gazettes in electronic forms.-The Court shall presume the genuineness of every electronic record purporting to be the Official Gazette, or purporting to be electronic record directed by any law to be kept by person, if such electronic record is kept substantially in the form required by law and is produced from proper custody.”
13. After section 85, the following sections shall be inserted, namely:- “85A. Presumption as to electronic agreements.- The court shall presume that every electronic record purporting to be an agreement containing the digital signatures of the parties was so concluded by affixing the digital signature of the parties.
“85B. Presumption as to electronic records and digital signatures.-(1) IN any proceedings involving a secure digital signature, the Court shall presume unless the contrary is proved that-
(a) the secure digital signature is affixed by subscriber with the intention of signing or approving the electronic record;
(b) except in the case of a secure electronic record or a secure digital signature, nothing in this section shall create any presumption relating to authenticity and integrity of the electronic record or any digital signature.
85C. Presumption as to Digital Signature Certificates.-The Court shall presume, unless contrary is proved, that the information listed in a Digital Signature Certificate is correct, except for information specified as subscriber information which has not been verified, if the certificate was accepted by the subscriber .”
14. After section 88, the following section shall be inserted, namely:- “88A. Presumption as to electronic messages.- The Court may presume that b electronic message forwarded by the originator through an electronic mail server to the addresses to whom the message purports to be addressed corresponds with the message as fed into his computer for transmission; but the Court shall not make any presumption as to the person by whom such message was sent.”
Explanation.-for the purposes of this section, the expression “addressee’ and “originator” shall have the same meanings respectively assigned to them in clauses (b) and (za) of sub-section (1) of section 2 of the information Technology Act, 2000.”
15. After section 90, the following section shall be inserted, namely:- “90 A. . Presumption as to electronic records five years old.-where any electronic record, purporting or proved to be five years old, is produced from any custody which the court in the particular case considers proper, the Court may presume that the digital signature which purports to be the digital signature of any particular person was so affixed by him or any person authorised by him this behalf.
Explanation.-Electronic records are said to be in proper custody if they are in the place in which, and under the care of the person with whom, they naturally be; but no custody is improper if it is proved to have had a legitimate origin, or the circumstances of the particular case are such as to render such and origin probable.
16. For section 131 the following section shall be substituted, namely:-
131. Production of documents or electronic records which another person, having possession, could refuse to produce.- No one shall be compelled to produce documents in his possession or electronic records under his control, which any other person would be entitled to refuse to produce if they wer in his possessions or control, unless such last-mentioned person consents to their production.”
AMENDMENTS TO THE BANKERS’ BOOKS EVIDENCE ACT,1891
1. In section2,- (a) for clause (3), the following clause shall be substituted, namely:- (3) “bankers” books “include ledgers, day-books, accounts-books and all other books used in the ordinary business of a bank whether kept in the written form or as printouts of date stored in floppy, disc, tape or any other form of electro-magnetic data storage device:
(b) for clause (8), the following clause shall be substituted, namely:- (8) “certified copy” means when the books of a bank,-
(a) are maintained in written form, a copy of any entry in such books together with a certificate written at the foot of such copy that it is true copy of such entry, that such entry is contained in one of the ordinary books of the bank and was made in the usual and ordinary course of business and that such book is still in the custody of the bank, and where copy was obtained by a mechanical or other process which in itself ensured the accuracy of the copy, a further certificate to that effect, but where the book from which the copy had been so prepared, a further certificate to that effect, each such certificate being dated and subscriber by the principal accountant or manger of the bank with his name and official title; and
(b) consist of printouts of data stored in a floppy, disc, tape or any other electro-magnetic data storage device, a printout of such entry or a copy of such entry or a copy of such printout together with such statements certified in accordance with the provisions of section 2A;
2. After section 2, the following section shall be inserted, namely:- “2A”.Conditions in the printout.-A printout of entry or a copy of printout referred to in sub-section (8) of section 2 shall be accompanied by the following, namely:-
(a) a certificate to the effect that it is a printout of such entry or a copy of such printout by the principal accountant or branch manager; and
(b) a certificate by a person in-charge of computer system containing a brief description of the computer system and the particulars of-
(A) the safeguards adopted by the system to ensure that data is entered or any other operation performed only by authorised person;
(B) the safeguards adopted to prevent and detect unauthorised change of data;
(C) the safeguards available to retrieve data that is lost due to systemic failure or any other reasons;
(D) the manner in which data is transferred from the system to removable media like floppies, discs, tapes or other electro-magnetic data storage devices;
(E) the mode of verification in order to ensure that data has been accurately transferred to such removable media;
(F) the mode of identification of such data storage devices;
(G) the arrangements for the storage and custody of such storage devices;
(H) the safeguards to prevent and detect any tampering with the system; and
(I) any other factor which will vouch for the integrity and accuracy of the system.
(c) a further certificate from the person in-charge of the computer system to the effect that to the best of his knowledge and belief, such computer system operated properly at the material time, he was provided with all the relevant data and the printout in question represents correctly, or is appropriately derived from, the relevant data.”
AMENDMENT TO THE RESERVE BANK OF INDIA ACT, 1934
In the Reserve Bank of India Act, 1934 in section 58, in sub-section (2), after clause (p), the following clause shall be inserted, namely:- “(pp) the regulation of fund transfer through electronic means between the banks or between the banks and other financial institution referred to in clause (c) of section 45-I, including the laying down of the conditions subject to which banks and other financial institutions shall participate in such fund transfers, the manner of such fund transfers and the rights and obligations of the participants in such fund transfers.
[9th August, 1952]
“An Act to regulate the profession of notaries.”
Be it enacted by Parliament as follows:
[9th August, 1952]
“An Act to regulate the profession of notaries.”
Be it enacted by Parliament as follows:
(1) This Act may be called The Notaries Act, 1952
(2) It extends to the whole of India (3) It shall come into force on such date as the central government may, by notification in the official gazette, appoint.
(a) Omitted by Act 25 of 1968 (b) “Instrument” includes every document by which any right or liability is, or purpose to be, created, transferred, modified, limited, extended, suspended, extinguished or recorded. (c) “Legal Practitioner” means any advocate or agent of the supreme court to any advocate, vakil or attorney of any high court or any pleader authorised under any law for the time being in force to practice in any court of law (d) “Notary” means a person appointed as such under this act:
Provided that for a period of two years from the commencement of this Act it shall include also a person who, before such commencement, was appointed a notary public under the negotiable instruments in 1881 and is, immediately before such commencement, in practice in any part of India.
Provided further that in relation to the sat of Jammu and Kashmir the said period of two years shall be computed from the date on which this act comes into force in that State.
(e) “Prescribed” means prescribed by rules made under this act. (f) “Register” means a register of notaries maintained by the government under section 4
(g) “State Government”, in relation to a Union Territory, means the administrator thereof.
The Central Government, for the whole or any part of India, and any such State Government, for the whole or any part of State, may appoint as notaries, any legal practitioners or other persons who possess such qualifications as may be prescribed.
(1) The Central Government and every State Government shall maintain, in such form as may be prescribed, a register of the notaries appointed by that Government and entitled to practice as such under this act.
(2) Every such Register shall include the following particulars about the notary is entered therein, namely:-
(a) his full name, date of birth, residential and professional address.
(b) the date on which his name is entered in the register.
(c) his qualification , and
(d) any other particulars which may be prescribed.
(1) Every Notary who in ends to practice as such shall, on payment to the government appointing him of the prescribed fee, if any, be entitled.-
(a) to have his name entered in the Register maintained by that government under section 4, and
(b) to a certificate authorizing him to practice for a period of three years from the date on which the certificate is issued to him.
(2) Every such notary who wishes to continue to practice after the expiry of the period for which his certificate of practice has been issued under this section shall, on application made to the Government appointing him and payment of the prescribed fee, if any, be entitled to have his certificate renewed for three years at a time.
The Central Government and, every State Government shall, during the month of January each year, publish in the Official Gazzette a list of notaries appointed by that Government and in practice at the beginning of that year together with such details pertaining to them as may be prescribed.
every Notary shall have and use, as occasion may arise, seal of such form and design as may be prescribed.
(1) A notary may do all or any of the following acts by virtue of his office , namely:-
(a) verify, authenticate, certify or attest the execution of any instrument.
(b) Present any promissory note, hundi or bill of exchange for acceptance or payment or demand better security.
(c) note to protest the dishonour by non acceptance or non payment of any promissory note, hundi, bill of exchange or protest for better security or prepare acts of honour under the Negotiable Instruments Act, 1881, or serve notice of such note or protest.
(d) note and draw up ship’s protest, boat’s protest or protest relating to de moorage and other commercial matters.
(e) administer oath to, or take affidavit from, any person,
(f) prepare bottom and respondent bonds, charter parties and other mercantile documents.
(g) prepare, attest or authenticate any instrument intended to take effect in any country or place outside India in such form and language as many conform to the law of the place where such deed is intended to operate.
(h) translate, and verify the translation of, any document from one language to another.
(i) any other act which may be prescribed.
(2) No act specified in sub-section (1) shall be deemed to be a notaries act except when it is done by a notary under his signature and official seal.
(1) Subject to the provision of this section, no person shall practice as a notary or do any notaries act under the official seal of notary unless he holds a certificate of practice in force issued to him under section 5.
Provided that nothing in this sub-section shall apply to the presentation of any promissory note, hundi or bill of exchange for acceptance or payment by the clerk of a notary acting on behalf of such notary.
(2) Nothing contained in sub-section (1) shall, until the expiry of two years from the commencement of this Act, apply to any such person as is referred to in the provision to clause (d) of section 2.
Provided that in relation to Jammu and Kashmir the said period of two years shall be computed from the date on which this act comes in to force in that state.
The Government appointing any notary may, by order, remove from the Register maintained by it under section 4, the names of the notary if he:-
(a) makes a request to that effect; or
(b) has not paid any prescribed fee required to be paid by him; or
(c) is an undischarged solvent; or
(d) has been found, upon inquiry in the prescribed manner, to be guilty of such professional or other misconduct as, in the opinion of the government, renders him unfit to practice as a notary.
Any reference to a notary public in any other law shall be construed as a reference to a notary entitled to practice under this act.
Any person who –
(a) falsely represents that he is a notary without being appointed as such, or
(b) practices as a notary or does any notaries act in contravention of section 9, shall be punishable with imprisonment for a term which may extend to three months, or with fine, or with both.
(1) No court shall take cognizance of any offence committed by a notary in the exercise or purported exercise of his function under this act save upon complaint in writing made by an officer authorised by the Central Government or State Government by general or special order in this behalf.
(2) No Magistrate other than a Presidency Magistrate or a Magistrate of the first class shall try an offence punishable under this act.
If the Central Government is satisfied that by law or practice of any country or place outside India, the notaries act done by notaries within India are recognised for all or any limited purposes in that country or place, the Central Government may, by notification in the Official Gazette, declare the notorial acts lawfully done by notaries within such country or place shall be recogniseed within India for all purposes or, as the case may be, for such limited purposes as may be notified in the notification.
(1) The Central Government may, by notification in the Official Gazette, make rules to carry out the purposes of this act.
(2) In particular, and without prejudice to the generality of the forgoing power, such rules may provide for all or any of the following matters, namely:-
(a) the qualification of a notary, the form and manner in which applications for the appointment as a notary may be made and the disposal of such applications;
(b) the certificates, testimonials or proofs as to character, integrity, ability and competence which any person applying for appointment as a notary may be required to furnish;
(c) the fee payable for appointment as a notary and for the issue and renewal of sa certificate of practice, and exemption , whether wholly or in part, from such fees in specified classes of cases;
(d) the fees payable to a notary for doing any notarial act;
(e) the form of registers and the particulars to be entered therein;
(f) the form and design of the seal of notary;
(g) the manner in which inquiries into allegations of professional or other misconduct of notaries may be made;
(h) the acts which a notary may do in addition to those specified in section 8 and the manner in which a notary may perform his functions;
(i) any other matter which has to be, or may be prescribed.
(3) Every rule made by the central government under this act shall be laid as soon as may be after it is made, before each house of parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions and if before the expiry of session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.
Repealed by the repealing and Amending Act, 1957 (36 of 1957), section 2 and schedule I.
Section 1. SHORT TITLE, EXTENT AND COMMENCEMENT.
(1) This Act may be called the Gift-tax Act, 1958.
(2) 1 It extends to the whole of India except the State of Jammu and Kashmir.
(3) It shall be deemed to have come into force on the 1st day of April, 1958.
Section 2. DEFINITIONS.
In this Act, unless the context otherwise requires,—
1[***]
2[(ii) “Appellate Tribunal” means the Appellate Tribunal constituted under section 252 of the Income-tax Act;]
2[(iii) “assessee” means a person by whom gift-tax or any other sum of money is payable under this Act, and includes—
(a) every person in respect of whom any proceeding under this Act has been taken for the determination of gift-tax payable by him or by any other person or the amount of refund due to him or such other person;
(b) every person who is deemed to be an assessee under this Act;
(c) every person who is deemed to be an assessee in default under this Act;]
3[(iiia) “Assessing Officer” means the Assistant Commissioner or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of the Income-tax Act which apply for the purposes of gift-tax under section 7 of this Act, and also the Deputy Commissioner who is directed under clause (b) of sub-section (4) of the said section 120 to exercise or perform all or any of the powers and functions conferred on or assigned to the Assessing Officer under that Act;]
2[(iv) “assessment” includes re-assessment;
(iva) “ assessment year” means the period of twelve months commencing on the 1st day of April, every year;]
(v) “Board” means the 4[Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of 1963))];
5[(va) “charitable purpose” includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility 6[***];]
7[***]
8[***]
9[(vii) the experessions “company”, “Indian company” and “company in which the public are substantially interested” shall have the meanings respectively assigned to them under section 2 of the Income-tax Act;]
10[***]
(viii) “donee” means any person who acquires any property under a gift, and, where a gift is made to a trustee for the benefit of another person, includes both the trustee and the beneficiary;
(ix) “donor” means any person who makes a gift;
(x) “executor” means an executor or adiminstrator of the estate of a deceased person;
11[(xi) the expressions “firm”, “partner” and “partnership” shall have the meanings respectively assigned to them under section 2 of the Income-tax Act;]
(xii) “gift” means the transfer by one person to another of any existing movable or immovable property made voluntarily and without consideration in money or money’s worth, and 12[includes the transfer or conversion of any property referred to in section 4, deemed to be a gift under that section];
13[Explanation.—A transfer of any building or part thereof referred to in clause (iii), clause (iiia) or clause (iiib) of section 27 of the Income-tax Act, by the person who is deemed under the said clause to be the owner thereof made voluntarily and without consideration in money or money’s worth, shall be deemed to be a gift made by such person;]
14[***]
15[(xiv) “Income-tax Act” means the Income-tax Act, 1961 (43 of 1961);]
16[***]
17[(xvib) “legal representative” has the meaning assigned to it in clause (11) of section 2 of the Code of Civil Procedure, 1908 (5 of 1908);]
18[***]
(xviii) “person” includes a Hindu undivided family or a company or an association or a body of individuals or persons, whether incorporated or not;
(xix) “prescribed” means prescribed by rules made under this Act;
(xx) “previous year”, in relation to any assessment year—
(a) in the case of an assessee 19[having no source of income, profits or gains or] having a source of income, profits or gains in respect of which there is no previous year under the Income-tax Act, means the twelve months ending on the 31st day of March immediately preceding the assessment year;
20[***]
(c) in the case of any other assessee, means the previous year as defined in 21[section 3] of the Income-tax Act if an assessment were to be made under that Act for that year:
22[Provided that where a person who has not been assessed under this Act for any assessment year makes a gift on a date which does not fall within a previous year as defined in sub-clause (a) 23[***] or sub-clause (c), the previous year shall be the twelve months ending on the 31st day of March immediately preceding the assessment;
24[***]]
(xxi) “principal officer”, used with reference to a company or any association of persons, means—
(a) the secretary and treasurer, manager, managing agent, managing director or agent of the company or association; or
(b) any person connected with the management of the affairs of the company or association upon whom the 25[Assesssing Officer] has served a notice of his intention of treating him as the principal officer thereof;
(xxii) “property” includes any interest in property, movable or immovable;
(xxiii) “taxable gifts” means gifts chargeable to gift-tax under this Act;
26[(xxiiia) territories to which this Act extends shall be deemed to include the Union territories of Dadra and Nagar Haveli, Goa, Daman and Diu, and Pondicherry—
(a) as respects any period for the purposes of section 5; and
(b) as respects any period included in the previous year, for the purposes of making any assessment for the assessment year commencing on the 1st day of April, 1963, or for any subsequent year;]
(xxiv) “transfer of property” means any disposition, conveyance, assignment, settlement, delivery, payment or other alienation of property and, without limiting the generality of the foregoing, includes—
(a) the creation of a trust in property;
(b) the grant or creation of any lease, mortgage, charge, easement, licence, power, partnership or interest in property;
(c) the exercise of a power of appointment 27[(whether general, special or subject to any restrictions as to the persons in whose favour the appointment may be made)] of property vested in any person; not the owner of the property, to determine its disposition in favour of any person other than the donee of the power; and
(d) any transaction entered into by any person with intent thereby to diminish directly or indirectly the value of his own property and to increase the value of the property of any other person;
28[(xxv) the expressions “Chief Commissioner”, “Director-General”, “Commissioner”, “Commissioner (Appeals)”, “Director”, 29[“Additional Director of Income-tax”, “Additional Commissioner of Income-tax”, “Additional Commissioner of Income-tax (Appeals)”, “Deputy Director”,] “Deputy Commissioner”, “Deputy Commissioner (Appeals)”, “Assistant Commsissioner”, “Income-tax Officer”, “Tax Recovery Officer” and “Inspector of Income-tax” shall have the meanings respectively assigned to them under section 2 of the Income-tax Act.]
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1. Clause (i) omitted by Act 4 of 1988, sec. 162(a) as amanded by Act 26 of 1988, sec. 88 (j) (i) (w.e.f. 1-4-1988).
2. Subs. by Act 53 of 1962, sec. 2(a) (w.e.f. 1-4-1963).
3. Ins. by Act 4 of 1988, Sec. 162 (b) as amended by Act 26 of 1988, sec. 88(j)(i) (w.e.f. 1-4-1988).
4. Subs. by Act 54 of 1963, sec. 5, for “Central Board of Revenue constituted under the Central Board of Revenue Act, 1924 (4 of 1924)” (w.e.f. 1-4-1963).
5. Ins. by Act 53 of 1962, sec. 2(b) (w.e.f. 1-4-1963).
6. The words “not involving the carrying on of any activity for profit” omitted by Act 67 of 1984, sec. 71(w.e.f. 1-4-1984).
7. Clause (vi) omitted by Act 4 of 1988, sec. 162 (c)(i) as amended by Act 26 of 1988, sec. 88 (j) (iii) (w.e.f. 1-4-1988).
8. Clause (via) omitted by Act 4 of 1988, sec. 162 (c) (i) as amended by Act 26 of 1988, sec. 88 (j) (iii) (w.e.f. 1-4-1988). Earlier clause (via) was ins. by Act 29 of 1977, sec. 39 and Sch. V (w.e.f. 10-7-1978).
9. Subs. by Act 4 of 1988, sec. 162 (d) (w.e.f. 1-4-1989).
10. Clause (viia) omitted by Act 4 of 1988 sec. 162 (c)(i) as amended by Act 26 of 1988, sec. 88(j) (iii) (w.e.f. 1-4-1988). Earlier clause (viia) was ins. by Act 53 of 1962, sec. 2 (c) (w.e.f. 1-4-1963).
11. Subs. by Act 4 of 1988, sec. 162 (e) (w.e.f. 1-4-1989).
12. Subs. by Act 32 of 1971, sec. 37 (a), for “includes the transfer of any property deemed to be a gift under section 4 (w.e.f. 1-4-1972).
13. Ins. by Act 11 of 1987, sec. 90 (w.e.f. 1-4-1988).
14. Clause (xiii) omitted by Act 4 of 1988, sec. 162 (c) (i) as amended by Act, 26 of 1988, sec. 88(j) (iii) (w.e.f. 1-4-1988).
15. Subs. by Act 53 of 1962, sec. 2(d) (w.e.f 1-4-1963).
16. Clauses (xv), (xvi) and (xvia) omitted by Act 4 of 1988, sec. 162 (c) (i) as amended by Act 26 of 1988, sec. 88(j) (iii) (w.e.f 1-4-1988). Earlier clause (xvia) was ins. by Act 53 of 1962, sec. 2 (e) (w.e.f. 1-4-1963).
17. Ins. by Act 53 of 1962, sec. 2(e).
18. Clause (xvii) Omitted by Act 4 of 1988, sec. 162 (c) (ii) as amended by Act 26 of 1988, sec. 88(j) (iii) (w.e.f. 1-4-1989)
19. Ins. by Act 12 of 1959, sec. 27 (i) (w.e.f. 1-4-1959).
20. Sub-clause (b) omitted by Act 4 of 1988, sec. 162(f) (i) (w.e.f. 1-4-1989).
21. Subs. by Act 53 of 1962, sec. 2(f) (ii), for “Clause (ii) of section 2” (w.e.f. 1-4-1963).
22. Two provisons were ins. by Act 12 of 1959, sec. 27(ii) (w.e.f. 1-4-1959).
23. The words “or sub-clause (b)” omitted by Act 4 of 1988, sec. 162 (f) (ii) (w.e.f. 1-4-1989).
24. Second Proviso omitted by Act 4 of 1988, sec. 162(f) (iii) (w.e.f. 1-4-1989).
25. Subs by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
26. Ins. by Taxation Laws (Extension to Union Territories) Regulation, 1963 (w.e.f. 1-4-1963).
27. Ins. by Act 44 of 1980, sec. 42(a) (w.e.f. 1-4-1980).
28. Ins. by Act 4 of 1988, sec. 162 (g) as amended by Act 26 of 1988, sec. 88(j)(iv) (w.e.f. 1-4-1988).
29. Ins. by Act 32 of 1994, sec. 54 (w.e.f. 1-6-1994).
Section 3. CHARGE OF GIFT-TAX.
1[(1)] Subject to the other provisions contained in this Act, there shall be charged for every 2[assessment year] commencing on and from the 1st day of April, 1958, 3[but before the 1st day of April, 1987,] a tax (hereinafter referred to as gift-tax) in respect of the gifts, if any, made by a person during the previous year (other than gifts made before the 1st day of April, 1957) at the rate or rates specified in 4[Schedule I].
2[(2) 6[Subject to the other provisions (including provisions for the levy of additional gift-tax) contained in this Act], there shall be charged for every assessment year commencing on and from the 1st day of April, 1987, gift-tax in respect of the gifts, if any, made by a person during the previous year, at the rate of thirty per cent. on the value of all taxable gifts.]
\7[(3) Notwithstanding anything contained in sub-section (2), the provisions of this Act shall cease to apply and shall have no effect whatsoever in respect of any gift made on or after the 1st day of October, 1998.]
—————
1. Section 3 re-numbered as sub-section (1) thereof by Act 23 of 1986, sec. 41 (w.e.f. 1-4-1987).
2. Subs. by Act 53 of 1962, sec. 3, for “financial year” (w.e.f. 1-4-1963).
3. Ins. by Act 23 of 1986, sec. 41 (a) (w.e.f. 1-4-1987).
4. Subs. by Act 3 of 1989, sec. 79, for “Schedule” (w.e.f. 1-4-1989).
5. Ins by Act 23 of 1986, sec. 41 (b) (w.e.f. 1-4-1987).
6. Subs. by Act 4 of 1988, sec. 163, for “Subject to the other
provisions contained in this Act”, (w.e.f. 1-4-1989).
7. Ins. by Act 21 of 1998, sec. 75 (w.e.f. 1-10-1998).
Section 4. GIFTS TO INCLUDE CERTAIN TRANSFERS.
1(1) For the purposes of this Act, –
(a) where property is transferred otherwise than for adequate consideration, the amount by which the 2value of the property as on the date of the transfer and determined in the manner laid down in Schedule II exceeds the value of the consideration shall be deemed to be a gift made by the transferor :
3Provided that nothing contained in this clause shall apply in any case where the property is transferred to the Government or where the value of the consideration for the transfer is determined or approved by the Central Government or the Reserve Bank of India;
(b) where property is transferred for a consideration which, having regard to the circumstances of the case, has not passed or is not intended to pass either in full or in part from the transferee to the transferor, the amount of the consideration which has not passed or is not intended to pass shall be deemed to be a gift made by the transferor;
(c) 38 where there is a release, discharge, surrender, forfeiture or abandonment of any debt, contract or other actionable claim or of any interest in property by any person, the value of the release, discharge, surrender, forfeiture or abandonment to the extent to which it has not been found to the satisfaction of the 4Assessing Officer to have been bona fide, shall be deemed to be a gift made by the person, responsible for the release, discharge, surrender, forfeiture or abandonment;
(d) where a person absolutely entitled to property causes or has caused the same to be vested in whatever manner in himself and any other person jointly without adequate consideration and such other person makes an appropriation from or out of the said property, the amount of the appropriation used for the benefit of the person making the appropriation or for the benefit of any other person shall be deemed to be a gift made in his favour by the person who causes or has caused the property to be so vested;
5(e) where a person who has an interest in property as a tenant for a term or for life or a remainderman surrenders or relinquishes his interest in the property or otherwise allows his interest to be terminated without consideration or for a consideration which is not adequate, the value of the interest so surrendered, relinquished or allowed to be terminated or, as the case may be, the amount by which such value exceeds the consideration received, shall be deemed to be a gift made by such person.
6(2) where in the case of an individual being a member of a Hindu undivided family, any property having been the separate property of the individual has been converted by the individual into property belonging to the family through the act of impressing such separate property with the character of property belonging to the family or throwing it into the common stock of the family (such property being hereafter in this sub-section referred to as the converted property), then, notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, for the purpose of computation of the taxable gifts made by the individual, the individual shall be deemed to have made a gift of so much of the converted property as the members of the Hindu undivided family other than such individual would be entitled to, if a partition of the converted property had taken place immediately after such conversion.
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1. Section 4 re-numbered as sub-section (1) thereof by Act 32 of 1971, sec. 37 (b) (w.e.f. 1-4-1972).
2. Subs. by Act 49 of 1991, sec. 84, for “market value of the property at the date of the transfer”. (w.e.f. 1-4-1992).
3. Ins. by Act 25 of 1975, sec. 29 (w.r.e.f. 1-4-1974).
4. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
5. Ins. by Act 44 of 1980, sec. 42 (b) (w.e.f. 1-4-1980).
6. Ins. by Act 32 of 1971, sec. 37 (b) (w.e.f. 1-4-1972).
Section 5. EXEMPTION IN RESPECT OF CERTAIN GIFTS.
(1) Gift-tax shall not be charged under this Act in respect of gifts made by any person-
(i) of immovable property situate outside the territories to which this Act extends;
(ii) of movable property situate outside the said territories unless the person –
(a) being an individual, is a citizen of India and is ordinarily resident in the said territories; or
(b) not being an individual, is resident in the said territories, during the previous year in which the gift is made;
1[(iia) being an individual who is not resident in India, to any person resident in India, of foreign currency or other foreign exchange [as defined, respectively, in clause (c) and clause (d) of section 2 of the Foreign Exchange Regulation Act, 1947 (7 of 1947)] remitted from a country outside India in accordance with the provisions of the said Act, and any rules made thereunder, during the period commencing on the 26th day of October, 1965, and ending on the 28th day of February, 1966 or such later date as the Central Government may, by notification in Official Gazette, specify in this behalf.
Explanation.—For the purposes of this clause, the expression “resident in India” shall have the meaning assigned to it in the Income-tax Act;]
2[(iib) being a person resident outside India, out of the moneys standing to his credit in a Non-resident (External) Account in any bank in India in accordance with the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder.
Explanation—For the purposes of this clause, “person resident outside India” has the meaning assinged to it in clause (q) of section 2 of the Foreign Exchange Regulation Act, 1973 (46 of 1973);
(iic) being a citizen of India, or a person of Indian origin, who is not resident in India, to any relative of such person in India, of convertible foreign exchange remitted from a country outside India in accordance with the provisisons of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder.
Explanation.—For the purposes of this clause and clause (iid),—
(a) a person shall be deemed to be of Indian origin if he or either of his parents or any of his grand-parents was born in undivided India;
(b) “convertible foreign exchange” means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder;
(c) “relative” has the meaning assigned to it in clause (41) of section 2 of the Income-tax Act;
(d) “resident in India” shall have the meaning assigned to it in the Income-tax Act;
(iid) being a citizen of India or a person of Indian origin, who is not resident in India, to any relative of such person in India of property in the form of 3[any foreign exchange asset as defined in clause (b) of section 115C of the Income-tax Act];]
4[(iie) being an individual who is a non-resident Indian, once out of the moneys standing to his credit in an account opened and operated in accordance with the Non-resident (Non-repatriable) Rupee Deposit Scheme, 1992.
(iii) of property in the form of savings certificates issued by the Central Government, which that Government, by notification in the Official Gazette, exempts from gift-tax;
5[***]
6[(iiib) of property in the form of Special Bearer Bonds, 1991;]
7[(iiic) 8[being an individual or a Hindu undivided family, of property in the form of such Capital Investment Bonds] as the Central Government may, by notification in the Official Gazette, specify in this behalf subject to a maximum of rupees ten lakhs in value in the aggregate in one or more previous years:
Provided that the exemption conferred by this clause shall be available only to a person who has initially subscribed to the said Bonds;]
9[(iiid) being an individual or a Hindu undivided family, of property in the form of such Relief Bonds, as the Central Government may, by notification in the Official Gazette, specify in this behalf subject to a maximum of rupees five lakhs in value in the aggregate in one or more previous years:
Provided that the exemption conferred by this clause shall be available only to a person who has initially subscribed to the said Bonds;]
10[(iiie) being an individual who is a non-resident Indian, 11[of property in the form of the bonds specified under sub-clause (iid) of clause (15) of section 10 of the Income-tax Act:
Provided that] where an individual, who is a non-resident Indian in any previous year in which the bonds are acquired, becomes a resident in India in any subsequent year, the provisions of this clause shall apply in respect of the gifts of property referred to in this clause in such subsequent year or any year thereafter.
Explanation.—For the purposes of this clause, the expressions—
12[***]
(b) “non-resident Indian” shall have the meaning assigned to it clause (e) of section 115C of the Income-tax Act;]
(iv) to the Government or any local authority 13[or any authority referred to in clause (20A) of section 10 of the Income-tax Act];
(v) to any institution or fund established 14[or deemed to be established] for a charitable purpose to which the provisions of 15[section 80G] of the Income-tax Act apply;
16[(va) (i) to such temple, mosque, gurdwara, church or other place as has been notified by the Central Government for the purposes of 17[clause (b) of sub-section (2) of section 80G of the Income-tax Act]; or
(ii) by way of settlement on trust, of property the income from which, according to the deed of settlement, is to be used exclusively in connection with the temple, mosque, gurdwara, church or other place specified therein and notified as aforesaid;]
18[***]
(vii) to any relative dependent upon him for support and maintenance, on the occasion of the marriage of the relative, subject to a maximum of rupees 19[one hundred thousand] in value in respect of the marriage of each such relative;
20[***]
(x) under a will;
(xi) in contemplation of death;
(xii) for the education of his children, to the extent to which the gifts are proved to the satisfaction of the 21[Assessing Officer] as being reasonable having regard to the circumstances of the case;
(xiii) being an employer, to any employee by way of bonus, gratuity or pension or to the dependents of a deceased employee, to the extent to which the payment of such bonus, gratuity or pension is proved to the satisfaction of the 27[Assessing Officer] as being reasonable having regard to the circumstances of the case and is made solely in recognition of the services rendered by the employee;
21[***]
(xv) to any person in charge of any such Bhoodan or Sampattidan movement as the Central Government may, by notification in the Official Gazette, specify;
23[***]
24[(1A) Any reference in clause (v) 25[***] of sub-section (1) to charitable purpose in relation to a gift made on or after the 1st day of April, 1964, shall be construed as not including a purpose the whole or substantially the whole of which is of a religious nature.]
(2) Without prejudice to the provisions contained in sub-section (1), gift-tax shall not be charged under this Act in respect of gifts made by any person during the previous year, subject to a maximum of rupees 26[thirty thousand] in value.
27[***]
Explanation.—For the purposes of this section,—
(a) an individual shall be deemed to be ordinarily resident in the territories to which this Act extends during the previous year in which the gift is made if during that year he is regarded as a resident but not as not ordinarily resident 28[within the meaning of section 6 of the Income-tax Act, subject to the modification that references in that section to India shall be construed as references to the territories to which this Act extends];
(b) a Hindu undivided family firm or other association of persons shall be deemed to be resident in the territories to which this Act extends during any previous year unless, during that year, the control and management of its affairs was situated wholly outside the said territories;
(c) a company shall be deemed to be resident in the territories to which this Act extends during the previous year, if—
(i) it is a company formed and registered under the Companies Act, 1956 (1 of 1956), or is an existing company within the meaning of that Act; or
(ii) during that year, the control and management of that company was situated wholly in the said territories;
(d) “gifts made in contemplation of death” has the same meaning as in section 191 of the Indian Succession Act, 1925 (39 of 1925).
—————
1. Ins. by Act 13 of 1966, sec. 41 (a)(i) (w.e.f. 1-4-1966).
2. Ins. by Act 14 of 1982, sec. 38 (a) (w.e.f. 1-4-1983).
3. Subs. by Act 11 of 1983, sec. 42 (a) (w.e.f. 1-4-1984).
4. Ins. by Act 38 of 1993, sec. 41 (a)(i) (w.e.f. 1-4-1993).
5. Clause (iiia) omitted by Act 23 of 1986, sec. 42 (a) (w.e.f. 1-4-1987). Earlier clause (iiia) was ins. by Act 41 of 1975, sec. 7 (w.e.f. 4-12-1965).
6. Ins. by Act 7 of 1981, sec. 7 (w.e.f. 12-1-1981).
7. Ins. by Act 14 of 1982, sec. 38(b) (w.e.f 1-4-1983).
8. Subs. by Act 11 of 1983, sec. 42(b), for “of property in the form of such Capital Investment Bonds”, (w.e.f. 1-4-1983).
9. Ins. by Act 26 of 1988, sec. 67 (w.e.f. 1-4-1988).
10. Ins. by Act 3 of 1989, sec. 80 (w.e.f. 1-4-1989).
11. Subs. by Act 49 of 1991, sec. 85 (a) (w.e.f. 1-4-1991).
12. Clause (a) omitted by Act 49 of 1991, sec. 85(b) (w.e.f. 1-4-1991).
13. Ins. by Act 66 of 1976, sec. 28 (w.e.f. 1-4-1977).
14. Ins. by Act 21 of 1973, sec. 21(w.e.f. 1-4-1974).
15. Subs. by Act 32 of 1971, sec. 37 (c)(i) for “section 88”(w.r.e.f. 1-4-1968).
16. Ins. by Act 10 of 1965, sec. 71 (i) (w.e.f. 1-4-1965).
17. Subs. by Act 32 of 1971, sec. 37 (c) (ii), for “sub-section (6) of section 88 of the Income-tax Act” (w.r.e.f. 1-4-1968).
18. Clause (vi) omitted by Act 23 of 1986, sec. 42 (a) (w.e.f. 1-4-1987).
19. Subs. by Act 32 of 1994, sec. 55, for “thirty thousand” (w.e.f. 1-4-1995). Earlier the words “thirty thousand” were subs. by Act 38 of 1993, sec. 41(a) (ii), for “ten thousand” (w.e.f. 1-4-1994).
20. Clauses (viii) and (ix) omitted by Act 23 of 1986, sec. 42 (a) (w.e.f. 1-4-1987).
21. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988)
22. Clause (xiv) omitted by Act 23 of 1986, sec. 42 (a) (w.e.f 1-4-1987).
23. Clause (xvi) omitted by Act 23 of 1986, sec. 42 (a) (w.e.f. 1-4-1987). Earlier clause (xvi) was omitted by Act 54 of 1972, sec. 6 (w.e.f. 1-4-1973) and was ins. by Act 67 of 1984, sec. 72 (w.e.f. 1-4-1985).
24. Ins. by Act 15 of 1965, sec. 21 (i) (w.e.f. 1-4-1964).
25. The words “or clause (vi)” omitted by Act 23 of 1986, sec. 42 (b) (w.e.f. 1-4-1987).
26. Subs. by Act 38 of 1993, sec. 41(b), for “twenty thousand” (w.e.f. 1-4-1994). Earlier the words “twenty thousand” were subs. by Act 23 of 1986, sec. 42(c), for “five thousand” (w.e.f. 1-4-1987) and the words “five thousand” were subs. by Act 19 of 1970, sec. 27(a), for “ten thousand” (w.e.f. 1-4-1971), and still earlier the words “ten thousand” were subs. by Act 13 of 1966, sec. 41(a) (ii) (w.e.f. 1-4-1966). Prior to this the words “five thousand” were subs. by Act 5 of 1964, sec. 52 (a) (ii), for “ten thousand”(w.e.f. 1-4-1964).
27. Sub-section (3) omitted by Act 23 of 1986, sec. 42 (d) (w.e.f. 1-4-1987).
28. Subs. by Act 53 of 1962, sec. 4 (ii), for “in the taxable territories within the meaning of the Income-tax Act” (w.e.f. 1-4-1963).
Section 6. VALUE OF GIFTS, HOW DETERMINED.
1[6. Value of gifts, how determined.— (1) Subject to the provisions of sub-section (2), the value of any property, other than cash, transferred by way of gift shall, for the purpose of this Act, be its value as on the date on which the gift was made and shall be determined in the manner laid down in Schedule II.
(2) Where a person makes a gift which is not revocable for a specified period, the value of the property gifted shall be the capitalised value of the income from such property during the period for which the gift is not revocable.
—————
1. Subs. by Act 3 of 1989, sec. 81 (w.e.f. 1-4-1989).
Section 6A.
1[***]
—————
1. Section 6A omitted by Act 23 of 1986, sec. 43 (w.e.f. 1-4-1987). Earlier Section 6A was ins. by Act 5 of 1964, sec. 52(b) (w.e.f. 1-4-1964) and was omitted by Act 13 of 1966, sec. 41 (b) (w.e.f. 1-4-1966) and was again ins. by Act 41 of 1975, sec. 106 (w.e.f. 1-4-1976).
Section 7. GIFT-TAX AUTHORITIES AND THEIR JURISDICTION.
1[7. Gift-tax authorities and their jurisdiction.—The income-tax authorities specified in section 116 the Income-tax Act shall be the gift-tax authorities for the purposes of this Act and every such authority shall exercise the powers and perform the functions of a gift-tax authority under this Act in respect of any person within his jurisdiction, and for this purpose his jurisdiction under this Act shall be the same as he has under the Income-tax Act by virtue of orders or directions issued under section 120 of that Act (including orders or directions assigning concurrent jurisdiction) or under any other provision of that Act.
Explanation : For the purposes of this section, the gift-tax authority having jurisdiction in relation to a person who has no income assessable to income-tax under the Income-tax Act shall be the gift-tax authority having jurisdiction in respect of the area in which that person resides.
—————
1. Subs. by Act 4 of 1988, sec. 164 (w.e.f.1-4-1988).
Section 7A.
[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]
1[***]
—————
1. Section 7A omitted by Act 4 of 1988, sec. 165 (w.e.f. 1-4-1988). Earlier section 7A was ins. by Act 53 of 1962, sec. 5 (w.e.f. 1-4-1963) and was subs. by Act 20 of 1967, sec. 35 (b) (w.e.f. 1-4-1967) and again subs. by Act 67 of 1984), sec. 78 (w.e.f. 1-10-1984).
Section 7AA.
[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]
1[***]
—————
1. Section 7AA omitted by Act 4 of 1988, sec. 165 (w.e.f. 1-4-1988). Earlier section 7AA was ins. by Act 41 of 1975, sec. 108 (w.e.f. 1-10-1975) and was subs. by Act 29 of 1977), sec. 39 and Sch. V, Pt. III (w.e.f. 10-7-1978).
Section 7B.
[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]
1[***]
—————
1. Section 7B omitted by Act 4 of 1988, sec. 165 (w.e.f. 1-4-1988). Earlier section 7B was subs. along with section 7A by Act 20 of 1967. sec. 35 (b) (w.e.f. 1-4-1967).
Section 8. CONTROL OF GIFT-TAX AUTHORITIES.
1[8. Control of gift-tax authorities. Section 118 of the Income-tax Act and any notification issued thereunder shall apply in relation to the control of gift-tax authorities as they apply in relation to the control of the corresponding income-tax authorities, except to the extent to which the Board may, by notification in the Official Gazette, otherwise direct in respect of any gift-tax authority.
—————
1. Subs. by Act 4 of 1988, sec. 164 (w.e.f. 1-4-1988).
Section 8A.
[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]
1[***]
—————
Section 9. INSTRUCTIONS TO SUBORDINATE AUTHORITIES.
1[9. Instructions to subordinate authorities. —(1) The Board may, from time to time, issue such orders, instructions and directions to other gift-tax authorities as it may deem fit for the proper administration of this Act, and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board :
Provided that no such orders, instructions or directions shall be issued –
(a) so as to require any gift-tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or
(b) so as to interfere with the discretion of the Deputy Commissioner (Appeals) or Commissioner (Appeals) in the exercise of his appellate functions.
(2) Without prejudice to the generality of the foregoing power, –
(a) the Board may, if it considers it necessary or expedient so to do, for the purpose of proper and efficient management of the work of assessment and collection of revenue, issue, from time to time (whether by way of relaxation of any of provisions of sections 213, 14, 15, 16B, 17 and 34 or otherwise), general or special orders in respect of any class of cases, setting forth directions or instructions (not being prejudicial to assessees) as to the guidelines, principles or procedures to be followed by the gift-tax authorities in the work relating to assessment or collection of revenue or the initiation of proceedings for the imposition of penalties and any such order may, if the Board is of opinion that it is necessary in the public interest so to do, be published and circulated in the prescribed manner for general information;
(b) the Board may, if it considers it desirable or expedient so to do for avoiding genuine hardship in any case or class of cases, by general or special order, authorise any gift-tax authority, not being a Deputy Commissioner (Appeals) or Commissioner (Appeals) to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified by or under this Act for making such application or claim and deal with the same on merits in accordance with law.
—————
1. Subs. by Act 4 of 1988, sec. 164 (w.e.f. 1-4-1988).
2. Subs. by Act 12 of 1990, sec. 59, for “15, 16” (w.e.f. 1-4-1990).
Section 9A.
[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]
1[***]
—————
1. Section 9A omitted by Act 4 of 1988, sec. 165 (w.e.f. 1-4-1988). Earlier section 9A was ins. by Act 53 of 1962, sec.6 (w.e.f. 1-4-1963).
Section 10. JURISDICTION OF ASSESSING OFFICERS AND POWER TO TRANSFER CASES.
1[10. Jurisdiction of Assessing Officers and power to transfer cases.—(1) The provisions of sections 124 and 127 of the Income-tax Act shall, so far as may be, apply for the purposes of this Act as they apply for the purposes of the Income-tax Act, subject to the modifications specified in sub-section (2).
(2) The modifications referred to in sub-section (1) shall be the following namely :-
(a) in section 124 of the Income-tax Act, – (i) in sub-section (3), references to the provisions of the Income-tax Act shall be construed as references to the corresponding provisions of the Gift-tax Act; (ii) sub-section(5) shall be omitted;
(b) in section 127 of the Income-tax Act, in the Explanation below sub-section 2[(4)], references to proceedings under the Income-tax Act shall be construed as including references to proceedings under the Gift-tax Act.]
—————
1. Subs. by Act 4 of 1988, sec. 164 (w.e.f. 1-4-1988).
2. Subs. by Act 3 of 1989, sec. 82, for “(5)” (w.r.e.f. 1-4-1988).
Section 11.
[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]
1[***]
—————
1. Section 11 omitted by Act 4 of 1988, sec. 165 (w.e.f. 1-4-1988). Earlier section 11 was subs. by Act 53 of 1962, sec. 7 (w.e.f. 1-4-1963) and was again subs. by Act 20 of 1967, sec. 35 (c) (w.e.f. 1-4-1967).
Section 11A.
[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]
1[***]
—————
1. Section 11A omitted by Act 4 of 1988,sec. 165 (w.e.f. 1-4-1988). Earlier section 11A was ins. by Act 19 of 1970, sec. 27 (b) after renumbering the then section 11A as section 11AA (w.e.f. 1-4-1970)and the original section 11A was ins. by Act 20 of 1967, sec. 35 (f) (w.e.f.1-4-1967).
Section 11AA.
[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]
1[***]
—————
1. Section 11AA omitted by Act 4 of 1988, sec. 165 (w.e.f. 1-4-1988). Earlier section 11AA was ins. as section 11A by Act 20 of 1967, sec. 35 (f) (w.e.f. 1-4-1967) and the original section 11A was re-numbered as section 11AA by Act 19 of 1970, sec. 27 (b) (w.e.f. 1-4-1970).
Section 11B.
[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]
1[***]
—————
1. Section 11B omitted by Act 4 of 1988, sec. 165 (w.e.f. 1-4-1988). Earlier section 11A was subs. along with section 11 by Act 53 of 1962, sec. 7 (w.e.f. 1-4-1963), and section 11A was renumbered as section 11B by Act 20 of 1967, sec. 35 (7) (w.e.f. 1-4-1967).
Section 12.
[OMITTED BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, W.E.F. 1-4-1988]
1[***]
—————
1. Section 12 omitted by Act 4 of 1988, sec. 165 (w.e.f. 1-4-1988).
Section 13. RETURN OF GIFTS.
1(1) Every person who during a previous year has made any taxable gifts, or is assessable in respect of the taxable gifts made by any other person under this Act, which, in either case, exceeded the maximum amount not chargeable to gift-tax, shall, on or before the 30th day of June of the corresponding assessment year, furnish a return of such gifts in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed.
(2) Notwithstanding anything contained in any other provision of this Act, a return which shows the amount of taxable gifts below the maximum amount which is not chargeable to tax shall be deemed never to have been furnished :
Provided that this sub-section shall not apply to a return furnished in response to notice under section 16.
2[***]
—————
1. Subs. by Act 4 of 1988, sec. 166(a) (w.e.f.1-4-1989).
2. Sub-section (3) omitted by Act 4 of 1988, sec. 166(b) (w.e.f. 1-4-1989).
Section 14. RETURN AFTER DUE DATE AND AMENDMENT OF RETURN.
1 RETURN AFTER DUE DATE AND AMENDMENT OF RETURN. – If any person has not furnished a return within the time allowed under sub-section (1) of section 13 or by a notice issued under clause (i) of sub-section (4) of section 15, or having furnished a return discovers any omission or wrong statement therein, he may furnish a return or a revised return, as the case may be, at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier :
Provided that –
(a) where such return or revised return relates to the assessment year commencing on the 1st day of April, 1987, or any earlier assessment year, it may be furnished at any time up to and inclusive of the 31st day of March, 1990 or before the completion of the assessment, whichever is earlier;
(b) where such return or revised return relates to the assessment year commencing on the 1st day of April, 1988, it may be furnished at any time up to and inclusive of the 31st day of March, 1991 or before the completion of the assessment, whichever is earlier.
—————
1. Subs. by Act 4 of 1988, sec. 167 (w.e.f. 1-4-1989).
Section 14A. RETURN BY WHOM TO BE SIGNED.
1 RETURN BY WHOM TO BE SIGNED. The return made under section 13 or section 14 shall be signed and verified –
2 (a) in the case of an individual, – (i) by the individual himself;
(ii) where he is absent from India, by the individual or by some person duly authorised by him in this behalf;
(iii) where he is mentally incapacitated from attending to his affairs, by his guardian or any other person competent to act on his behalf; and
(iv) where, for any other reason, it is not possible for the individual to sign the return, by any person duly authorised by him in this behalf :
Provided that in a case referred to in sub-clause (ii) or sub-clause (iv), the person signing the return holds a valid power of attorney from the individual to do so, which shall be attached to the return;
(b) in the case of a Hindu undivided family, by the Karta, and, where the Karta is absent from India or is mentally incapacitated from attending to his affairs, by any other adult member of such family;
(c) in the case of a company, by the managing director thereof or where for any unavoidable reason such managing director is not able to sign and verify the return, or where there is no managing director, by any director thereof :
Provided that where the company is not resident in India, the return may be signed and verified by a person who holds a valid power of attorney from such company to do so, which shall be attached to the return :
Provided further that, –
(a) where the company is being wound up, whether under the orders of the Court or otherwise, or where any person has been appointed as the receiver of any assets of the company, the return shall be signed and verified by the liquidator referred to in sub-section (1) of section 178 of the Income-tax Act;
(b) where the management of the company has been taken over by the Central Government or any State Government under any law, the return of the company shall be signed and verified by the principal officer thereof.
(d) in the case of a firm, by the managing partner thereof or where for any unavoidable reason such managing partner is not able to sign and verify the return, or where there is no managing partner as such, by any partner thereof, not being a minor;
(e) in the case of any other association, by any member of the association or the principal officer thereof; and
(f) in the case of any other person, by that person or by some person
competent to act on his behalf.
————
1. Ins. by Act 53 of 1962, sec. 11 (w.e.f. 1-4-1963).
2. Subs. by Act 4 of 1988, sec. 168 (i) (w.e.f.1-4-1989).
3. Clauses (c) and (d) subs. by Act 41 of 1975, sec. (111) (w.e.f. 1-4-1976).
4. Two provisions by Act 4 of 1988, sec. 168 (ii) (w.e.f. 1-4-1989).
Section 14B. SELF-ASSESSMENT.
1SELF-ASSESSMENT. (1) Where any tax is payable on the basis of any return furnished under section 13 or under section 14 or in response to a notice under clause (i) of sub-section (4) of section 15 or under section 16, after taking into account the amount of tax, if any, already paid under any provision of this Act, the assessee shall be liable to pay such tax, together with interest payable under any provision of this Act for any delay in furnishing the return, before furnishing the return and the return shall be accompanied by proof of payment of such tax and interest.
Explanation : Where the amount paid by the assessee under this sub-section falls short of the aggregate of the tax and interest as aforesaid, the amount so paid shall first be adjusted towards the interest payable as aforesaid and the balance, if any, shall be adjusted towards the tax payable.
(2) After the regular assessment under section 15 has been made, any amount paid under sub-section (1) shall be deemed to have been paid towards such regular assessment.
(3) If any assessee fails to pay the whole or any part of such tax or interest or both in accordance with the provisions of sub-section (1), he shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of the tax or interest or both remaining unpaid and all the provisions of this Act shall apply accordingly.
(4) The provisions of this section shall apply in respect of assessment for the assessment year commencing on the 1st day of April, 1989 and subsequent assessment years.
2[(4)The provisions of this section shall apply in respect of assessment for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years.]
—————
1. Ins. by Act 4 of 1988, sec. 169 (w.e.f. 1-4-1989).
2. Ins. by Act 36 of 1989, sec. 31 (w.e.f. 1-4-1989).
Section 15. ASSESSMENT.
1[15. Assessment.—(1) (a) Where a return has been made under section 13 or section 14 or in response to a notice under clause (i) of sub-section (4),—
(i) if any tax or interest is found due on the basis of such return after adjustment of any amount paid by way of tax or interest, an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice issued under section 31 and all the provisions of this Act shall apply accordingly; and
(ii) if any refund is due on the basis of such return, it shall be granted to the assessee;
Provided that in computing the tax or interest payable by, or refundable to the assessee, the following adjustments shall be made in the taxable gifts declared in the return, namely:—
i) any arithmetical errors in the return, accounts or documents accompanying it shall be rectified;
(ii) any exemption or deduction, which on the basis of the information available in such return, accounts or documents, is prima facie admissible but which is not claimed or made in the return, shall be allowed;
(iii) any exemption or deduction claimed or made in the return, which, on the basis of the information available in such return, accounts or documents, is prima facie inadmissible, shall be disallowed:
2[Provided further that where adjustments are made under the first proviso, an intimation shall be sent to the assessee, notwithstanding that no tax or interest is found due from him after making the said adjustments:]
3[4[Provided also] that an intimation for any tax or interest due under this clause shall not be sent after the expiry of two years from the end of the assessment year in which the gifts were first assessable.]
(b) Where, as a result of an order made under 5[sub-section (3) or sub-section (5) of this section or section 16 or section 22 or section 23 or section 24 or section 26 or section 28 or section 34 relating to any earlier assessment year and passed subsequent to the filing of the return referred to in clause (a) there is any variation in the exemption or deduction claimed or made in the return, and as a result of which,—
(i) if any tax or interest is found due, an intimation shall be sent to the assessee specifying the sum so payable, and such intimation shall be deemed to be a notice of demand issued under section 31 and all the provisions of this Act shall apply accordingly; and
(ii) if any refund is due, it shall be granted to the assessee:
Provided that an intimation for any tax or interest due under this clause shall not be sent after the expiry of four years from the end of the financial year in which any such order was passed.
6[(1A) (a) Where in the case of any person, the taxable gift, as a result of the adjustments made under 7[the first proviso] to clause (a) of sub-section (1), exceeds the taxable gift declared in the return by any amount, the Assessing Officer shall,—
(i) further increase the amount of tax payable under sub-section (1) by an additional gift-tax calculated at the rate of twenty per cent. of the tax payable on such excess amount and specify the additional gift-tax in the intimation to be sent under sub-clause (i) of clause (a) of sub-section (1);
(ii) where any refund is due under sub-section (1), reduce the amount of such refund by an amount equivalent to the additional gift-tax calculated under sub-clause (i).
(b) Where as a result of an order under section 22 or section 23 or section 24 or section 26 or section 28 or section 34, the amount on which additional gift-tax is payable under clause (a) has been increased or reduced, as the case may be, the additional gift-tax shall be increased or reduced accordingly, and,—
(i) in a case where the additional gift-tax is increased, the Assessing Officer shall serve on the assessee a notice of demand under section 31;
(ii) in a case where the additional gift-tax is reduced, the excess amount paid, if any, shall be refunded.
Explanation.—For the purposes of this sub-section, “tax payable on such excess amount” means the difference between the tax on the taxable gift and the tax that would have been chargeable had such taxable gift been reduced by the amount of adjustments.]
8[(1B) Where an assessee furnishes a revised return under section 14 after the issue of an intimation, or the grant of refund, if any, under sub-section (1) of this section, the provisions of sub-sections (1) and (1A) of this section shall apply in relation to such revised return and—
(i) the intimation already sent for any gift-tax, additional gift-tax or interest shall be amended on the basis of the said revised return and where any amount payable by way of gift-tax, additional gift-tax or interest specified in the said intimation has already been paid by the assessee then, if any such amendment has the effect of—
(a) enhancing the amount already paid, the intimation amended under this clause shall be sent to the assessee specifying the excess amount payable by him and such intimation shall be deemed to be a notice of demand issued under section 31 and all the provisions of this Act, shall apply accordingly;
(b) reducing the amount already paid, the excess amount paid shall be refunded to the assessee;
(ii) the amount of the refund already granted shall be enhanced or reduced on the basis of the said revised return and where the amount of refund already granted is—
(a) enhanced, only the excess amount of refund due to the assessee shall be paid to him;
(b) reduced, the excess amount so refunded shall be deemed to be the tax payable by the assessee and an intimation shall be sent to the assessee specifying the amount so payable, and such intimation shall be deemed to be a notice of demand issued under section 31 and all the provisions of this Act shall apply accordingly:
Provided that an assessee, who has furnished a revised return under section 14 after the service upon him of the intimation under sub-section (1) of this section, shall be liable to pay additional gift-tax in relation to the adjustments made under the first proviso to clause (a) of sub-section (1) and specified in the said intimation, whether or not he has made the said adjustments in the revised return.]
(2) 9[Where a return has been made under section 13 or section 14 or in response to a notice under clause (i) of sub-section (4) of this section, the Assessing Officer shall, if he] considers it necessary or expedient to ensure that the assessee has not omitted to disclose any taxable gift or has not understated the amount or value of any such gift or has not under-paid the tax in any manner 10[serve on the assessee] a notice requiring him, on a date to be specified therein, either to attend at the office of the Assessing Officer or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return:
11[Provided that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished.]
(3) On the date specified in the notice issued under sub-section (2) or, as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by order in writing, assess the value of taxable gifts made by the assessee and determine the sum payable by him on the basis of such assessment.
(4) For the purposes of making an assessment under this Act, the Assessing Officer may serve, on any person who has made a return under section 13 or section 14 or in whose case the time allowed under sub-section (1) of section 13 for furnishing the return has expired, a notice requiring him, on a date to be specified therein,—
(i) where such person has not made a return 12[within the time allowed under sub-section (1) of section 13], to furnish a return of the taxable gifts made by him or of the taxable gifts made by any other person in respect of which he is assessable under this Act during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, or
(ii) to produce or cause to be produced such accounts, records or other documents as the Assessing Officer may require.
(5) If any person—
(a) fails to make the return required under sub-section (1) of section 13 and has not made a return or a revised return under section 14, or
(b) fails to comply with all the terms of a notice issued under sub-section (2) or sub-section (4), the Assessing Officer, after taking into account all relevant material which he has gathered, shall, after giving such person an opportunity of being heard, estimate the vlaue of taxable gifts to the best of his judgment and determine the sum payble by such person on the basis of such assessment:
Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the person to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment:
Provided further that it shall not be necessary to give such opportunity in a case where a notice under sub-section (4) has been issued prior to the making of the assessment under this sub-section.
(6) Notwithstanding anything contained in section 6, for the purpose of making an assessment under this Act, 13[where under the provisions of section 6 read with Schedule II, the fair market value of any property transferred by way of gift is to be taken into account in such assessment,] the Assessing Officer may refer the valuation of such property to the Valuation Officer,—
(a) in a case where the value of the property as returned is in accordance with the estimate made by a registered valuer, if the Assessing Officer is of opinion that the value so returned is less than its fair market value;
(b) in any other case, if the Assessing Officer is of opinion—
(i) that the fair market value of the property exceeds the value of the property as returned by more than such percentage of the value of the property as returned or by more than such amount as may be prescribed in this behalf; or
(ii) that having regard to the nature of the property and other relevant circumstances, it is necessary so to do,and where any such reference is made, the provisions of sub-sections (2), (3), (4), (5) and (6) of section 16A, clauses (ha) and (i) of sub-section (1) and sub-sections (3A) and (4) of section 23, sub-section (5) of section 24, section 34AA, section 35 and section 37 of the Wealth-tax Act, 1957 (27 of 1957), shall, with the necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under sub-section (1) of section 16A of that Act.
Explanation.—In this sub-section, “Valuation Officer” has the same meaning as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957)].
14[(7) Where a regular assessment under sub-section (3) or sub-section (5) is made,—
(a) any tax or interest paid by the assessee under sub-section (1) shall be deemed to have been paid towards such regular assessments;
(b) in no refund is due on regular assessment or the amount refunded under sub-section (1) exceeds the amount refundable on regular assessment, the whole or the excess amount so refunded shall be deemed to be tax payable by the assessee and the provisions of this Act shall apply accordingly.
(8) The provisions of this section, except those of sub-section (6), as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988), shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year.]
15[Explanation.—An intimation sent to the assessee under sub-section (1) or sub-section (IB) shall be deemed to be an order for the purposes of sub-section (1) of section 24.]
—————
1. Subs. by Act 4 of 1988, sec. 170 (w.e.f. 1-4-1989).
2. Ins. by Act 36 of 1989, sec. 32 (a)(i)(1) (w.e.f. 1-4-1989).
3. Ins. by Act 3 of 1989, sec. 83 (a) (w.e.f. 1-4-1989).
4. Subs. by Act 36 of 1989, for “Provided further” (w.e.f. 1-4-1989).
5. Ins. by Act 36 of 1989, sec. 32 (a)(ii)(w.e.f. 1-4-1989).
6. Ins. by Act 3 of 1989, sec. 83 (b) (w.e.f. 1-4-1989).
7. Subs. by Act 36 of 1989, sec. 32 (b) for “ the proviso” (w.e.f. 1-4-1989).
8. Ins. by Act 12 of 1990, sec. 60(a) (w.r.e.f. 1-4-1989).
9. Subs. by Act 36 of 1989, sec. 32 (c)(i), for “In a case referred to in sub-section (1) if the Assessing Officer” (w.e.f. 1-4-1989).
10. Subs. by Act 36 of 1989, sec. 32 (c) (ii), for “he shall serve on the assessee” (w.e.f. 1-4-1989).
11. Subs. by Act 49 of 1991, sec. 86 (a) (w.e.f. 1-10-1991).
12. Subs. by Act 12 of 1990, sec. 60 (b), for “before the end of the relevant assessment year”(w.e.f. 1-4-1990).
13. Ins. by Act 3 of 1989, sec. 83 (c) (w.e.f. 1-4-1989).
14. Sub-sections (7) and (8) ins. by Act 36 of 1989, sec. 32 (d) (w.e.f. 1-4-1989).
15. Ins. by Act 49 of 1991, sec. 86 (b) (w.e.f. 1-10-1991).
Section 16. GIFT ESCAPING ASSESSMENT.
1(1) If the Assessing Officer 2has, reasons to believe] that the taxable gifts in respect of which any person is assessable under this Act (whether made by him or by any other person) have escaped assessment for any assessment year (whether by reason of under-assessment or assessment at too low a rate or otherwise), he may, subject to the other provisions of this section and section 16A, serve on such person a notice requiring him to furnish within such period, 3[***], as may be specified in the notice, a return in the prescribed form and verfied in the prescribed manner, setting forth the taxable gifts made by him or by such other person during the previous year mentioned in the notice, in respect of which he is assessable, along with such other particulars as may be required by the notice, and may proceed to assess or reassess such gifts and also any other taxable gifts in respect of which such person is assessable, which have escaped assessment and which come to his notice subsequently in the course of the proceedings under this section for the assessment year concerned (hereafter in this section referred to as the relevant assessment year); and the provisions of this Act shall, so far as may be apply as if the return were a return required under section 13:
Provided that where an assessment under sub-section (3) of section 15 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any taxable gift chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 13 or section 14 or in response to a notice issued under sub-section (4) of section 15 or this section or to disclose fully and truly all material facts necessary for his assessment for that assessment year :
4Provided further that the Assessing Officer shall, before issuing any notice under this sub-section, record his reasons for doing so.
Explanation : Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.
(1A) No notice under sub-section (1) shall be issued for the relevant assessment year, – (a) in a case where an assessment under sub-section (3) of section 15 or sub-section (1) of this section has been made for such assessment year, –
(i) if four years have elapsed from the end of the relevant assessment year, unless the case falls under sub-clause (ii) or sub-clause (iii);
(ii) if four years, but not more than seven years, have elapsed from the end of the relevant assessment year, unless the value of taxable gifts chargeable to tax which have escaped assessment amounts to or is likely to amount to rupees fifty thousand or more for that year;
(iii) if seven years, but not more than ten years, have elapsed from the end of the relevant assessment year, unless the value of taxable gifts chargeable to tax which have escaped assessment amounts to or is likely to amount to rupees one lakh or more for that year;
(b) in any other case, – (i) if four years have elapsed from the end of the relevant assessment year, unless the case falls under sub-clause (ii) or sub-clause (iii);
(ii) if four years, but not more than seven years, have elapsed from the end of the relevant assessment year, unless the value of taxable gifts chargeable to tax which have escaped assessment amounts to or is likely to amount to rupees twenty-five thousand or more for that year;
(iii) if seven years, but not more than ten years, have elapsed from the end of the relevant assessment year, unless the value of taxable gifts chargeable to tax which have escaped assessment amounts to or is likely to amount to rupees fifty thousand or more for that year.
Explanation : For the purposes of sub-section (1) and sub-section (1A), the following shall also be deemed to be cases where taxable gifts chargeable to tax have escaped assessment, namely :-
(a) where no return of taxable gifts has been furnished by the assessee although the taxable gifts made by him or the taxable gifts made by any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to gift-tax;
(b) where a return of taxable gifts has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the amount or value of the taxable gifts or has claimed excessive exemption or deduction in the return.
(1B)(a) In a case where an assessment under sub-section (3) of section 15 or sub-section (1) of this section has been made for the relevant assessment year, no notice shall be issued under sub-section (1) 5by an Assessing Officer who is below the rank of Assistant Commissioner or Deputy Commissioner, unless the Deputy Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice :
Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.
(b) In a case, other than a case falling under clause (a), no notice shall be
issued under sub-section (1) by an Assessing Officer, who is below the rank of Deputy Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the Deputy Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice.
(2) Nothing contained in this section limiting the time within which any proceedings for assessment or reassessment may be commenced shall apply to an assessment or reassessment to be made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 22, section 23, section 24, section 26 or section 28, 6or by a court in any proceedings under any other law.
—————
1. Sub-sections (1), (lA) and (1B) subs. by Act 4 of 1988, sec. 171 (a), for sub-section (1) (w.e.f. 1-4-1989).
2. Subs. by Act 3 of 1989, sec. 84 (a), for “for, reasons to be recorded by him in writing, is of the opinion”.
3. The words “not being less than thirty days”, omited by the Finance Act, 2003, sec. 101 (w.r.e.f. 1-4-1989).
4. Ins. by Act 3 of 1989, sec. 84 (b) (w.e.f. 1-4-1989).
5. Subs. by Act 12 of 1990, sec. 61 (w.e.f. 1-4-1990)
6. Ins. by Act 4 of 1988, sec. 171(b) (w.e.f. 1-4-1989).
Section 16A. TIME LIMIT FOR COMPLETION OF ASSESSMENT AND REASSESSMENT.
1[16A. Time-limit for completion of assessment and reassessment.—2[(1) No order of assessment shall be made under section 15 at any time after the expiry of 3[two years] from the end of the assessment year in which the gifts were first assessable:
4[Provided that,—
(a) where the gifts were first assessable in the assessment year commencing on the 1st day of April, 1987, or any ealier 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].
(2) No order of assessment or reassessment shall be made under section 16 after the expiry of two years from the end of the financial year in which the notice under sub-section (1) of that section was served:
Provided that,—
(i) where the notice under clause (a) of sub-section (1) of section 16 was served during the financial year commencing on the 1st day of April, 1985, or the 1st day of April, 1986 such assessment or reassessment may be completed on or before the 31st day of March,1990;
(ii) where the notice under clause (b) of sub-section (1) of section 16 relates to the assessment for the assessment year commencing on the 1st day of April, 1985, or the 1st day of April, 1986, such assessment or reassessment may be completed on or before the 31st day of March, 1990 or the expiry of two years from the end of the financial year in which such notice was served, whichever is later.
Explanation.—References to section 16 in the proviso shall be construed as references to that section as it stood before its amendment by the Direct Tax Laws (Amendment) Act, 1987 (4 of 1988).]
(3) Notwithstanding anything contained in sub-sections (1) and (2), an order of fresh assessment in pursuance of an order passed on or after the 1st day of April, 1975, under section 22, section 23 or section 24, setting aside or cancelling an assessment, may be made at any time before the expiry of 5[two years] from the end of the financial year in which the order under section 22 or section 23 is received by the 6[Chief Commissioner or Commissioner] or, as the case may be, the order under section 24 is passed by the Commissioner:
7[Provided that where the order setting aside or cancelling the assessment was passed during the financial year commencing on the 1st day of April, 1985 or the 1st day of April, 1986, the order of fresh assessment may be made on or before the 31st day of March, 1990.]
(4) The provisions of sub-sections (1) and (2) shall not apply to the assessment or reassessment made on the assessee in consequence of, or to give effect to, any finding or direction contained in an order under section 22, section 23, section 24, section 26, or section 28 or in an order of any Court in a proceeding otherwise than by way of appeal or reference under this Act and such assessment or reassessment may, subject to the provisions of sub-section (3), be completed at any time.
Explanation 1.—In computing the period of limitation for the purposes of this section—
(i) the time taken in reopening the whole or any part of the proceeding or in giving an opportunity to the assessee to be reheard under the proviso to section 38, or
(ii) the period during which the assessment proceeding is stayed by an order or injunction of any Court,shall be excluded:
8[Provided that where immediately after the exclusion of the aforesaid time or period, the period of limitation referred to in sub-sections (1), (2) and (3) available to the Assessing Officer for making an order of assessment or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly.]
Explanation 2.—Where, by an order referred to in sub-section (4), any gift is excluded from the taxable gifts for an assessment year in respect of an assessee, then, an assessment of such gift for another assessment year shall, for the purposes of sub-section (2) of section 16 and this section, be deemed to be one made in consequence of, or to give effect to, any finding or direction contained in the said order.]
—————
1. Ins. by Act 41 of 1975, sec. 112 (w.e.f. 1-10-1975).
2. Subs. by Act 4 of 1988, sec. 172 (a) (w.e.f. 1-4-1989).
3. Subs. by Act 13 of 1989, sec. 31(a), for “one year” (w.e.f. 1-4-1989).
4. Subs. by Act 13 of 1989, sec. 31(b) (w.e.f. 1-4-1989).
5. Subs. by Act 4 of 1988, sec. 172 (b) (i), for “four years” (w.e.f. 1-4-1989).
6. Subs. by Act 4 of 1988, sec. 161, for “Commissioner” (w.e.f. 1-4-1988).
7. Ins. by Act 4 of 1988, sec. 172 (b) (ii) (w.e.f. 1-4-1989).
8. Ins. by Act 49 of 1991, sec. 87 (w.e.f. 27-9-1991).
Section 16B. INTEREST FOR DEFAULTS IN FURNISHING RETURN OF GIFTS.
1[16B. Interest for defaults in furnishing return of gifts.—(1) Where a return of gifts for any assessment year under sub-section (1) of section 13 or section 14, or in response to a notice under clause (i) of sub-section (4) of section 15, is furnished after the 30th day of June of such year, or is not furnished, the assessee shall be liable to pay simple interest at the rate of two per cent. for every month or part of a month comprised in the period commencing on the 1st day of July of the assessment year, and,—
(a) where the return is furnished after the 30th day of June ending on the date of furnishing of the return; or
(b) where no return has been furnished, ending on the date of completion of the assessment under sub-section (5) of section 15, on the amount of tax payable on the taxable gifts as determined 2[under sub-section (1) of section 15 or] on regular assessment.
3[Explanation 1.—In this sub-section, “tax payable on the taxable gifts as determined under sub-section (1) of section 15” shall not include the additional gift-tax, if any payable under section 15.]
Explanation 2.—Where in relation to an assessment year the assessment is made for the first time under section 16, the assessment so made shall be regarded as a regular assessment for the purposes of this section.
4[Explanation 3.—In this sub-section, “tax payable on the taxable gifts as determined under sub-section (1) of section 15 or on regular assessment” shall, for the purposes of computing the interest payable under section 14B, be deemed to be tax payable on the taxable gifts as declared in the return.]
(2) The interest payable under sub-section (1) shall be reduced by the interest, if any, paid under section 14B towards the interest chargeable under this section.
(3) Where return of gifts for any assessment year, required by a notice under sub-section (1) of section 16 issued 5[after the determination of taxable gifts under sub-section (1) of section 15 or] after the completion of an assessment under sub-section (3) or sub-section (5) of section 15 or section 16, is furnished after the expiry of the time allowed under such notice, or is not furnished, the assessee shall be liable to pay simple interest at the rate of two per cent. for every month or part of a month comprised in the period commencing on the day immediately following the expiry of the time allowed as aforesaid, and,—
(a) where the return is furnished after the expiry of the time aforesaid, ending on the date of furnishing the return; or
(b) where no return has been furnished, ending on the date of completion of the reassessment under section 16,
on the amount by which the tax on the taxable gifts determined on the basis of such reassessment exceeds the tax on the taxable gifts as determined 6[under sub-section (1) of section 15 or] on the basis of the earlier assessment aforesaid.
7[***]
(4) where, as a result of an order under section 22 or section 23 or section 24 or section 26 or section 28 or section 34, the amount of tax on which interest was payable under this section has been increased or reduced, as the case may be, the interest shall be increased or reduced accordingly, and,—
(i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be a notice under section 31 and the provisions of this Act shall apply accordingly, and
(ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded.
(5) The provisions of this section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years.]
—————
1. Ins. by Act 4 of 1988, sec. 173 (w.e.f. 1-4-1989).
2. Ins. by Act 3 of 1989, sec. 85 (a) (i) (w.e.f. 1-4-1989).
3. Subs. by Act 3 of 1989, sec. 85 (a) (ii) (w.e.f. 1-4-1989).
4. Ins. by Act 3 of 1989, sec. 85(a)(iii) (w.e.f. 1-4-1989).
5. Ins. by Act 3 of 1989, sec. 85 (b) (i) (w.e.f. 1-4-1989.)
6. Ins. by Act 3 of 1989, sec. 85(b) (ii) (w.e.f. 1-4-1989).
7. Explanation omitted by Act 3 of 1989, sec. 85 (b) (iii) (w.e.f. 1-4-1989).
Section 17. PENALTY FOR FAILURE TO FURNISH RETURNS, TO COMPLY WITH NOTICES AND CONCEALMENT OF GIFTS, ETC.
1[17. Penalty for failure to furnish returns, to comply with notices and concealment of gifts, etc.—(1) If the 2[Assessing Officer], 3[Deputy Commissioner (Appeals)], 4[Commissioner(Appeals)], 5[Chief Commissioner or Commissioner] or Appellate Tribunal, in the course of any proceedings under this Act, is satisfied that any person—
6[***]
(b) has 7[***] failed to comply with a notice under sub-section (2) or sub-section (4) of section 15; or
(c) has concealed the particulars of any gift or deliberately furnished inaccurate particulars thereof,he or it may, by order in writing, direct that such person shall pay by way of penalty—
8[***]
9[(ii) in the cases referred to in clause (b), in addition to the amount of gift-tax payable by him, a sum which shall not be less than one thousand rupees but which may extend to twenty-five thousand rupees, for each such failure;]
(iii) in the cases referred to in clause (c), in addition to any gift-tax payable by him, a sum which shall not be less than twenty per cent. but which shall not exceed one and half times the amount of the tax, if any, which would have been avoided if the return made by such person had been accepted as correct:
10[Provided that in cases referred to in clause (b), no penalty shall be imposable if the person proves that there was a reasonable cause for the failure referred to in that clause.]
11[Explanation.—Where any adjustment is made in the taxable gifts declared in the return under the proviso to clause (a) of sub-section (1) of section 15 and additional gift-tax charged under that section, the provisions of this sub-section shall not apply in relation to the adjustments so made.]
(2) No order imposing a penalty under sub-section (1) shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard.
12[(3) No order imposing a penalty under sub-section (1) shall be made,—
(i) by the Income-tax Officer, where the penalty exceeds ten thousand rupees;
(ii) by the Assistant Commissioner, where the penalty exceeds twenty thousand rupees,except with the prior approval of the Deputy Commissioner,]
(4) 13[A Deputy Commissioner (Appeals)] 14[a Commissioner (Appeals)], a 15[Chief Commissioner or Commissioner] or the Appellate Tribunal] on making an order under this section imposing a penalty, shall forthwith send a copy of the same to the 16[Assessing Officer].
17[(5) No order imposing a penalty under this section shall be passed—
(i) in a case where the assessment to which the proceedings for imposition of penalty relate is the subject-matter of an appeal to the Deputy Commissioner (Appeals) or Commissioner (Appeals) under section 22 or an appeal to the Appellate Tribunal under sub-section (2) of section 23, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Deputy Commissioner (Appeals) or the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever is later;
(ii) in a case where the relevant assessment is the subject-matter of revision under sub-section (2) of section 24, after the expiry of six months from the end of the month in which such order of revision is passed;
(iii) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later.
(i) the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 38; and
(ii) any period during which a proceeding under this section for the levy of penalty is stayed by an order or injunction of any court, shall be excluded.
(6) The provisions of this section as they stood immediately before their amendment by the Direct Tax Laws (Amendment) Act, 1989, shall apply to and in relation to any assessment for the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year and references in this section to the other provisions of this Act shall be construed as references to those provisions as for the time being in force and applicable to the relevant assessment year.]—————
1. Subs. by Act 53 of 1962, sec. 14 (w.e.f. 1-4-1963).
2. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
3. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).
4. Ins. by Act 29 of 1977, sec. 39 and Sch. v (w.e.f. 10-7-1978).
5. Subs. by Act 4 of 1988, sec. 161, for “Commissioner” (w.e.f. 1-4-1988).
6. Clause (a) omitted by Act 3 of 1989, sec. 86 (a) (i) (w.e.f. 1-4-1989).
7. The words “without reasonable cause” omitted by Act 46 of 1986, sec. 40 (i) (w.e.f. 10-9-1986).
8. Clause (i) omitted by Act 3 of 1989, sec. 86 (a) (ii) (w.e.f. 1-4-1989).
9. Subs. by Act 3 of 1989, sec. 86 (a) (iii) (w.e.f. 1-4-1989).
10. Subs. by Act 3 of 1989, sec 86 (a)(iv) (w.e.f. 1-4-1989). Earlier it was ins. by Act 46 of 1986, sec. 40 (ii) (w.e.f. 10-9-1986)
11. Ins. by Act 3 of 1989, sec. 86 (a) (v) (w.e.f. 1-4-1989).
12. Subs. by Act 3 of 1989, sec. 86 (b) (w.e.f. 1-4-1989).
13. Subs. by Act 4 of 1988, sec. 161 for “An Appellate Assistant Commissioner” (w.e.f. 1-4-1988).
14. Ins. by Act 29 of 1977, sec. 39 and Sch. V (w.e.f. 10-7-1978).
15. Subs. by Act 4 of 1988, sec. 161, for “Commissioner” (w.e.f. 1-4-1988).
16. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
17. Ins. by Act 3 of 1989, sec. 86(c) (w.e.f. 1-4-1989).
Section 17A. PENALTY FOR FAILURE TO ANSWER QUESTIONS, SIGN STATEMENTS, FURNISH INFORMATION, ALLOW INSPECTION, ETC.
1 [17A. Penalty for failure to answer questions, sign statements, furnish information, allow inspection, etc.—(1) If a person, –
(a) being legally bound to state the truth of any matter touching the subject of his assessment, refuses to answer any question put to him by a gift-tax authority in the exercise of his powers under this Act; or
(b) refuses to sign any statement made by him in the course of any proceedings under this Act, which a gift-tax authority may legally require him to sign; or
(c) to whom a summons is issued under sub-section (1) of section 36, either to attend to give evidence or produce books of account or other documents at a certain place and time, omits to attend or produce the books of account or documents at the place and time, he shall pay, by way of penalty, a sum which shall not be less than five hundred rupees but which may extend to ten thousand rupees for each such default or failure :
Provided that no penalty shall be imposable under clause (c) if the person proves that there was reasonable cause for the said failure.
(2) If a person fails to furnish in due time any statement or information which such person is bound to furnish to the Assessing Officer under section 37, he shall pay, by way of penalty, a sum which shall not be less than one hundred rupees but which may extend to two hundred rupees for every day during which the failure continues :
Provided that no penalty shall be imposable under this sub-section if the person proves that there was a reasonable cause for the said failure.
(3) Any penalty imposable under sub-section (1) or sub-section (2) shall be imposed, –
(a) in a case where the contravention, failure or default in respect of which such penalty is imposable occurs in the course of any proceeding before a gift-tax authority not lower in rank than a Joint Director or a Joint Commissioner, by such gift-tax authority;
(b) in any other case, by the Joint Director or the Joint Commissioner.
(4) No order under this section shall be passed by any gift-tax authority referred to in sub-section (3) unless the person on whom penalty is proposed to be imposed has been heard or has been given a reasonable opportunity of being heard in the matter by such authority.
Explanation : In this section “gift-tax authority” includes a Director General, Director, Joint Director, Assistant Director or Valuation Officer while exercising the powers vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respect of the matters specified in sub-section (1) of section 36.
————
1. Section 17A Subs. by Act 3 of 1989, sec. 87 (w.e.f. 1-4-1989). Earlier it was ins. by Act 41 of 1975, sec. 114 (w.e.f. 1-4-1976) and was subs. by Act 4 of 1988, sec. 174 (w.e.f. 1-4-1989).
Section 18. REBATE ON ADVANCE PAYMENTS.
1 [18. Rebate on advance payments.—It a person making a taxable gift pays into the treasury within fifteen days of his making the gift any part of the amount of tax due on the gift calculated at the rates specified in the Schedule 2[or at the rate specified in sub-section (2) of section 3], he shall, at the time of assessment under section 15, be given credit—
(i) for the amount so paid; and
(ii) for a sum equal to one-ninth of the amount so paid, so however, that such sum shall in no case exceed one-tenth of the tax due on the gift.
Explanation.—If a person makes more than one taxable gift in the course of a previous year, the amount of tax due on any one of such gifts shall be the difference between the total amount of tax due on the aggregate value of all the taxable gifts so far made, including the taxable gift in respect of which tax has to be paid, calculated at the rates specified in the schedule or, as the case may be, 3[at the rate specified in sub-section (2) or section 3], and the total amount of tax on the aggregate value of all the gifts made during that year, excluding the taxable gift in respect of which tax has to be paid, calculated at the rates specified in the Schedule or, as the case may be, 4[at the rate specified in sub-section (2) of section 3].]
—————
1. Section 18 subs. by Act 41 of 1975, sec. 15 (w.e.f. 1-4-1976). Earlier it was subs. by Act 13 of 1960, sec. 17 (w.e.f. 1-4-1960).
2. Subs. by Act 23 of 1986, sec. 44(a) for “or, in a case where the provisions of section 6A are applicable to a gift, in the manner specified in that section” (w.e.f. 1-4-1987).
3. Subs. by Act 23 of 1986, sec. 44(b) for “in the manner specified in section 6A” (w.e.f. 1-4-1987).
4. Subs. by Act 23 of 1986, sec. 44(b) for “in the manner specified in section 6A” (w.e.f. 1-4-1987).
Section 18A. CREDIT FOR STAMP DUTY PAID ON INSTRUMENT OF GIFT.
1[18A. Credit for stamp duty paid on instrument of gift.—Where any stamp duty has been paid under any law relating to stamp duty in force in any State on an instrument of gift of property, the assessee shall be entitled to a deduction from the gift-tax payable by him of an amount equal to the stamp duty so paid or one-half of the gift-tax payable, before making the deduction under this section, whichever is less.
————
1. Section 18A subs. by Act 14 of 1982, sec. 39 (w.e.f. 1-4-1983). Earlier it was ins. by Act 10 of 1965, sec. 71 (ii) (w.e.f. 1-4-1965).
Section 18B.
1 [***]
—————
1. Chapter IVA containing section 18B omitted by Act 3 of 1989, sec. 95 (P) (w.e.f. 1-4-1989). Earlier it was ins. by Act 4 of 1988, sec. 175 (w.e.f. 1-4-1989).
Section 19. TAX OF DECEASED PERSON PAYABLE BY LEGAL REPRESENTATIVE.
(1) Where a person dies, his executor, administrator or other legal representative shall be liable to pay out of estate of the deceased person, to the extent to which the estate is capable of meeting the charge, the gift-tax determined as payable by such person, or any sum which would have been payable by him under this Act, if he had not died.
(2) Where a person dies without having furnished a return under section 13, or after having furnished a return which the 1Assessing Officer has reason to believe to be incorrect or incomplete, the Assessing Officer may make an assessment of the value of the taxable gifts made by such person and determine the gift-tax payable by him, and for this purpose may, by the issue of the appropriate notice which would have had to be served upon the deceased person if he had survived, require from the executor, administrator, or other legal representative of the deceased person any accounts, documents or other evidence which might, under the provisions of section 15, have been required from the deceased person.
(3) The provisions of sections 13, 14 and 16 shall apply to an executor, administrator or other legal representative as they apply to any person referred to in 2those sections.
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1. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
2. Subs. by Act 58 of 1960, sec. 3 and Sch. II, for “that section” (w.e.f. 26-12-1960).
Section 19A. ASSESSMENT OF PERSONS LEAVING INDIA.
1[19A. Assessment of persons leaving India.—(1) Notwithstanding anything contained in section 3, when it appears to the 2[Assessing Officer] that any individual may leave India during the current assessment year or shortly after its expiry and that he has no present intention of returning to India, the gifts made by such individual during the period from the expiry of the previous year for that assessment year up to the probable date of his departure from India, shall be chargeable to gift-tax in that assessment year.
(2) The taxable gifts made in each completed previous year or part of any previous year included in such period shall be chargeable to gift-tax at the rate or rates specified in the Schedule 3[or, as the case may be, at the rate specified in sub-section (2) of section 3], and separate assessments shall be made in respect of each such completed previous year or part of any previous year.
(3) The 2[Assessing Officer] may estimate the value of the gifts made by such individual during such period or any part thereof, where it cannot be readily determined in the manner provided in this Act.
(4) For the purpose of making an assessment under sub-section (1), the 1[Assessing Officer] may serve a notice upon such individual requiring him to furnish, within such time, not being less than seven days, as may be specified in the notice, a return in the same form and verified in the same manner as 4[a return under sub-section (1) of section 13], giving particulars of the gifts made by him during each completed previous year comprised in the period referred to in sub-section (1) and during any part of the previous year comprised in that period; and the provisions of this Act shall, so far as may be, and subject to the provisions of this section, apply 5[as if the notice were a notice issued under clause (i) of sub-section (4) of section 15].
(5) The gift-tax chargeable under this section shall be in addition to the tax, if any, chargeable under any other provision of this Act.
(6) Where the provisions of sub-section (1) are applicable, any notice issued by the 6[Assessing Officer] under 7[clause (i) of sub-section (4) of section 15] or under section 16 in respect of any gift-tax chargeable under any other provisions of this Act may, notwithstanding anything contained in 7[clause (i) of sub-section (4) of section 15] or section 16, as the case may be, required the furnishing of the return by such individual within such period, not being less than seven days, as the 6[Assessing Officer] may think proper.]
—————
1. Ins by Act 53 of 1962, sec. 15 (w.e.f. 1-4-1963).
2. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
3. Ins. by Act 23 of 1986, sec. 45 (w.e.f. 1-4-1987).
4. Subs. by Act 4 of 1988, sec. 186(1)(a)(i), for “a return under sub-section (2) of section 13”(w.e.f. 1-4-1989).
5. Subs. by Act 4 of 1988, sec. 186 (1)(a)(ii), for “as if the notice were a notice issued under sub-section (2) of section 13” (w.e.f. 1-4-1989).
6. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
7. Subs. by Act 4 of 1988, sec. 186 (1)(b), for “sub-section (2) of Section 13” (w.e.f. 1-4-1988).
Section 20. ASSESSMENT AFTER PARTITION OF A HINDU UNDIVIDED FAMILY.
(1) Where, at the time of making an assessment, it is brought to the notice of the 1Assessing Officer that a partition has taken place among the members of a Hindu undivided family, and the 1Assessing Officer, after enquiry, is satisfied that the joint family property has been partitioned among the various members or groups of members in definite portions, he shall record an order to that effect and he shall make assessments 2on the value of the taxable gifts made by the family as such as if no partition had taken place and each member or group of members shall be liable jointly and severally for the tax assessed on the value of the taxable gifts made by the joint family as such.
(2) Where the 1[Assessing Officer] is not so satisfied, he may, by order, declare that such family shall be deemed for the purposes of this Act to continue to be a Hindu undivided family.
—————
1. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
2. Subs. by Act 58 of 1960, sec. 3 and Sch. II, for “on the amount of taxable gifts” (w.e.f. 26-12-1960).
Section 21. LIABILITY IN CASE OF DISCONTINUED FIRM OR ASSOCIATION OF PERSONS.
(1) Where a firm or association of persons liable to pay gift-tax has been discontinued or dissolved the Assessing Officer shall determine the gift-tax payable by the firm or association of persons as such as if no such discontinuance or dissolution had taken place.
(2) If the 1[Assessing Officer], the 2[Deputy Commissioner (Appeals)] 3[the Commissioner (Appeals)] or the Appellate Tribunal in the course of any proceedings under this Act in respect of any such firm or other association of persons as is referred to in sub-section (1) is satisfied that the firm or association is guilty of any of the acts specified in clause (a) or clause (b) or clause (c) of sub-section (1) of section 17, he or it may impose or direct the imposition of a penalty in accordance with the provisions of that section.
(3) Every person who was at the time of such discontinuance or dissolution a partner of the firm or a member of the association, as the case may be, shall be jointly and severally liable for the amount of tax or penalty payable, and all the provisions of Chapter VII, so far as may be, shall apply to any such assessment or imposition of penalty.
—————
1. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
2. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).
3. Ins. by Act 29 of 1977, sec. 39 and Sch. V, Pt. III (w.e.f. 10-7-1978).
Section 21A. ASSESSMENT OF DONEE WHEN DONOR CANNOT BE FOUND.
1[21A. Assessment of donee when the donor connot be found.—(1) Where an 2Assessing Officer after using all due and reasonable diligence cannot find the donor who had made any taxable gifts, for the purpose of service of notice under sub-section (2) of section 13, or under section 16, the Assessing Officer may make an assessment of the value of all such taxable gifts made by him and determine the gift-tax payable by him and for this purpose may, by the issue of the appropriate notice which would have had to be served upon the donor, require from the donee or donees any accounts, documents or other evidence which might, under the provisions of section 15, have been required from the donor.
(2) Where any assessment in respect of the taxable gifts made by the donor has been made under sub-section (1), every donee shall be liable for the gift-tax so assessed :
Provided that where the donees are more than one, they shall be jointly and severally liable for the amount of the gift-tax so assessed :
Provided further that the amount of the gift-tax which may be recovered from each donee shall not exceed the value of the gift made to him as on the date of the gift.
(3) The provisions of sections 13, 14 and 16 shall apply to a donee as they apply to any person referred to in those sections.
—————
1. Ins. by Act 53 of 1962, sec. 16 (w.e.f. 1-4-1963).
2. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).
Section 22. APPEAL TO THE DEPUTY COMMISSIONER (APPEALS) FROM ORDERS OF ASSESSING OFFICER.
22. Appeal to the 1[Deputy Commissioner (Appeals)] from orders of 2[Assessing Officer].—(1) 3[Subject to the provisions of sub-section (1A), any person],—
(a) objecting to the value of 4[***] taxable gifts determined under this Act; or
(b) objecting to the amount of gift-tax determined as payable by him under this Act; or
(c) denying his liability to be assessed under this Act; or
5[(d) objecting to any penalty imposed by the Assessing Officer under section 17 6[***];]; or
(e) objecting to any order of the 7[Assessing Officer] under sub-section (2) of section 20;or
(f) objecting to any penalty imposed by the 8[Assessing Officer] under 9[sub-section (1) of section 221] of the Income-tax Act] as applied under section 33 for the purposes of gifts-tax; 10[or]
11[(g) objecting to an order of the 8[Assessing Officer] under section 34 having the effect of enhancing the assessment or reducing a refund or an order refusing to allow the claim made by the assessee under that section; or
(h) 12[***]] may appeal to the 13[Deputy Commissioner (Appeals)] against the assessment or order, as the case may be, in the prescribed form and verified in the prescribed manner:
Provided that no appeal shall lie under clause (f) unless the tax has been paid before the appeal is filed.
14[(1A) Notwithstanding anything contained in sub-section (1), any person—
(a) objecting to the value of taxable gifts determined under this Act or objecting to the amount of gift-tax determined as payable by him or denying his liability to be assessed under this Act where the value of taxable gifts determined on assessment exceeds two lakh rupees; or
15[(b) objecting to any assessment or order referred to in clauses (a) to (g) (both inclusive) of sub-section (1), where such assessment or order has been made by the Deputy Commissioner in exercise of the powers or functions conferred on or assigned to him under section 7 or section 10; or
16[(c) objecting to any penalty imposed under sub-section (1) of section 17 with the previous approval of the Deputy Commissioner as specified in sub-section (3) of that section;]
(d) objecting to any penalty imposed by the Deputy Director or the Deputy Commissioner under section 17A;]
(e) objecting to any order made by 17[an Assessing Officer] in the case of such persons or classes of persons as the Board may, having regard to the nature of the cases, the complexities involved and other relevant considerations, direct, may appeal to the Commissioner (Appeals) against the assessment or order, as the case may be, in the prescribed form and verified in the prescribed manner:
Provided that no appeal shall lie under clause (b) of this sub-section against any order referred to in clause (f) of sub-section (1) unless the tax has been paid before the appeal is filed.]
18[(1B) Notwithstanding anything contained in sub-section (1), the Board or the Director-General or the Chief Commissioner or the Commissioner, if so authorised by the Board, may, by order in writing, transfer any appeal which is pending before a Deputy Commissioner (Appeals) and any matter arising out of or connected with such appeal and which is so pending, to the Commissioner (Appeals), if the Board or, as the case may be, the Director-General, the Chief Commissioner or the Commissioner (at the request of the appellant or otherwise) is satisfied that it is necessary or expedient so to do having regard to the nature of the case, the complexities involved and other relevant considerations and the Commissioner (Appeals) may proceed with such appeal or matter from the stage at which it was before it was so transferred:
Provided that the appellant may demand that before proceeding further with the appeal or matter, the previous proceeding or any part thereof be reopened or that he be reheard.]
(2) An appeal shall be presented within thirty days of the receipt of the notice of demand relating to the assessment or penalty objecting to, or the date on which any order objected to, is communicated to him, but the 19[Deputy Commissioner (Appeals)] 20[or, as the case may be, the Commissioner (Appeals)] may admit an appeal after the expiration of the period aforesaid if he is satisfied that the appellant had sufficient cause for not presenting the appeal within that period.
(3) The 19[Deputy Commissioner (Appeals)] 20[or, as the case may be, the Commissioner (Appeals)] shall fix a day and place for the hearing of the appeal and may from time to time adjourn the hearing.
(4) The 21[Deputy Commissioner (Appeals)] 20[or, as the case may be, the Commissioner (Appeals)] may,—
(a) at the hearing of an appeal, allow an appellant to go into any ground of appeal, not specified in the grounds of appeal;
(b) before disposing of an appeal, make such further inquiry as he thinks fit or cause further inquiry to be made by the 21[Assessing Officer].
(5) In disposing of an appeal, the 19[Deputy Commissioner (Appeals)] 20[or, as the case may be, the Commissioner (Appeals)] may pass such order as he thinks fit which may include or order enhancing the amount of gift-tax determined or penalty imposed:
Provided that no order enchaning the amount of gift-tax determined or penalty imposed shall be made unless the person affected thereby has been given a reasonable opportunity of showing cause against such enhancement.
22[(5A) In disposing of an appeal, the 23[Deputy Commissioner (Appeals)] 23[or, as the case may be, the Commissioner (Appeals)] may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the 22[Deputy Commissioner (Appeals)] 23[or, as the case may be, the Commissioner (Appeals)] by the appellant.
(5B) The order of the 23[Deputy Commissioner (Appeals)] 24[or, as the case may be, the Commissioner (Appeals)] disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reasons for the decision.]
(6) A copy of every order passed by the 23[Deputy Commissioner (Appeals)] 24[or, as the case may be, the Commissioner (Appeals)] under this section shall be forwarded to the appellant and the 25[Chief Commissioner or Commissioner].
—————
1. Subs. by Act 4 of 1988, sec. 161, for “Gifts-tax Officer” (w.e.f. 1-4-1988).
2. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).
3. Subs. by Act 29 of 1977, sec. 39 and Sch. V, Pt. III, for “any person” (w.e.f. 10-7-1978).
4. The word “his” omitted by Act 53 of 1962, sec. 17(i)(a) (w.e.f. 1-4-1963).
5. Subs. by Act 4 of 1988, sec. 176 (a)(i) (w.e.f. 1-4-1989).
6. Certain words omitted by Act 3 of 1989, sec. 88(i) (w.e.f. 1-4-1989).
7. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
8. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
9. Subs. by Act 53 of 1962, sec. 17 (i)(b)(1), for “Sub-section (1) of section 46 of the Income-tax Act” (w.e.f. 1-4-1963).
10. Ins. by Act 53 of 1962, sec. 17(i) (b)(2)(w.e.f. 1-4-1963).
11. Clauses (g) and (h) ins. by Act 53 of 1962, sec. 17(i) (c) (w.e.f. 1-4-1963).
12. Clause (h) omitted by Act 4 of 1988, sec. 176 (a) (ii) (w.e.f. 1-4-1989).
13. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).
14. Sub-sections (1A), (1B) and (1C) by Act 29 of 1977, sec. 39 and Sch. V, Pt. III (w.e.f. 10-7-1978).
15. Clauses (b), (c) and (d) subs. by Act 4 of 1988, sec. 176(b) (w.e.f. 1-4-1989).
16. Clause (c) Subs. by Act 3 of 1989, sec. 88 (ii) (w.e.f. 1-4-1989).
17. Subs. by Act 4 of 1988, sec. 161, for “a Gift-tax Officer” (1-4-1988).
18. Subs. by Act 4 of 1988, sec. 176 (c), for sub-sections (1B) and (1C) (w.e.f. 1-4-1989).
19. Subs. by Act 4 of 1988, sec. 161 for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).
20. Ins. by Act 29 of 1977, sec. 39 and Sch. V, Pt. III (w.e.f. 10-7-1978).
21. Subs. by Act 4 of 1988, sec. 161 for “Gift-tax Officer” (w.e.f. 1-4-1988).
22. Ins. by Act 53 of 1962, sec. 17(ii) (w.e.f. 1-4-1963).
23. Subs. by Act 4 of 1986 sec. 161, for, “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).
24. Ins. by Act 29 of 1977, sec. 39 and Sch. V, Pt. IV (w.e.f. 10-7-1978).
25. Subs. by Act 4 of 1988, sec. 161, for “Commissioner” (w.e.f. 1-4-1988).
Section 23. APPEAL TO THE APPELLATE TRIBUNAL.
1[(1) An assessee, objecting to an order passed by the 2[Deputy Commissioner (Appeals)] 3[or the Commissioner (Appeals)] 4[under section 17 or section 17A] of section 22 5[***] or sub-section (2) of section 36 6[***] may appeal to the Appellate Tribunal within sixty days of the date on which the order is communicated to him.]
(2) The Commissioner may, if he is not satisfied as to the correctness of any order passed by 7[a Deputy Commissioner (Appeals)] 3[or a Commissioner (Appeals) under section 22 direct the 8[Assessing Officer] to appeal to the Appellate Tribunal against such order, and such appeal may be made at any time before the expiry of sixty days of the date on which the order is communicated to the Commissioner.
9[(2A) The 8[Assessing Officer] or the assessee, as the case may be, on receipt of the notice that an appeal against the order of the 10[Deputy Commissioner (Appeals)] 3[or the Commissioner (Appeals)] has been preferred under sub-section (1) or sub-section (2) by the other party, may, notwithstanding that he may not have appealed against such order or any part thereof, within thirty days of the receipt of the notice, file a memorandum of cross-objections, verified in the prescribed manner against any part of the order of the 11[Deputy Commissioner (Appeals)] 12[or the Commissioner (Appeals)] and such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in sub-section (1) or sub-section (2).]
13[(3) The Appellate Tribunal may admit an appeal or permit the filing of a memorandum of cross-objections after the expiry of the relevant period referred to in sub-section (1) or sub-section (2) or sub-section (2A), if it is satisfied that there was sufficient cause for not presenting it within that period.]
(4) An appeal to the Appellate Tribunal shall be in the prescribed form and shall be verified in the prescribed manner and shall, except in the case of an appeal referred to in sub-section (2), be accompanied by 14[a fee of 15[two hundred rupees]].
(5) The Appellate Tribunal may, after giving the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit, and any such orders may include an order enhancing the amount of gift-tax determined or penalty imposed:
Provided that no order enhancing the amount of gift-tax determined or penalty imposed shall be made unless the person affected thereby has been given a reasonable opportunity of showing cause against such enhancement.
16[***]
(9) A copy of every order passed by the Appellate Tribunal under this section shall be forwarded to the assessee and the Commissioner.
(10) Save as provided in section 26, any order passed by the Appellate Tribunal on appeal shall be final.
(11) The provisions of 17[sub-sections (1), (4) and (5) of section 255 of the Income-tax Act] shall apply to the Appellate Tribunal in the discharge of its functions under this Act as they apply to it in the discharge of its functions under the Income-tax Act.
—————
1. Subs. by Act 53 of 1962, sec. 18(i) (w.e.f. 1-4-1962).
2. Ins. by Act 53 of 1962, sec. 17(ii) (w.e.f. 1-4-1963).
3. Ins. by Act 29 of 1977, sec. 39 and Sch. V, Pt. III (w.e.f 10-7-1978).
4. Subs. by Act 41 of 1975, sec. 116(i), for “under section 17” (w.e.f. 1-4-1976).
5. The words “or section 22A” omitted by Act 3 of 1989, sec. 95 (u) (w.e.f. 1-4-1989). Earlier they were ins. by Act 4 of 1988, sec. 186(2) (w.e.f. 1-4-1989).
6. The words “or to an order passed by the Inspecing Assistant Commissioner under section 17A”, omitted by Act 29 of 1977, sec. 39 and Sch. V, Pt. III (w.e.f. 10-7-1978).
7. Subs. by Act 4 of 1988. sec. 161, for” an Appellate Assistant Commissioner” (w.e.f. 1-4-1988).
8. Subs. by Act 4 of 1988, sec. 161, for “Gift-Tax Officer” (w.e.f. 14-1988).
9. Ins. by Act 53 of 1962, sec. 18 (ii) (w.e.f. 1-4-1963).
10. Subs. by Act 4 of 1986 sec. 161, for, “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).
11. Subs. by Act 4 of 1988. sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).
12. Ins. by Act 29 of 1977, 539 and Sch. V, Pt. III (w.e.f. 10-7-1978).
13. Subs. by Act 53 of 1962, sec. 18(iii) (w.e.f. 1-4-1963).
14. The words ”a fee of one hundred and twenty-five rupees” subs. by Act 42 of 1970, sec. 67 for “a fee of rupees one hundred” (w.e.f. 1-4-1971).
15. Subs. by Act 16 of 1981, sec. 32, for “one hundred and twenty-five rupees” (w.e.f 1-6-1981).
16. Sub-sections (6), (7) and (8) omitted by Act 45 of 1972, sec. 22, (w.e.f 1-1-1973).
17. Subs. by Act 53 of 1962, sec. 18(iv), for “sub-sections (5), (7) and (8) of section 5A of the Income-tax Act” (w.e.f. 1-4-1963).
Section 24. POWERS OF COMMISSIONER TO REVISE ORDERS OF SUBORDINATE AUTHORITIES.
(1) The Commissioner may, either on his own motion or on application made by an assessee in this behalf, call for the record of any proceeding under this Act in which an order has been passed by any authority subordinate to him, and may make such inquiry or cause such inquiry to be made, and, subject to the provisions of this Act, pass such order thereon not being an order prejudicial to the assessee, as the Commissioner thinks fit:
Provided that the Commissioner shall not revise any order under this sub-section in any case—
(a) where an appeal against the order lies to the 1[Deputy Commissioner (Appeals)] 2[or to the Commissioner (Appeals)] or to the Appellate Tribu nal and the time within which such appeal can be made has not expired or, 3[in the case, of an appeal to the Commissoner (Appeals) or to the Appellate Tribunal], the assessee has not waived his right of appeal;
(b) where the order is pending in appeal before the 1[Deputy Commissioner (Appeals) or has been the subject of an appeal 2[to the Commissioner (Appeals) or] to the Appellate Tribunal;
(c) where the application is made by the assessee for such revision unless—
(i) the application is accompanied by a fee of rupees twenty-five; and
(ii) the application is made within one year from the date of the order sought to be revised or within such further period as the Commissioner may think fit to allow on being satisfied that the assessee was prevented by sufficient cause from making the application within that period; and
(d) where the order is sought to be revised by the Commissioner of his own motion, if such order is made more than one year previously.
Explanation.—For the purposes of this sub-section,—
(a) the 1[Deputy Commissioner (Appeals)] shall be deemed to be an authority subordinate to the Commissioner, and
(b) an order by the Commissioner declining to interfere shall be deemed not to be an order prejudicial to the assessee.
(2) Without prejudice to the provisions contained in sub-section (1), the Commissioner may call for and examine the record of any proceeding under this Act, and, if he considers that any order passed therein by 4[an Assessing Officer] is erroneous in so far as it is prejudicial to the interests of revenue, he may, after giving the assessee an opportunity of being heard, and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling it and directing a fresh assessment.
5[Explanation.—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,—
(a) an order passed 6[on or before or after the 1st day of June,1988,] by the Assessing Officer shall include an order passed by the Deputy Commissioner in exercise of the powers or in performance of the functions of an Assessing Officer conferred on or assigned to him under orders or directions issued by the Board or by the Chief Commissioner or Director-General or Commissioner authorised by the Board in this behalf under section 120 of the Income-tax Act read with section 7 of this Act;
(b) “record”7[shall include and shall be deemed always to have included] all records relating to any proceeding under this Act available at the time of examination by the Commissioner;
(c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject-matter of any appeal 8[filed on or before or after the 1st day of June,1988], the powers of the Commissioner under this sub-section shall extend 8[and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.]
(3) No order shall be made under sub-section (2) after the expiry of two years 9[from the end of the financial year in which the order sought to be revised was passed].
10[Explanation.—In computing the period of limitation for purposes of this sub-section, the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 38 and any period during which any proceeding under this section is stayed by an order or injunction of any Court shall be excluded.]
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1. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).
2. Ins. by Act 29 of 1977, sec. 39 and Sch. V, Pt. III (w.e.f. 10-7-1978).
3. Subs. by Act 29 of 1977, sec. 39 and Sch. V, Pt. III for “in the case of the Appellate Tribunal” (w.e.f. 10-7-1978).
4. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer”. (w.e.f. 1-4-1988).
5. Subs. by Act 26 of 1988, sec. 68 (w.e.f. 1-6-1988). Earlier it was ins. by Act 67 of 1984, sec. 74, (a) (w.e.f. 1-10-1984).
6. Ins. by Act 13 of 1989, sec. 32(i) (w.r.e.f. 1-6-1988).
7. Subs. by Act 13 of 1989, sec. 32 (ii), for “includes” (w.r.e.f. 1-6-1988).
8. Ins. by Act 13 of 1989, sec. 32 (iii) (w.r.e.f. 1-6-1988).
9. Subs. by Act 67 of 1984, sec. 74(b), for “from the date of the order sought to be revised” (w.e.f. 1-10-1984).
10. Ins. by Act 53 of 1962, sec. 19 (w.e.f. 1-4-1963).
Section 25. APPEAL TO THE APPELLATE TRIBUNAL FROM ORDERS OF ENHANCEMENT BY CHIEF COMMISSIONER OR COMMISSIONER.
25. Appeal to the Appellate Tribunal from orders of enhancement by 1[Chief Commissioner or Commissioner]—2[(1) An assessee objecting to an order passed by the 1[Chief Commissioner or Commissioner] 3[under section 17 or section 17A] or to an order of enhancement passed by him under section 24 4[or an order passed by the Director-General or Director under section 17A] may appeal to the Appellate Tribunal within sixty days of the date on which the order is communicated to him.]
(2) An appeal to the Appellate Tribunal under sub-section (1) shall be in the prescribed form and shall be verified in the prescribed manner and shall be accompanied by 5[a fee of 6[two hundred rupees]].
(3) The provisions of 7[sub-sections (3),(5),(9) and (10) of section 23 shall apply in relation to any appeal under this section as they apply in relation to any appeal under that section.
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1. Subs. by Act 4 of 1988, sec. 161, for “Commissioner” (w.e.f. 1-4-1988).
2. Subs. by Act 53 of 1962, sec. 20 (w.e.f. 1-4-1963)
3. Subs. by Act 41 of 1975, sec. 117, for “under section 17” (w.e.f. 1-4-1976).
4. Ins. by Act 3 of 1989, sec. 89 (w.e.f. 1-4-1989).
5. The words “a fee of one hundred and twenty-five rupees” subs. by Act 42 of 1970, sec. 68, for “a fee of rupees one hundred” (w.e.f. (1-4-1971).
6. Subs. by Act 16 of 1981, sec. 33, for “one hundered and twenty-five rupees” (w.e.f. 1-6-1981).
7. Subs. by Act 45 of 1972, sec. 23 for “sub-sections (3) and (5) to 10” (w.e.f. 1-1-1973).
Section 26. REFERENCE TO HIGH COURT.
1[(1) The assessee or the 2[Chief Commissioner or Commissioner] may, within sixty days of the date upon which he is served with notice of an order under section 23 or section 25 3[or clause (e) of sub-section (1) of section 34], by application in the prescribed form, accompanied, where the application is made by the assessee, by 4[a fee of 5[two hundred rupees]], require the Appellate Tribunal to refer to the High Court any question of law arising out of such order and, subject to the other provisions contained in this section, the Appellate Tribunal shall, within one hundred and twenty days of the receipt of such application, draw up a statement of the case and refer it to the High Court.
(2) The Appellate Tribunal may, if it is satisfied that the applicant was prevented by sufficient cause from presenting the application within the period specified in sub-section (1), allow it to be presented within a further period not exceeding thirty days.]
(3) If, on an application made under sub-section (1), the Appellate Tribunal,—
(a) refuses to state a case on the ground that no question of law arises, or
(b) rejects it on the ground that it is time-barred,
the applicant may, within ninety days from the date on which he is served with a notice of refusal or rejection, as the case may be, apply to the High Court, and the High Court may, if it is not satisfied with the correctness of the decision of the Appellate Tribunal, require the Appellate Tribunal to state the case to the High Court, and on receipt of such requisition the Appellate Tribunal shall state the case:
Provided that, if in any case where the Appellate Tribunal has been required by an assessee to state a case the Appellate Tribunal refuses to do so on the ground that no question of law arises, the assessee may, within thirty days from the date on which he receives notice of refusal to state the case, withdraw his application, and if he does so, the fee paid by him under sub-section (1) shall be refunded to him.
6[(3A) If, on an application made under this section, the Appellate Tribunal is of the opinion that on account of a conflict in the decisions of High Courts in respect of any particular question of law, it is expedient that a reference should be made direct to the Supreme Court, the Appellate Tribunal may draw up a statement of the case and refer it through its President direct to the Supreme Court.]
(4) The statement to the High Court 7[or the Supreme court] shall set forth the facts, the determination of the Appellate Tribunal and the question of law which arises out of this case.
(5) If the High Court 8[or the Supreme Court] is not satisfied that the case as stated is sufficient to enable it to determine the question of law raised thereby, it may require the Appellate Tribunal to make such modification therein as it may direct.
(6) The High Court 8[or the Supreme Court], upon hearing any such case, shall decide the question of law raised therein, and in doing so, may, if it thinks fit, alter the form of the question of law and shall deliver judgment thereon containing the grounds on which such decision is founded and shall send a copy of the judgment under the seal of the Court and the signature of the Registrar to the Appellate Tribunal and the Appellate Tribunal shall pass such orders as are necessary to dispose of the case conformably to such judgment.
9[(7) The costs of any reference to the High Court or the Supreme Court which shall not include the fee for making the reference shall be in the discretion of the Court.]
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1. Subs. by Act 53 of 1962, sec. 21(i) (w.e.f. 1-4-1963).
2. Subs. by Act 4 of 1988, sec. 161, for “Commissioner” (w.e.f. 1-4-1988).
3. Ins. by Act 49 of 1991, sec. 88 (w.e.f. 27-9-1991).
4. The words “a fee of one hundred and twenty-five rupees” subs. by Act 42 of 1970, sec. 69, for” a fee of one hundred rupees” (w.e.f. 1-4-1971).
5. Subs. by Act 16 of 1981, sec. 34 for “one hundred and twenty-five rupees”(w.e.f. 1-6-1981).
6. Ins. by Act 53 of 1962, sec. 21 (ii). (w.e.f. 1-4-1963).
7. Ins. by Act 53 of 1962, sec. 21 (iii) (w.e.f. 1-4-1963).
8. Ins. by Act 53 of 1962, sec. 21 (iii) (w.e.f. 1-4-1963).
9. Subs. by Act 53 of 1962, sec. 27 (iv) (w.e.f. 1-4-1963).
Section 27. HEARING BY HIGH COURT.
When a case has been stated to the High Court under section 26, it shall be heard by a Bench of not less than two Judges of the High Court and shall be decided in accordance with the opinion of such Judges or of the majority of such judges, if any :
Provided that where there is no such majority, the Judges shall state the point of law upon which they differ and the case shall then be heard upon that point only by one or more of the Judges of the High Court, and such point shall be decided according to the opinion of the majority of the Judges who have heard the case, including those who first heard it.
Section 28. APPEAL TO THE SUPREME COURT.
(1) An appeal shall lie to the Supreme Court from any judgment of the High Court delivered on a case stated under section 26 in any case which the High Court certifies as a fit case for appeal to the Supreme Court.
(2) Where the judgment of the High Court is varied or reversed on appeal under this section, effect shall be given to the order of the Supreme Court in the manner provided in sub-section (6) of section 26.
(3) The High Court may, on application made to it for the execution of any order of the Supreme Court in respect of any costs awarded by it, transmit the order for execution to any court subordinate to the High Court.
Section 28A. TAX TO BE PAID NOTWITHSTANDING REFERENCE, ETC.
1 Notwithstanding that a reference has been made to the High Court or the Supreme Court, or an appeal has been preferred to the Supreme Court, tax shall be payable in accordance with the assessment made in the case.
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1. Ins. by Act 53 of 1962, sec. 22 (w.e.f. 1-4-1963).
Section 28B. DEFINITION OF HIGH COURT.
In this Chapter, “High Court” means –
(i) in relation to any State, the High Court of that State;
1[(ii) in relation to the Union territory of Delhi, the High Court of Delhi;
2[(iia) [***]]
3[(iii) in relation to the Union Territories of Arunachal Pradesh *and Mizoram, the Gauhati High Court (the High Court of Assam, Nagaland, Meghalaya, Manipur and Tripura);]
(iv) in relation to the Union territory of Andaman and Nicobar Islands, the High Court at Calcutta;
(v) in relation to the Union territory of 4[Lakshadweep], the High Court of Kerala;
5[(va) in relation to the Union territory of Chandigarh, the High Court of Punjab and Haryana;]
6[(vi) in relation to the Union territories of Dadra and Nagar Haveli and Goa**, Daman and Diu, the High Court at Bombay;
(vii) in relation to the Union territory of Pondicherry, the High Court at Madras.]]
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Section 29. GIFT-TAX BY WHOM PAYABLE.
1[29. Gift-tax by whom payable.—Subject to the provisions of this Act, gift-tax shall be payable by the donor but when in the opinion of the 2[Assessing Officer] the tax cannot be recovered from the donor, it may be recovered from the donee:
Provided that where the donees are more than one, they shall be jointly and severally liable for the amount of tax determined to be payable by the donor :
Provided further that the amount of tax which may be recovered from each donee shall not exceed the value of the gift made to him as on the date of the gift.
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1. Subs. by Act, 53 of 1962, sec. 23 (w.e.f. 1-4-1963).
2. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
Section 30. GIFT-TAX TO BE CHARGED ON PROPERTY GIFTED.
Gift-tax payable in respect of any gift comprising immovable property shall be a first charge on that property but any such charge shall not affect the title of a bona fide purchaser for valuable consideration without notice of the charge.
Section 31. NOTICE OF DEMAND.
1[31. Notice of demand.—When any tax, interest, penalty, fine or any other sum is payable in consequence of any order passed under this Act, the 2[Assessing Officer] shall serve upon the assessee a notice of demand in the prescribed form specifying the sum so payable.]
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1. Subs. by Act 53 of 1962, sec. 24 (w.e.f. 1-4-1963).
2. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
Section 32. RECOVERY OF TAX AND PENALTIES.
(1) Any amount specified as payable in a notice of demand under section 31 shall be paid within thirty days of the service of the notice at the place and to the person mentioned in the notice :
Provided that, where the Assessing Officer has any reason to believe that it will be detrimental to revenue if the full period of thirty days aforesaid is allowed, he may, with the previous approval of the Joint Commissioner direct that the sum specified in the notice of demand shall be paid within such period being a period less than the period of thirty days aforesaid, as may be specified by him in the notice of demand.
(2) If the amount specified in any notice of demand under section 31 is not paid within the period limited under sub-section (1), the assessee shall be liable to pay simple interest at one and one-half per cent, for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in sub-section (1) and ending with the day on which the amount is paid ;
Provided that where as a result of an order under section 22, or section 23, or section 24, or section 25, or section 26 or section 28, or section 34, the amount on which interest was payable under this section had been reduced, the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded.
Provided further that in respect of any period commencing on or before the 31st day of March, 1989 and ending after that date, such interest shall, in respect of so much of such period as falls after that date, be calculated at the rate of one and one-half per cent for every month or part of a month.
(3) Without prejudice to the provisions contained in sub-section (2), on an
application made by the assessee before the expiry of the due date under sub-section (1), the Assessing Officer may extend the time for payment or allow payment by installments subject to such conditions as he may think fit to impose in the circumstances of the case.
(4) If the amount is not paid within the time limited under sub-section (1) or extended under sub-section (3), as the case may be, at the place and to the person mentioned in the said notice, the assessee shall be deemed to be in default.
(5) If, in a case where payment by installments is allowed under sub-section (3), the assessee commits default in paying any one of the installments within the time fixed under that sub-section, the assessee shall be deemed to be in default as to the whole of the amount then outstanding, and the other installment or installments shall be deemed to have been due on the same date as the installment actually in default.
(6) Where the assessee has presented an appeal under section 22, the Assessing Officer may in his discretion and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired as long as such appeal remains undisposed of.
Section 33. MODE OF RECOVERY.
1The provisions contained in 2sections 221 to 227, 228A, 229, 231 and 232 of the Income-tax Act and the Second and Third Schedules to that Act and any rules made thereunder shall, so far as may be, apply as if the said provisions were provisions of this Act and referred to gift-tax and sums imposed by way of penalty, fine and interest under this Act instead of to income-tax and sums imposed by way of penalty fine and interest under that Act 3and to the corresponding gift-tax authorities instead of to the income-tax authorities specified therein.
Explanation I : Any reference to sub-section (2) or sub-section (6) of section 220 of the Income-tax Act in the said provisions of that Act or the rules made thereunder shall be construed as references to sub-sections (2) and (6) respectively of section 32 of this Act.
4Explanation II : The Chief Commissioner or Commissioner and the Tax Recovery Officer referred to in the Income-tax Act shall be deemed to be the corresponding gift-tax authorities for the purpose of recovery of gift-tax and sums imposed by way of penalty, fine and interest under this Act.
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1. Subs. by Act 53 of 1962, sec. 24 (w.e.f. 1-4-1963).
2. Subs. by Act 16 of 1972, sec. 53, for “sections 221 to 227” (w.e.f. 1-4-1972).
3. Subs. by Act 4 of 1988, sec. 179(a), for certain words (w.e.f. 1-4-1989).
4. Subs. by Act 4 of 1988, sec. 179 (b) (w.e.f. 1-4-1989).
Section 33A. REFUNDS.
(1) Where, as a result of any order passed in appeal or other proceeding under this Act, refund of any amount becomes due to the assessee, the 1[Assessing Officer] shall, except as otherwise provided in this Act, refund the amount to the assessee without his having to make claim in that behalf:
2[Provided that where, by the order aforesaid.—
(a) an assessment is set aside or cancelled and an order of fresh assessment is directed to be made, the refund, if any, shall become due only on the making of such fresh assessment;
(b)the assessment is annulled, the refund shall become due only of the amount, if any, of the tax paid in excess of the tax chargeable on the 3[taxable gifts] returned by the assessee.]
4(2) Where refund of any amount becomes due to the assessee as a result of an order under this Act or under the provisions of sub-section (1) of section 15 after a return has been made under section 13 or section 14 or in response to a notice under clause (i) of sub-section (4) of section 15 and the Assessing Officer is of the opinion, having regard to the fact that,—
(i) a notice has been issued, or is likely to be issued, under sub-section (2) of section 15 in respect of the said return; or
(ii) the order is the subject-matter of an appeal or further proceeding; or
(iii) any other proceeding under this Act is pending; that the grant of the refund is likely to adversely affect the revenue, the Assessing Officer may, with the previous approval of the Chief Commissioner or Commissoner, withhold the refund till such time as the Chief Commissioner or Commissioner may determine.]
(3) Where a refund is due to the assessee in pursuance of an order referred to in sub-section (1) and the 1[Assessing Officer] does not grant the refund within a period of six months from the date of such order, the Central Government shall pay to the assessee simple interest at 5[fifteen per cent.] per annum on the amount of refund due from the date immediately following the expiry of the period of six months aforesaid to the date on which the refund is granted.
6[(3A) Where the whole or any part of the refund referred to in sub-section (3) is due to an assessee as a result of any amount having been paid by him after the 31st day of March, 1975, in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceeding under this Act to be in excess of the amount which such assessee is liable to pay as tax or penalty, as the case may be, under this Act, the Central Government shall pay to such assessee simple interest at the rate specified in sub-section (3) on the amount so found to be in excess from the date on which such amount was paid to the date on which the refund is granted:
Provided that, where the amount so found to be in excess was paid in instalments, such interest shall be payable on the amount of each such instalments or any part of such instalment, which was in excess, from the date on which such instalment was paid to the date on which the refund is granted:
Provided further that no interest under this sub-section shall be payable for a period of one month from the date of the passing of the order in appeal or other proceeding:
Provided also that, where interest is payable to an assessee under this sub-section, no interest under sub-section (3) shall be payable to him in respect of the amount so found to be in excess.]
(4) Where a refund is withheld under the provisions of sub-section (2), the Central Government shall pay interest at the aforesaid rate on the amount of refund ultimately determined to be due as a result of the appeal or further proceedings for a period commencing after the expiry of six months from the date of the order referred to in that sub-section to the date the refund is granted.
7[(4A) The provisions of sub-sections (3), (3A) and (4) shall not apply in respect of any assessment for the assessment year commencing on the 1st day of April, 1989, or any subsequent assessment year.
(4B) (a) 8[Where refund of any amount becomes due to the assessee under this Act,] he shall, subject to the provisions of this sub-section, be entitled to receive, in addition to the said amount, simple interest thereon calculated at the rate of one 9[***] per cent. for every month or part of a month comprised in the period or periods from the date or, as the case may be, dates of payment of the tax or penalty to the date on which the refund is granted .
Explanation.—For the purposes of this clause, “date of payment of the tax or penalty” means the date on and from which the amount of tax or penalty specified in the notice of demand issued under section 31 is paid in excess of such demand.
(b) If the proceedings resulting in the refund are delayed for reasons attributable to the assessee, whether wholly or in part, period of the delay so attribuatable to him shall be excluded from the period for which interest is payable, and where any question arises as to the period to be excluded, it shall be decided by the Chief Commissioner or Commissioner whose decision thereon shall be final.
(c) Where as a result of an order under 10[sub-section (3) or sub-section (5) of section 15 or] section 16 or section 22 or section 23 or section 24 or section 26 or section 28 or section 34 the amount on which the interest was payable under clause (a) has been increased or reduced, as the case may be, interest shall be increased or reduced accordingly, and, in a case where the interest is reduced, the Assessing Officer shall serve on the assessee a notice of demand in the prescribed form specifying the amount of the excess interest paid and requiring him to pay such amount; and such notice of demand shall be deemed to be a notice under section 31 and the provisions of this Act shall apply accordingly.
(d) The provisions of this sub-section shall apply in respect of assessments for the assessment year commencing on the 1st day of April, 1989, and subsequent assessment years.]
(5) Where under any of the provisions of this Act, a refund is found to be due to any person, the 11[Assessing Officer], 12[Deputy Commissioner (Appeals)], 13[Commissioner (Appeals)] or 14[Chief Commissioner or Commissioner], as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section.]
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1. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
2. Ins. by Act 4 of 1988, sec. 180(i) (w.e.f. 1-4-1989).
3. Subs. by Act 3 of 1989, sec. 90(a), for “total income” (w.e.f. 1-4-1989).
4. Subs. by Act 36 of 1989, sec. 33 (w.e.f. 1-4-1989).
5. Subs. by Act 67 of 1984 sec. 75, for “twelve per cent.” (w.e.f. 1-10-1984). Earlier the words “twelve per cent.” were subs. by Act 16 of 1972, sec. 52, for “nine per cent.” (w.e.f. 1-4-1972). Prior to that the words “nine per cent.” were subs. by Act 27 of 1967 sec. 3, for “six per cent.” (w.e.f. 1-10-1967). Still earlier, the words “six per cent.” were subs. by Act 15 of 1965, sec. 21 (ii), for “four per cent.” (w.e.f. 1-4-1965).
6. Ins. by Act 41 of 1975, sec. 118 (w.e.f. 1-10-1975).
7. Ins. by Act 4 of 1988, sec. 180 (ii) (w.e.f. 1-4-1989).
8. Subs. by Act 3 of 1989, sec. 9(b) (i) for “where, in pursuance of any order passed under this Act, the refund of any amount becomes due to the assessee”. (w.e.f. 1-4-1989).
9. The words “and a half” omitted by Act 49 of 1991, sec. 89 (w.e.f. 1-10-1991).
10. Ins. by Act 3 of 1989, sec. 90 (b) (ii) (w.e.f. 1-4-1989).
11. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
12. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).
13. Ins. by Act 29 of 1977, sec. 39 and Sch. V, Pt. III (w.e.f. 10-7-1978).
14. Subs. by Act 4 of 1988, sec. 161, for “Commissioner” (w.e.f. 1-4-1988).
Section 34. RECTIFICATION OF MISTAKES.
1[34. Rectification of mistakes.—(1) With a view to rectifying any mistake apparent from the record—
(a) The 2[Assessing Officer] may amend any order of assessment or of refund or any other order passed by him;
3[(aa) a gift-tax authority may amend any intimation sent by it under sub-section (1) of section 15 or enhance or reduce the amount of refund granted by it under that sub-section;]
4[(b) the Deputy Director or Deputy Commissioner or Director or Commissioner or Deputy Commissioner (Appeals) or Commissioner (Appeals) may amend any order passed by him under section 17A;
(c) the Deputy Commissioner (Appeals) or Commissioner (Appeals) may amend any order passed by him under Section 22 5[***];
(d) the Commissioner may amend any order passed by him under section 24;
(e) the Appellate Tribunal may amend any order passed by it under section 23 or section 25.]
(2) Subject to the other provisions of this section, the authority concerned—
(a) may make an amendment under sub-section (1) of its own motion; and
(b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee, and where the authority concerned is the 6[Deputy Commissioner (Appeals)] 7[or the Commissioner (Appeals)] or the Appellate Tribunal by the 8[Assessing Officer] also.
(3) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this section unless the authority concerned has given notice to the assessee of its intention so to do and has allowed the assessee a reasonable opportunity of being heard.
(4) Where an amendment is made under this section, an order shall be passed in writing by the gift-tax authority concerned.
(5) Subject to the provisions of sub-section (2) of 9[section 33A], where any such amendment has the effect of reducing the assessment, the 8[Assessing Officer] shall make any refund which may be due to such assessee.
(6) Where any such amendment has the effect of enhancing the assessment or reducing a refund already made, the 8[Assessing Officer] shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be issued under section 31 and the provisions of this Act shall apply accordingly.
(7) No amendment under this section shall be made after the expiry of four years 10[from the end of the financial year in which the order sought to be amended was passed].]
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1. Subs. by Act 53 of 1962, sec. 26 (w.e.f. 1-4-1963).
2. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
3. Ins. by Act 4 of 1988, sec. 181 (w.e.f. 1-4-1989).
4. Subs. by Act 4 of 1988, sec. 186 (3) (w.e.f. 1-4-1989).
5. The words “or section 22A” omitted by Act 3 of 1989, sec. 91 (w.e.f. 1-4-1989).
6. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).
7. Ins. by Act 29 of 1977, sec. 39 and Sch. V, Pt. III (w.e.f. 10-7-1978).
8. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
9. Subs. by Act 5 of 1964, sec. 52 (c), for “section 33” (w.e.f. 1-4-1963).
10. Subs. by Act 67 of 1984, sec. 76, for “from the date of the order sought to be amended” (w.e.f. 1-10-1984).
Section 35. PROSECUTION.
(1) If any person fails without reasonable cause, –
(a) to furnish in time any return of gifts under this Act;
(b) to produce, cause to be produced, on or before the date mentioned in any notice under 1[***] sub-section (4) of section 15, such accounts, records and documents as are referred to in the notice;
2[***]
he shall, on conviction before a magistrate, be punishable with fine which may extend to rupees ten for every day during which the default continues.
(2) If a person makes a statement in a verification in any return of gifts furnished under this Act or in a verification mentioned in section 22, 23 or 25 which is false, and which he either knows or believes to be false, or does not believe to be true, he shall, on conviction before a magistrate, be punishable with simple imprisonment which may extend to one year, or with fine which may extend to rupees one thousand, or with both.
3[(2A) If a person abets or induces in any manner another person to make and deliver an account, statement or declaration relating to any gifts chargeable to tax which is false and which he either knows to be false or does not believe to be true, he shall, on conviction before a magistrate, be punishable with simple imprisonment which may extend to six months or with fine which may extend to one thousand rupees or with both.]
4[(3) A person shall not be proceeded against for an offence under this Act except with the previous sanction of the Commissioner or Commissioner (Appeals):
Provided that the Chief Commissioner or, as the case may be, Director General may issue such instructions or directions to the aforesaid gift-tax authorites as he may deem fit for institution of proceedings under this sub-section.
(4) Any such offence may, either before or after the institution of proceedings, be compounded by the Chief Commissioner or Director-General.]
5[6[Explanation 1].—For the purposes of this section, “Magistrate” means a Presidency magistrate or a Magistrate of the first class.]
7[Explanation 2.—For the removal of doubts, it is hereby declared that the powers of the Board to issue orders, instructions or directions under this Act shall include and shall be deemed always to have included the power to issue instructions or directions (including instructions or directions to obtain the previous approval of the Board) to other gift-tax authorities for the proper composition of offences under this section.]
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1. The words “sub-section (2) or” omitted by Act 41 of 1975, sec. 119(i) (w.e.f. 1-4-1976).
2. Clause (c) omitted by Act 41 of 1975, sec. 119(ii) (w.e.f. 11-4-1976).
3. Ins. by Act 53 of 1962, sec. 27 (ii) (w.e.f. 1-4-1963).
4. Subs. by Act 49 of 1991, sec. 90(a) (w.e.f. 1-10-1991).
5. Subs. by Act 53 of 1962, sec. 27(ii) (w.e.f. 1-4-1963).
6. Explanation re-numbered as explanation 1 by Act 49 of 1991, sec. 90(b) (w.r.e.f. 1-4-1963).
7. Ins. by Act 49 of 1991, sec. 90(b) (w.r.e.f. 1-4-1958).
Section 35A. OFFENCES BY COMPANIES.
1[35A. Offences by companies.—(1) Where an offence under this Act has been committed by a company, every person who, at the time the offence was committed, was in charge of and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly :
Provided that nothing contained in this sub-section shall render any such person liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation : For the purposes of this section, – (a) “company” means a body corporate, and includes – (i) a firm, and
(ii) an association of persons or a body of individuals, whether incorporated or not; and
(b) “director”, in relation to –
(i) a firm, means a partner in the firm,
(ii) an association of persons or a body of individuals, means any member controlling the affairs thereof.
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1. Ins. by Act 41 of 1975, sec. 120 (w.e.f. 1-10-1975).
Section 35B. OFFENCES BY HINDU UNDIVIDED FAMILIES.
(1) Where an offence under this Act has been committed by a Hindu undivided family, the Karta thereof shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render the Karta liable to any punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a Hindu undivided family and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any member of the Hindu undivided family, such member shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Section 35C. SECTION 360 OF THE CODE OF CRIMINAL PROCEDURE, 1973 AND THE PROBATION OF OFFENDERS ACT, 1958, NOT TO APPLY.
Nothing contained in section 360 of the Code of Criminal Procedure, 1973 (2 of 1974), or in the Probation of Offenders Act, 1958 (20 of 1958), shall apply to a person convicted of an offence under this Act unless that person is under eighteen years of age.
Section 35D. PRESUMPTION AS TO CULPABLE MENTAL STATE.
1[35D. Presumption as to culpable mental state.—(1) In any prosecution for any offence under this Act which requires a culpable mental state on the part of the accused, the court shall presume the existence of such mental state but it shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution.
Explanation : In this sub-section “culpable mental state” includes intention, motive or knowledge of a fact, or belief in, or reason to believe, a fact.
(2) For the purposes of this section, a fact is said to be proved only when the court believes it to exist beyond reasonable doubt and not merely when its existence is established by a preponderance of probability.
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1. Ins. by Act 46 of 1986, sec. 41 (w.e.f. 10-9-1986).
Section 35E. PROOF OF ENTRIES IN RECORDS OR DOCUMENTS.
1[35E. Proof of entries in records or documents.—Entries in the records or other documents in the custody of a gift-tax authority shall be admitted in evidence in any proceedings for the prosecution of any person for an offence under this Act, and all such entries may be proved either by the production of the records or other documents in the custody of the gift-tax authority containing such entries, or by the production of a copy of the entries certified by the gift-tax authority having custody of the records or other documents under its signature and stating that it is a true copy of the original entries and that such original entries are contained in the records or other documents in its custody.
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1. Ins. by Act 3 of 1989, sec. 92 (w.e.f. 1-4-1989).
Section 36. POWER REGARDING DISCOVERY, PRODUCTION OF EVIDENCE, ETC.
1[36. Power regarding discovery, production of evidence, etc.—(1) The 2[Assessing Officer], the 3[Deputy Commissioner (Appeals)], 4[the Commissioner (Appeals),] the 5[Chief Commissioner or Commissioner] and the Appellate Tribunal shall, for the purposes of this Act, have the same powers as are vested in a Court under the Code of Civil Procedure 1908 (5 of 1908), when trying a suit in respect of the following matters, namely:—
(a) discovery and inspection;
(b) enforcing the attendance of any person, including any officer of a banking company and examinaing him on oath;
(c) compelling the production of books of account and other documents; and
(d) issuing commissions.
6[(1A) If the Director-General or Director or Deputy Director or Assistant Director has reason to suspect that any gifts chargeable to tax under this Act have been concealed, or are likely to be concealed, by any person or class of persons within his jurisdiction, then for the purposes of making any inquiry or investigation relating thereto, it shall be competent for him to exercise the powers conferred under sub-section (1) on the gifts-tax authorities referred to in that sub-section, notwithstanding that no proceedings with respect to such person or class of persons are pending before him or any other gift-tax authority.]
7[***]
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1. Subs. by Act 53 of 1962, sec. 28 (w.e.f. 1-4-1963).
2. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
3. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).
4. Ins. by Act 29 of 1977, sec. 39 and Schedule V, Pt. III (w.e.f. 10-7-1978).
5. Subs. by Act 4 of 1988, sec. 161, for “Commissioner” (w.e.f. 1-4-1988).
6. Ins. by Act 26 of 1988, sec. 70 (w.e.f. 1-6-1988).
7. Sub-section (2) omitted by Act 4 of 1988, sec. 182(b) (w.e.f. 1-4-1989).
Section 37. POWER TO CALL FOR INFORMATION.
1[Where, for the purposes of this Act, it appears necessary for any gift-tax authority to obtain any statement or information from any person or banking company,] 2[such gift-tax authority] may serve a notice requiring such person, on or before a date to be therein specified, to furnish such statement or information on the points specified in the notice, and that person shall, notwithstanding anything in any law to the contrary, be bound to furnish such statement or information to such gift-tax authority
Provided that no legal practitioner shall be bound to furnish any statement or information under this section based on any professional communication made to him otherwise than as permitted by section 126 of the Indian Evidence Act, 1872 (1 of 1872).
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1. Subs. by Act 4 of 1988, sec. 183 (a), for certain words (w.e.f. 1-4-1989).
2. Subs. by Act 4 of 1988, sec. 183 (b), for “the Gift-tax Officer” (w.e.f. 1-4-1989).
Section 38. EFFECT OF TRANSFER OF AUTHORITIES ON PENDING PROCEEDINGS.
Whenever in respect of any proceeding under this Act, any gift-tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises such jurisdiction, the authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor :
1[Provided that the assessee concerned may demand that before the proceeding is so continued the previous proceeding or any part thereof be reopened or that before any order of assessment is passed against him, he be reheard.]
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Section 39. COMPUTATION OF PERIOD OF LIMITATION.
1 COMPUTATION OF PERIOD OF LIMITATION. In computing the period of limitation prescribed for an appeal or an application under this Act, the day on which the order complained of was served and if the assessee was not furnished with a copy of the order when the notice of the order was served upon him, the time requisite for obtaining a copy of such order shall be excluded.
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Section 40. SERVICE OF NOTICE.
(1) A notice or a requisition under this Act may be served on the person therein named either by post or as if it were a summons issued by a court under the Code of Civil Procedure, 1908 (5 of 1908).
(2) Any such notice or requisition may, in the case of a firm or a Hindu undivided family, be addressed to any member of the firm or to the manager or any adult male member of the family, and in the case of a company or association of persons be addressed to the principal officer thereof.
1[(3) After a finding of total partition has been recorded by the 2[Assessing Officer] under section 20 in respect of any Hindu family, notices under this Act in respect of the gifts made by the family shall be served on the person who was the last manager of the Hindu family, or if such person is dead, then on all surviving adults who were members of the Hindu family immediately before the partition.
(4) Where a firm or other association of persons is dissolved, notice under this Act in respect of the gifts made by the firm or association may be served on any person who was a partner (not being a minor) or member of the association, as the case may be, immediately before its dissolution.
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1. Ins. by Act 53 of 1962, sec. 31 (w.e.f. 1-4-1963).
2. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
Section 41.
1[***]
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1. Section 41 omitted by Act 5 of 1964, sec. 52 (e) (w.e.f. 1-4-1964). Earlier it was subs. by Act 53 of 1962, sec. 32 (w.e.f. 1-4-1963).
Section 41A. PUBLICATION OF INFORMATION RESPECTING ASSESSEES.
1[41A. Publication of information respecting assessees.—(1) If the Central Government is of opinion that it is necessary or expedient in the public interest to publish the names of any assessees and any other particulars relating to any proceedings 2or prosecutions under this Act in respect of such assessees, it may cause to be published such names and particulars in such manner as it thinks fit.
3[(2) No publication under this section shall be made in relation to any penalty imposed under this Act until the time for presenting an appeal to the 4[Deputy Commissioner (Appeals)] 5[or, as case may be, the Commissioner (Appeals)] has expired without an appeal having been presented or the appeal, if presented, has been disposed of.]
Explanation : In the case of a firm, company or other association of persons, the names of the partners of the firm, directors, managing agents, secretaries and treasurers, or managers of the company, or the members of the association, as the case may be, may also be published if, in the opinion of the Central Government the circumstance of the case justify it.
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1. Section 41A subs. by Act 5 of 1964, sec. 52 (f) (w.e.f. 1-4-1964). Earlier it was ins. by Act 28 of 1960 sec. 13 (w.e.f. 1-4-1960) and was amended by Act 53 of 1962, sec. 33 (w.e.f. 1-4-1963).
2. Ins. by Act 41 of 1975, sec. 121 (i) (w.e.f. 1-10-1975).
3. Subs. by Act 41 of 1975, sec. 121 (ii) (w.e.f. 1-10-1975).
4. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).
5. Ins by Act 29 of 1977, sec. 39 and Schedule V, Pt. III (w.e.f. 10-7-1978).
Section 41B. DISCLOSURE OF INFORMATION RESPECTING ASSESSEES.
1[41B. Disclosure of information respecting assessees.—Where a person makes an application to the 2[Chief Commissioner or Commissioner] in the prescribed form for any information relating to any assessee in respect of any assessment made under this Act, the Chief Commissioner or Commissioner may, if he is satisfied that it is in the public interest so to do, furnish or cause to be furnished the information asked for in respect of that assessment only and his decision in this behalf shall be final and shall not be called in question in any court of law.
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1. Section 41B subs. by Act 5 of 1964, sec. 52 (f) (w.e.f. 1-4-1964). Earlier it was ins. by Act 28 of 1960, sec. 13 (w.e.f. 1-4-1960).
2. Subs. by Act 4 of 1988, sec. 161, for “Commissioner” (w.e.f. 1-4-1988).
Section 41C. RETURN OF GIFTS, ETC., NOT TO BE INVALID ON CERTAIN GROUNDS.
1[41C. Return of gifts etc., not to be invalid on certain grounds.—No return of gifts, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of gifts, assessment, notice, summons or other proceeding, if such return of gifts, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.
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1. Ins. by Act 41 of 1975, sec. 122 (w.e.f. 1-10-1975).
Section 42. BAR OF SUITS IN CIVIL COURT.
No suit shall lie in any civil court to set aside or modify 1any proceeding taken or order made under this Act, and no prosecution, suit or other legal proceeding shall lie against 2the Government or any officer of the Government for anything in good faith done or intended to be done under this Act.
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1. Subs. by Act 26 of 1988, sec. 71, for “any order made” (w.e.f. 1-3-1988). Earlier the words “any order made” were subs. by Act 11 of 1987, sec. 91 (w.e.f. 1-3-1987).
2. Ins. by Act 5 of 1964, sec. 52 (g) (w.e.f. 1-4-1964).
Section 43. APPEARANCE BEFORE GIFT-TAX AUTHORITIES BY AUTHORISED REPRESENTATIVES.
1[43. Appearance before Gift-tax authorities by authorised representa-tives.—An assessee who is entitled to or required to attend before any gift-tax authority or the Appellate Tribunal in connection with any proceeding under this Act, except where he is required under this Act to attend in person, may attend by a person who would be entitled to represent him before any income-tax authority or the Appellate Tribunal under section 288 of the Income-tax Act.
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1. Subs. by Act 53 of 1962, sec. 34 (w.e.f. 1-4-1963).
Section 43A. APPEARANCE BY REGISTERED VALUER IN CERTAIN MATTERS.
1[43A. Appearance by registered valuer in certain matters.—Any assessee who is entitled or required to attend before any gift-tax authority or the Appellate Tribunal in connection with any matter relating to the valuation of any asset, except where he is required under this Act to attend in person, may attend by a registered valuer.
Explanation : In this section, “registered valuer” has the same meaning as in clause (oaa) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).
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1. Ins. by Act 45 of 1972, sec. 24 (w.e.f. 1-1-1973).
Section 44. AGREEMENT FOR AVOIDANCE OR RELIEF OF DOUBLE TAXATION WITH RESPECT TO GIFT-TAX.
1The Central Government may enter into an agreement with the Government of any reciprocating country –
(a) for the avoidance or relief of double taxation with respect to gift-tax payable under this Act and under the corresponding law in force in the reciprocating country, or
(b) for exchange of information for the prevention of evasion or avoidance of gift-tax chargeable under this Act or under the corresponding law in force in that country or investigation of cases of such evasion or avoidance, or
(c) for recovery of tax under this Act and under the corresponding law in force in that country, and may, by notification in the Official Gazette, make such provision as may be necessary for implementing the agreement.
Explanation : The expression “reciprocating country” for the purposes of this Act means any country which the Central Government may, by notification in the Official Gazette, declare to be a reciprocating country.
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1. Subs. by Act 16 of 1972, sec. 54 (w.e.f. 1-4-1972).
Section 44A. ROUNDING OFF OF TAXABLE GIFTS.
1[44A. Rounding off of taxable gifts.—The amount assessed in accordance with the foregoing provisions of this Act as being the value of all taxable gifts shall be rounded off to the nearest multiple of ten rupees and, for this purpose, any part of a rupee consisting of paise shall be ignored and thereafter, if such amount is not a multiple of ten rupees, then, if the last figure in that amount is five or more, the amount shall be increased to the next higher amount which is a multiple of ten and, if the last figure is less than five, the amount shall be reduced to the next lower amount which is a multiple of ten; and the amount so rounded off shall be deemed to be the value of all taxable gifts of the assessee for the purposes of this Act.
————
1. Ins. by Act 42 of 1970, sec. 70 (w.e.f. 1-4-1971).
Section 44B. ROUNDING OFF OF TAX, ETC.
The amount of gift-tax, interest, penalty, fine or any other sum payable, and the amount of refund due, under the provisions of this Act, shall be rounded off to the nearest rupee and, for this purpose, where such amount contains a part of rupee consisting of paise, then, if such part is fifty paise or more, it shall be increased to one rupee, and if such part is less than fifty paise, it shall be ignored.
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1. Ins. by Act 42 of 1970, sec. 70 (w.e.f. 1-4-1971).
Section 45. ACT NOT TO APPLY IN CERTAIN CASES.
1[No tax shall be levied under this Act in respect of gifts made by]—
2[(a) a company in which the public are substantially interested;
(b) any company to an Indian company in a scheme of amalgamation;]
(e) any institution or fund the income whereof is exempt from income-tax under 3[section 11 or section 12] of Income-tax Act.
4[Explanation 1.—For the purposes of clause (b) the term “amalgamation” shall have the meaning assigned to it in clause (1B) of section 2 of the Income-tax Act.]
5[Explanation 3.—For the removal of doubts, it is hereby declared that the exemption admissible under clause (e) in relation to gifts made by an institution or fund referred to in that clause shall not be denied merely on either or both of the following grounds, namely:—
(i) that, subsequent to the gift, any part of the income of the institution or fund has become chargeable to tax due to non-compliance with any of the provisions of 6[section 11 or section 12 or section 12A] of the Income-tax Act;
(ii) that, under clause (c) of sub-section (1) of section 13 of the Income-tax Act, the exemption under 6[section 11 or section 12] of that Act is denied to the institution or fund in relation to any income arising to it from any investment referred to in clause (h) of sub-section (2) of section 13 of the said Act where the aggregate of the funds invested by it in a concern referred to in the said clause (h) does not exceed five per cent. of the capital of that concerm.]
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1. Subs. by Act 4 of 1988, sec. 184 (a), for “The provisions of this Act shall not apply to gifts made by” (w.e.f. 1-4-1984).
2. Subs. by Act 4 of 1988, sec. 184 (b) (w.e.f. 1-4-1989).
3. Subs. by Act 16 of 1972, sec. 55(a), for ”section 11” (w.e.f. 1-4-1973). Earlier “section 11” was subs. by Act 53 of 1962 sec. 35, for” clause (i) of subs-section 3 of section 4″ (w.e.f. 1-4-1963).
4. Subs. by Act 3 of 1989, sec. 93 (w.e.f. 1-4-1989), for Explanations 1 and 2. Earlier Explanation was remembered as Explanation 1 and Explanation 2 was ins. by Act 20 of 1967, sec. 35 (8) (ii) (w.e.f. 1-4-1967)
5. Ins. by Act 32 of 1971 sec. 37(c) (w.e.f. 1-4-1971).
6. Subs. by Act 16 of 1972, sec. 55(b), for “section 11” (w.e.f. 1-4-1973).
Section 46. POWER TO MAKE RULES.
(1) The Board may, by notification in the Official Gazette, make rules for carrying out the purposes of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power rules made under this section may provide for –
(a) the manner in which the value of any property may be determined;
(b) the form in which returns under this Act shall be made and the manner
in which they shall be verified;
(c) the form in which appeals and applications under this Act may be made, and the manner in which they shall be verified;
1[(cc) the circumstances in which, the conditions subject to which and the manner in which, the 2[Deputy Commissioner (Appeals)] 3[or the Commissioner (Appeals)] may permit an appellant to produce evidence which he did not produce or which he was not allowed to produce before the 4[Assessing Officer];
(d) the form of any notice of demand under this Act;
(e) the refunds of gift-tax paid in respect of gifts which are revoked on the happening of any specified event which does not depend on the will of the donor or of any amount paid under section 18;
5[(ee) the procedure to be followed in calculating interest payable by assessees or interest payable by the Government to assessees under any provisions of this Act, 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 specifying the circumstances in which and the extent to which petty amounts of interest payable by assessees may be ignored:]
(f) the areas for which lists of valuers may be drawn up;
(g) any other matter which has to be, or may be, prescribed for the purposes of this Act.
6[(3) The power to make rules conferred by this section shall include the power to give retrospective effect, from a date not earlier than the date of commencement of this Act, to the rules or any of them and, unless the contrary is permitted (whether expressly or by necessary implication), no retrospective effect shall be given to any rule so as to prejudicially affect the interests of assessees.]
7[(4) The Central Government shall cause every rule made under this Act to be laid as soon as may be after it is made before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session 8[or in two or more successive sessions], and, if, before the expiry of the session 9[immediately following the session or the successive sessions aforesaid], both Houses agree in making any modifications in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejdice to the validity of anything previously done under that rule.]
————
1. Ins. by Act 16 of 1972, sec. 56 (w.e.f 1-4-1972).
2. Subs. by Act 4 of 1988, sec. 161, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1988).
3. Ins. by Act 29 of 1977, sec. 39 and Sch. V, Pt. III (w.e.f. 10-7-1978).
4. Subs. by Act 4 of 1988, sec. 161, for “Gift-tax Officer” (w.e.f. 1-4-1988).
5. Ins. by Act 42 of 1970, sec. 71 (w.e.f. 1-4-1971).
6. Subs. by Act 26 of 1974, sec. 17 (w.e.f. 18-8-1974).
7. Subs. by Act 53 of 1962, sec. 36 (w.e.f. 1-4-1963).
8. Subs. by Act 41 of 1975 , sec. 123 (i), for “or in two successive sessions” (w.e.f. 1-4-1976).
9. Subs. by Act 41 of 1975, sec. 123 (ii), for “in which it is so laid or the session immediately following” (w.e.f. 1-4-1976).
Section 46A. POWER TO MAKE EXEMPTION, ETC., IN RELATION TO CERTAIN UNION TERRITORIES.
1POWER TO MAKE EXEMPTION, ETC., IN RELATION TO CERTAIN UNION TERRITORIES. – If the Central Government considers it necessary or expedient so to do for avoiding any hardships or anomaly or removing any difficulty that may arise as a result of the application of this Act to the Union territories of Dadra and Nagar Haveli, Goa, Daman and Diu, and Pondicherry, or in the case of the Union territory of Pondicherry, for implementing any provision of the Treaty of Cession concluded between France and India on the 28th day of May, 1956, the Central Government may, by general or special order, make an exemption, reduction in rate or other modification in respect of gift-tax in favour of any class of gifts or in regard to the whole or any part of the gifts made by any assessee or class of assessees :
Provided that the power conferred by this section shall not be exercisable after the 31st day of March, 1967, except for the purpose of rescinding an exemption, reduction or modification already made.
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1. Ins. by the Taxation Laws (Extension to Union Territories) Regulation, 1963, sec. 3 and Sch. (w.e.f. 1-4-1963).
Section 47. POWER TO REMOVE DIFFICULTIES.
1POWER TO REMOVE DIFFICULTIES. – (1) If any difficulty arises in giving effect to the provisions of this Act as amended by the Direct Tax Laws (Amendment) Act, 1987, the Central Government may, by order, do anything not inconsistent with such provisions for the purpose of removing the difficulty :
Provided that no such order shall be made after the expiration of three years from the 1st day of April, 1988.
(2) Every order made under sub-section (1) shall be laid before each House of Parliament.
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1. Ins. by Act 4 of 1988, sec. 185 (w.e.f.1-4-1988).
THE SCHEDULE I
1[2[THE SCHEDULE I]
3[[See section 3 (1)]]
RATES OF GIFT-TAX
| where the value of all taxable gifts does not exceed Rs. 20,000 | 5 per cent of the value of such gifts; | |
| where the vlaue of all taxable gifts exceeds, Rs. 20,000 but does not exceede Rs.50,000 |
Rs. 1,000 plus 10 per cent. of the amount by which the value of such gifts exceeds Rs. 20,000; |
|
| where the value of all taxable gifts exceeds, Rs. 50,000 but does not exceed Rs. 1,00,000 | Rs. 4,000 plus 15 per cent. of the amount by which the value of such gifts exceeds Rs. 50,000; | |
| where the value of all taxable gifts exceeds Rs. 1,00,000 but does not exceed Rs.2,00,000 |
Rs. 11,500 plus 20 per cent. of the amount by which the value of such gifts exceeds Rs. 1,00,000; |
|
| wher the value of all taxble gifts exceeds Rs. 2,00,000 but does not exceed Rs. 5,00,000 | Rs. 31,500 plus 25 per cent, of the amount by which the value of such gifts exceeds Rs. 2,00,000; |
|
| where the value of all taxable gifts exceeds Rs. 5,00,000 but does not exceed Rs. 10,00,000 |
Rs. 1,06,500 plus 30 per cent. of the amount by which the vlaue of such gifts exceeds Rs. 5,00,000; | |
| where the value of all taxable gifts exceeds Rs. 10,00,000 but does not exceed Rs.15,00,000 |
Rs. 2,56,500 plus 40 per cent. of the amount by which the vlaue of such gifts exceeds Rs. 10,00,000; |
|
| where the value of all taxable gifts exceed Rs.15,00,000 but does not exceed Rs. 20,00,000 |
Rs. 4,56,500 plus 50 per cent. of the amount by which the value of such gifts exceeds Rs. 15,00,000; |
|
| where the value of all taxable gifts exceeds Rs. 20,00,000 |
Rs. 7,06,500 plus 75 per cent, of the amount by which value of such gifts exceeds Rs. 20,00,000.] |
1. Subs. by Act 19 of 1970, sec. 27 (c) (w.e.f. 1-4-1971). Earlier the Schedule was subs. by Act 13 of 1966 sec. 41(c) (w.e.f. 1-4-1966) and still earlier subs. by Act 5 of 1964 sec. 52 (h) (w.e.f. 1-4-1964).
2. The Schedule renumbered as Schedule I by Act 3 of 1989, sec. 94 (w.e.f. 1-4-1989).
3. Subs. by Act 23 of 1986, sec. 46, for “(see section 3)” (w.e.f. 1-4-1987).
THE SCHEDULE II
1[THE SCHEDULE II]
[See section 6(1)
Rules for Determining the Value of Property Gifted
2[1.Value of gifted property how to determined.—3[Subject to the provisions of rules 2 to 7, the value of any property], other than cash, transferred by way of gift shall, for the purposes of this Act, be determined in accordance with the provisions of Schedule III to 4[the Wealth-tax Act, 1957 (27 of 1957) (hereinafter referred to as the Wealth-tax Act)], which shall apply subject to the following modifications, namely:—
In the said Schedule,—
(a) references by whatever form of words to the Wealth-tax Act shall be construed as references to this Act;
(b) in rule 5, the reference to the year ending on the valuation date shall be construed as a reference to the previous year as defined in this Act;
(c) save as provided in clause (b), references, to the valuation date shall be construed as references to the date on which the gift was made;
(d) reference to section 7 of the Wealth-tax Act shall be construed as references to section 6 of this Act;
(e) references to section 16A of the Wealth-tax Act shall be construed as references to sub-section (6) of section 15 of this Act.]
5[2. Quoted shares and debentures of companies.—The value of an equity share or a preference share in any company or a debenture of any company which is a quoted share or a quoted debenture shall be taken as the value quoted in respect of such share or debenture on the date on which the gift was made or where there is no such quotation on such date, the quotation on the date closest to such date and immediately preceding such date.
Explanation—The words and expressions used in this rule and rules 3 to 7 but not defined and defined in rule 2 of Schedule III of the Wealth-tax Act shall have the meanings respectively assigned to them in rule 2 of that Schedule.
3. Special provision for quoted shares of companies.—Notwithstanding anything in rule 2, the value of an equity share in any company which is a quoted share may, at the option of the assessee or a company, be taken on the basis of the average of the value quoted on the 31st day of March immediately preceding the assessment year and the values quoted in respect of such share on the said dates in relation to each of the immediately preceding nine assessment years, or where there is no such quotation on any of the aforesaid dates, the quotation on the date closest to the said date and immediately preceding such date:
Provided that where for any reason the value of such share is quoted in relation to lesser number of assessment years than the said nine assessment years, then the value or values so quoted shall be taken into account for the purposes of the aforesaid average:
Provided further that where the assessee opts for the average of the values so quoted, he shall get such vlaues certified by an accountant and attach the certificate to the return of gifts in respect of the relevant assessment year.
4. Unquoted preference shares.—(1) Subject to the provisions of sub-rule (2), the value of an unquoted preference share in any company shall,—
(a) where the preference share is issued before the date on which the gift was made at a rate of dividend of not less than eight per cent., be the paid-up value of such share; and
(b) where the preference share is issued before the said date at a rate of dividend of less than eight per cent., be the adjusted paid-up value of such share.
(2) Where no dividend has been paid in respect of an unquoted preference share by any company continuously for not less than three accounting years ending on the date on which the gift was made or, in a case where the accounting year of the company does not end on that date, for not less than three continuous accounting years ending on a date immediately before the date on which the gift was made, the paid-up value or, as the case may be, the adjusted paid-up value shall be reduced—
(a) in the case of a non-cumulative preference share, as indicated in the Table below:—
| Number of accounting years ending on the date on which the gifts was made or, in a case where the accounting year does not end on that date, the number of accounting years ending on a date immediately preceding the date on which the gift was made, for which no dividend has been paid | Rate of reduction |
| (1) | (2) |
| Three years | 10% |
| For years | 20% of the paid-up value or the |
| Five years | 30% adjusted paid-up value, as |
| Six years and above | 40% the case may be. |
(b) in the case of cumulative preference share, by one-half of the rates specified in the aforesaid Table.
Explanation—For the purposes of this rule, “adjusted paid-up value”, in relation to a preference share, means an amoount which bears to the paid-up value of the preference share the same proportion as the stipulated rate of dividend [being the rate of dividend on the preference share specified in the terms of issue of such share, and in a case where such dividend is required to be increases under the provisions of section 3 of the Preference Shares (Regulation of Dividends) Act, 1960 (63 of 1960), the rate of dividend as so increased] on such share bears to the rate of eight per cent.
5. Unquoted equiry shares in companies other than investment companies.—(1) The value of an unquoted equity share in any company, other than an investment company, shall be determined in the manner set out in sub-rule (2).
(2) The value of all the liabilities as shown in the balance-sheet of such company shall be deducted from the value of all its assets shown in that balance-sheet; the net amount so arrived at shall be divided by the total amount of its paid-up equity share capital as shown in the balance-sheet; the result multiplied by the paid-up value of each equity share shall be the break up value of each unquoted equity share, and an amount equal to eighty per cent. of the break-up value so determined shall be the value of the unquoted equity share for the purposes of this Act.
(3) For the purposes of sub-rule (2),—
(a) the following amounts shown as assets in the balance-sheet shall not be treated as assets, namely:—
(i) any amount paid as advance tax under the Income-tax Act;
(ii) any amount shown in the balance-sheet including the debit balance of the profit and loss account or the profit and loss appropriation account which does not represent the value of any asset;
(b) the following amounts shown as liabilities in the balance-sheet shall not to be treated as liabilities, namely:—
(i) the paid-up capital in respect of equity shares;
(ii) the amount set apart for payment of dividends on preference shares and equity shares where such dividends have not been declared before the date on which the gift was made at a general body meeting of the company;
(iii) reserves, by whatever name called, other than those set apart towards depreciation;
(iv) credit balance of the profit and loss account;
(v) any amount representing provision for taxation, other than the amount referred to in sub-clause (i) of clause (a), to the extent of the excess over the tax payable with reference to the book profits in accordance with the law applicable thereto;
(vi) any amount representing contingent liabilities other than arrears of dividends payable in respect of cumulative preference shares.
6. Unquoted equity shares in investment companies.—(1) Subject to rule 7, the value of an unquoted equity share in an investment company shall be determined in the manner specified in sub-rule (2).
(2) The value of all the liabilities as shown in the balance-sheet of such company shall be deducted from the value of all its assets shown in that balance-sheet; the net amount so arrived at shall be divided by the total paid-up equity share capital of the company as shown in the balance sheet, and the result multiplied by the paid-up value of each equity share shall be the value of the unquoted equity share in that investment company for the purposes of this Act.
(3) For the purposes of sub-rule (2), the value of an asset disclosed in the balance-sheet of the company shall be taken to be its value determined in accordance with the rules as applicable to that particular asset and, in the absence of any such rule, the value of such asset shall be its value as deter-mined under rule 20 of Schedule III of the Wealth-tax Act.
(4) For the purposes of this rule,—
(a) “balance-sheet” has the same meaining as in rule 5;
(b) the amounts referred to in sub-rule (3) of rule 5 shall not be treated as assets or liabilities.
(5) For the purposes of facilitating the valuation of unquoted equity shares under this rule and rule 7, the company concerned shall have such valuation made by its auditors appointed under section 224 of the Companies Act, 1956 (1 of 1956), and a certificate of the auditors relating to such valuation in the prescribed form shall be furnished to the Assessing Officer and the shareholders of the company; and the valuation made by the auditors shall be taken into account in the assessment of the shareholder of the company.
7. Unquoted equity shares in interlocked companies.—(1) The value of an unquoted equity share in one of the two interlocked companies held by the other interlocked company for the purposes of rule 6 shall be equal to the paid-up value of such share or the value determined under sub-rule (2), whichever is higher.
(2) For the purpose of sub-rule (1), the aggregate value of all the equity shares in an interlocked company shall be arrived at by multiplying the maintainable profits of such company by—
(a) the fraction 100/8.5 in a case where the gross total income of the company consists, to the extent of not less than 51 per cent of income chargeable under the head “Income from house property” under the Income-tax Act; or
(b) the fraction 100/10, in the case of any other interlocked company,and the resultant amount divided by the number of such equity shares shall be the value of such an equity share in such company.
(3) The maintainable profits of the company, for the purpose of sub-rule (2), shall be computed in the following manner, namely:—
(a) the book profits of the company for the five accounting years of the company immediately preceding the date on which the gift was made shall first be ascertained;
(b) adjustments shall be made to the book profits for each of the said five years for all non-recurring and extraordinary items of income and expenditure and losses;
(c) adjustments shall be made to the book profits for expenditure which is not of a revenue nature but is debited in the accounts and for receipts which are in the nature of revenue receipts but are not accounted for in the profit and loss account;
(d) any development rebate or investment allowance debited in the books of account shall be added back to the book profits;
(e) the tax liabilty of the company on the book profits, arrived at after the adjustments at items (a), (b), (c) and (d), shall be deducted from such book profits;
(f) amounts required for paying dividends on preference share or shares with prior rights shall be deducted from such book profits;
(g) the aggregate of the book profits for the accounting years so arrived at, divided by 5, shall be the maintainable profits of the company.
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1. Ins by Act 3 of 1989, sec. 94 (w.e.f. 1-4-1989).
2. Numbered by Act 38 of 1993 sec. 42 (w.e.f. 1-4-1993).
3. Subs. by Act 28 of 1993, sec. 42 (a) (i), for “The value of any property”.
4. Subs. by Act 38 of 1993, sec. 42(a)(ii), for “the Wealth-tax Act” (w.e.f. 1-4-1993).
5. Ins. by Act 38 of 1993, sec. 42 (b) (w.e.f. 1-4-1993).
