November 30, 2014
Section 1. Short title, extent and commencement
ACT NO. 14 OF 1947 1* [11th March, 1947.]
(1) This Act may be called the Industrial Disputes Act, 1947.
1[(2) It extends to the whole of India].
2[* * *]
(3) It shall come into force on the first day of April, 1947.
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1. Subs. by Act 36 of 1956, sec. 2, for the former sub-section (w.e.f. 29-8-1956).
2. Provision omitted by Act 51 of 1970, sec. 2 and Sch. (w.e.f. 1-9-1971).
Section 2.Definitions
In this Act, unless there is anything repugnant in the subject or context, -
(a) “Appropriate Government” means-
(i) In relation to any industrial dispute concerning 1[* * *] any industry carried on by or under the authority of the Central Government, 2[* * *] or by a railway company 3[or concerning any such controlled industry as may be specified in this behalf by the Central Government] 4[* * *] or in relation to an industrial dispute concerning 5[ 6[ 7[ 8[a Dock Labour Board established under section 5A of the Dock Workers (Regulation of employment) Act;
1948 (9 of 1948), or 9[the Industrial Finance Corporation of India Limited formed and registered under the Companies Act, 1956 (1 of 1956)] or the Employees’ State Insurance Corporation established under section 3 of the Employees State Insurance Act, 1948 (34of 1948), or the Board of Trustees constituted under section 3A of the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948), or the Central Board of Trustees and the State Boards of Trustees constituted under section 5A and section 5B, respectively, of the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (19 of 1952), 10[* * *], or the Life Insurance Corporation of India established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956), or 9[the Oil and Natural Gas Corporation Limited registered under tile Companies Act, 1956 (1 of 1956)], or the Deposit insurance and Credit Guarantee Corporation established under section 3 of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 (47 of 1961), or the Central Warehousing Corporation established under section 3 of tile Warehousing Corporations Act, 1962 (58 of 1962), or the Unit Trust of India established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963), or the Food Corporation of India established under section 3, or a Board of Management established for two or more contiguous States under section 16 of the Food Corporations Act, 1964 (37 of 1964), or 9[the Airports Authority of India constituted under section 3 of the Airports Authority of India Act, 1994 (55 of 1994)], or a Regional Rural Bank established under section 3 of the Regional Rural Banks Act, 1976 (21 of 1976),or the Export Credit and Guarantee Corporation Limited or the Industrial Reconstruction Bank of India Limited ], 11[ the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987)], or 12[ 9[an air transport service, or a banking or an insurance company], a mine, an oil-field,] 13[a Cantonment Board,] or a 53[“major port, any company in which not less than fifty-one per cent of the paid-up share capital is held by the Central Government, or any corporation, not being a corporation referred to in this clause, established by or under any law made by Parliament, or the Cental public sector undertaking, subsidiary companies set up by the principal undertaking and autonomous bodies owned or controlled by the Central Government, the Central Government, and”]
54[“(ii) in relation to any other industrial dispute, including the State public sector undertaking, subsidiary companies set up by the principal undertaking and autonomous bodies owned or controlled by the State Government, the State Government:
Provided that in case of a dispute between a contractor and the contract labour employed through the contractor in any industrial establishment where such dispute first arose, the appropriate Government shall be the Central Government or the State Government, as the case may be, which has control over such industrial establishment.]
14[(aa) “Arbitrator” includes an umpire;]
15[ 16[ (aaa)] “Average pay” means the average of the wages payable to a workman-
(i) In the case of monthly paid workman, in the three complete calendar months,
(ii) In the case of weekly paid workman, in the four complete weeks,
(iii) In the case of daily paid workman, in the twelve full working days,
Preceding the date on which the average pay becomes payable if the workman had worked for three complete calendar months or four complete weeks or twelve full working days, as the case may be, and where such calculation cannot be made, the average pay shall be calculated as the average of the wages payable to a workman during the period he actually worked;]
17[ (b) ‘Award’ means an interim or a final determination of any industrial dispute or of any question relating thereto by any Labour Court, Industrial Tribunal or National Industrial Tribunal and includes an arbitration award made under section 10A;]
18[(bb) “Banking company” means a banking company as defined in section 5 of the Banking Companies Act, 1949, 19(10 of 1949) having branches or other establishments in more than one State, and includes 20[ the Export-Import Bank of India] 21[the Industrial Reconstruction Bank of India,] 22[the Industrial Development Bank of India,] 23[the Small Industries Development Bank of India established under section 3 of the Small Industries Development Bank of India Act, 19891 the Reserve Bank of India, the State Bank of India, 24[a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) 25[a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, and any subsidiary bank], as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959);
(c) ‘Board” means a Board of Conciliation constituted under this Act;
26[(cc) “Closure’ means the permanent closing down of a place of employ or part thereof;]
(d) “Conciliation officer” means a conciliation officer appointed under this Act;
(e) “Conciliation proceeding” means any proceeding held by a conciliation officer or Board under this Act;
27[(ee) ‘Controlled industry’ means any industry the control of which by the Union has been declared by any Central Act to be expedient in the public interest;]
28 [* * * * *]
(f) “Court’ means a Court of Inquiry constituted under this Act;
(g) “Employer” means-
(i) In relation to any industry carried on by or under the authority of any department of 29[the Central Government or a State Government,] the authority prescribed in this behalf, or where no authority is prescribed, the head of the department;
(ii) In relation to an industry carried on by or on behalf of a local authority, the chief executive officer of that authority;
30 [(gg) “Executive’, in relation to a trade union, means the body, by whatever name called, to which the management of the affairs of the trade union is entrusted;]
31[ * * * * *]
(i) A person shall be deemed to be “independent” for the purpose of his appointment as the Chairman or other member of a Board, Court or Tribunal, if he is unconnected with the industrial dispute referred to such Board, Court or Tribunal or with any industry directly affected by such dispute:
32[Provided that no person shall cease to be independent by reason only of the fact that he is a shareholder of-an incorporated company which is connected with, or likely to be affected by, such industrial dispute; but in such a case, he shall disclose to the appropriate Government the nature and extent of the shares held by him in such company;]
*(j) “Industry” means any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen;
(k) “Industrial dispute” means any dispute or difference between employers and employers, or between employers and workmen, or between workmen and workmen, which is connected with the employment or non-employment or the terms of employment or with the conditions of labour, of any persons;
33[(ka) ‘Industrial establishment or undertaking’ means an establishment or undertaking in which any industry is carried on:
Provided that where several activities are carried on in an establishment or undertaking and only one or some of such activities is or are an industry or industries, then-
(a) If any unit of such establishment or undertaking carrying on any activity, being an industry, is severable from the other unit or units of such establishment or undertaking, such unit shall be deemed to be a separate industrial establishment or undertaking;
(b) If the predominant activity or each of the predominant activities carried on in such establishment or undertaking or any unit thereof is an industry and the other activity or each of the other activities carried on in such establishment, or undertaking or unit thereof is not severable from and is, for the purpose of carrying on, or aiding the carrying on of, such predominant activity or activities, the entire establishment or undertaking or, as the case may be, unit thereof shall be deemed to be an industrial establishment or undertaking;]
34[(kk) “Insurance company “ means an insurance company as defined in section 2 of the Insurance Act, 1938 (4 of 1938), having branches or other establishments in more than one State;]
35[(kka) “Khadi” has the meaning assigned to it in clause (d) of section 2 of the Khadi and Village Industries Commission Act, 1956 (61 of 1956);] 35[ 36[ (kkb)] ‘Labour Court’ means a Labour Court constituted under section 7;]
37[(kkk) “Lay-off” (with its grammatical variations and cognate expressions) means the failure, refusal or inability of an employer on account of shortage of coal, power or raw materials or the accumulation of stocks or the breakdown of machinery 38[or natural calamity or for any other connected reason] to give employment to a workman whose name is borne on the muster rolls of his industrial establishment and who has not been retrenched.
Explanation.
Every workman whose name is borne on the muster rolls of the industrial establishment and who presents himself for work at the establishment at the time appointed for the purpose during normal working hours on any day and is not given employment by the employer within two hours of his so presenting himself shall be deemed to have been laid-off for that day within the meaning of this clause:
Provided that if the workman, instead of being given employment at the commencement of any shift for any day is asked to present himself for the purpose during the second half of the shift for the day and is given employment then, he shall be deemed to have been laid-off only for one-half of that day:
Provided further that if he is not given any such employment even after so presenting himself, he shall not be deemed to have been laid-off for the second half of the shift for the day and shall be entitled to full basic wages and dearness allowance for that part of the day;]
(l) “Lock-out” means the 40[temporary closing of a place of employment], or the suspension of work, or the refusal by an employer to continue to employ any number of persons employed by him;
39[(la) “Major port” means a major port as defined in clause (8) of section 3 of the Indian Ports Act, 1908 (15 of 1908);
(lb) “Mine” means a mine as defined in clause (j) of sub-section (1) of section 2 of the Mines Act, 1952 (35 of 1952);]
40[(ll) “National Tribunal” means a National Industrial Tribunal constituted under section 7B;l
41[(lll) “Office beater”, in relation to a trade union, includes any member of the executive thereof, but does not include an auditor;]
(m) “Prescribed” means prescribed by rules made under this Act;
(n) “Public utility service” means-
(i) Any railway service 42[or any transport service for the carriage of passengers or goods by air];
43[(ia) Any service in, or in connection with the working of, any major port or dock;]
(ii) Any section of an industrial establishment, on the working of which the safety of the establishment or the workmen employed therein depends;
(iii) Any postal, telegraph or telephone service;
(iv) Any industry, which supplies power, light or water to the public;
(v) Any system of public conservancy or sanitation;
(vi) Any industry specified in the 44[First Schedule] which the appropriate Government may, if satisfied, that public emergency or public interest so requires, by notification in the Official Gazette, declared to be a public utility service for the purposes of this Act, for such period as may be specified in the notification:
Provided that the period so specified shall not, in the first instance, exceed six months but may, by a like notification, be extended from time to time, by any period not exceeding six months, at any one time if in the opinion of the appropriate Government public emergency or public interest requires such extension;
(o) “Railway company” means a railway company as defined in section 3 of the Indian Railways Act, 1890 (9 of 1890);
45[(oo) “Retrenchment” means the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action but does not include-
(a) Voluntary retirement of the workman; or
(b) Retirement of the workman on reaching the age of Superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf; or
46[(bb) Termination of the service of the workman as a result of the non-renewal of the contract of employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein; or]
(c) Termination of the service of a workman on the ground of continued ill-health;]
47[(p) “Settlement” means a settlement arrived at in the course of conciliation proceeding and includes a written agreement between the employer and workmen arrived at otherwise than in the course of conciliation proceeding where such agreement has been signed by the parties thereto in such manner as may be prescribed and a copy thereof has been sent to 48[an officer authorised in this behalf by] the appropriate Government and the conciliation officer;]
(q) “Strike” means a cessation of work by a body of persons employed in any industry acting in combination, or a concerted refusal, or a refusal, under a common understanding of any number of persons who are or have been so employed to continue to work or to accept employment;
49[(qq) ‘Trade union’ means a trade union registered under the Trade Unions Act, 1926 (16 of 1926);]
50[(r) “Tribunal” means an Industrial Tribunal constituted under section 7A and includes an Industrial Tribunal constituted before the 10th day of March, 1957, under this Act;]
50[(ra) “Unfair labour practice” means any of the practices specified in the Fifth Schedule;
(rb) “Village industries” has the meaning assigned to it in clause (h) of section 2 of the Khadi and Village Industries Commission Act, 1956 (61 of 1956); j
51[(rr) “Wages” means a remuneration capable of being expressed in terms of money, which would, if the terms of employment, expressed or implied, were fulfilled, be payable to a workman in respect of his employment of work done in such employment, and includes-
(i) Such allowances (including dearness allowance) as the workman is for the time being entitled to;
(ii) The value of any house accommodation, or of supply of light, water, medical attendance or other amenity or of any service or of any concessional supply of food grains or other articles;
(iii) Any travelling concession;
49[(iv) Any commission payable on the promotion of sales or business or both;]
But does not include-
(a) Any bonus;
(b) Any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the workman under any law for the time being in force;
(c) Any gratuity payable on the termination of his service;];
52[(s) “Workman” means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and for the purposes of any proceeding under this Act in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include any such person-
(i) Who is subject to the Air Force Act, 1950 (45of l950),or the Army Act, 1950 (46 of 1950), or the Navy Act, 1957 (62 of 1957); or
(ii) Who is employed in the police service or as an officer or other employee of a prison; or
(iii) Who is employed mainly in a managerial or administrative capacity; or
(iv) Who, being employed in a supervisory capacity, draws wages exceeding 55[ten thousand rupees] per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature.].
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1. Certain words and figures inserted by Act 10 of 1963, sec. 47 and Sch. 11, Pt. 11 have been omitted by Act 36 of 1964, sec. 2 (w.e.f. 19-12-1964).
2. The words “by the Federal Railway Authority” omitted by the A.0. 1948.
3. Ins. by Act 65 of 1951, sec. 32.
4. The words “operating a Federal Railway” omitted by the A.0. 1950.
5. Ins. by Act 47 of 1961, sec. 51 and Sch. 11, Pt. III (w.e.f. 1-1-1962).
6. Subs. by Act 36 of 1964, sec. 2, for ‘the Deposit Insurance Corporation established’ (w.e.f. 19-12-1964).
7. Subs. by Act 45 of 1971, sec. 2 (w.e.f. 15-12,1971).
8. Subs. by Act 46 of 1982, sec. 2 (w.e.f. 21-8-1984).
9. Subs. by the Industrial Disputes (Amendment) Act, 1996 (w.e.f. 11-10-1995).
10. Omitted by the Industrial Disputes (Amendment) Act, 1996 (w.e.f.11-10-1995).
11. Ins. by Act 53 of 1987, sec. 56 and Second Sch., Part III (w.e.f. 9-7-1988).
12. Subs. by Act 54 of 1949, sec. 3, for “a mine, oil-field”.
13. Ins. by Act 36 of 1964, sec. 2 (w.e.f. 19-12-1964).
14. Ins. by Act 36 of 1964, sec. 2 (w.e.f. 19.12.1964).
15. Ins. by Act 43 of 1953, sec. 2 (w.e.f. 24-10-1953).
16. Clause (aa) re-lettered as “(aaa)” by Act 36 of 1964, sec. 2 (w.e.f. 19-12-1964).
17. Subs. by Act 36 of 1956, sec. 3, for cl. (b) (w.e.f. 10-3-1957).
18. Subs. by Act 38 of 1959, sec. 64 and Sch. 111, Pt. 11, for cl. (bb), which was ins. by Act 54 of 1949, sec. 3.
19. The short title now reads as “the Banking Regulation Act, 1949”.
20. Ins. by Act 28 of 1991, sec. 40 and (w.e.f. 1-1-1982) Sch. 11, Pt. 11.
21. Ins. by Act 62 of 1984, sec. 71, and Sch. III, Pt. 11 (w.e.f. 20-3-1985).
22. Ins. by Act 18 of 1964, sec. 38 and Sch. II, Pt. 11 (w.e.f. 1-7-1964).
23. Ins. by Act 39 of 1989, sec. 53 and 2nd Sch.
24. Subs. by Act 5 of 1970, sec. 20, for “and any subsidiary bank” (w.e.f. 19-7-1969).
25. Subs. by Act 40 of 1980, sec. 20, for certain words (w.e.f. 15-4-1980).
26. Ins. by Act 46 of 1982, sec. 2 (w.e.f. 21-8-1984).
27. Ins. by Act 65 of 1951, sec. 32.
28. Clause (eee) ins. by Act 43 of 1953, sec. 2, omitted by Act 36 of 1964, sec. 2 (w.e.f. 19-12-1964).
29. Subs. by the A.0. 1948, for “a Government in British India”.
30. Ins. by Act 45 of 1971, sec. 2 (w.e.f. 15-12-1971).
31. Cl. (h) omitted by the A.0. 1950.
32. Ins. by Act 18 of 1952, sec. 2.
* On the enforcement of clause (c) of sec. 2 of Act 46 of 1982, clause 0) of sec. 2 shall be stand substituted as directed in clause (c) of that Act. For the text of clause (j) of the Act, see Appendix.
33. Ins. by Act 46 of 1982, sec. 2 (w.e.f. 21-8-1964).
34. Ins. by Act 54 of 1949, sec. 3.
35. Clause (kka) re-lettered as clause (kkb) and clause (kka) ins. by Act 46 of 1982, sec. 2 (w.e.f. 21-8-1984).
36. Ins. by Act 36 of 1956, sec. 3 (w.e.f. 10-3-1957).
37. Ins. by Act 43 of 1953, sec. 2 (w.e.f. 24-10-1953).
38. Subs. by Act 46 of 1982, sec. 2 for certain words (w.e.f. 21-8-1984).
39. Ins. by Act 36 of 1964, sec. 2 (w.e.f. 19-12-1964).
40. Ins. by Act 36 of 1956, sec. 3 (w.e.f. 10-3-1957).
41. Ins. by Act 45 of 1971, sec. 2 (w.e.f. 15-12-1971).
42. Ins. by Act 36 of 1964, sec. 2 (w.e.f. 19-12-1964).
43. Ins. by Act 45 of 1971, sec. 2 (w.e.f. 15.12.1971).
44. Subs. by Act 36 of 1964, sec. 2, for “Schedule” (w.e.f. 19-12-1964).
45. Ins. by Act 43 of 1953, sec. 2 (w.e.f. 2,4-10-1953).
46. Ins. by Act 49 of 1984, sec. 2 (w.e.f. 18-8-1984).
47. Subs. by Act 36 of 1956, sec. 3 for cl. (p) (w.e.f. 7-10-1956).
48. Ins. by Act 35 of 1965, sec. 2 (w.e.f. 1-12-1965).
49. Ins. by Act 46 of 1982, sec. 2 (w.e.f. 21-8-1984).
50. Subs. by Act 18 of 1957, sec. 2 for cl. (r) (w.e.f. 10-3-1957).
51. Ins. by Act 43 of 1953, sec. 2 (w.e.f. 24-10-1953).
52. Subs. by Act 46 of 1982, sec. 2, for clause (s) (w.e.f. 21-8-1984).
53. Subs. by Act. 24 of 2010, for clause (a) w.e.f. 18-8-2010.
54. Subs. by Act. 24 of 2010, for clause (b) w.e.f. 18-8-2010.
55. Subs. by Act. 24 of 2010, for clause (s) w.e.f. 18-8-2010.
Section 2 A. Dismissal, etc., of an individual workman to be deemed to be an industrial dispute
1[2A. Dismissal, etc., of an individual workman to be deemed to be an industrial dispute. Where any employer discharges, dismisses, retrenches or otherwise terminates the services of an individual workman, any dispute or difference between that workman and his employer connected with, or arising out of, such discharge, dismissal, retrenchment or termination shall be deemed to be an industrial dispute notwithstanding that no other workman nor any union of workmen is a party to the dispute.]
2[“(2) Notwithstanding anything contained in Section 10, any such workman as is specified in sub-section (1) may, make an application direct to the Labour Court or Tribunal for adjudication of the dispute referred to therein after the expiry of forty-five days from the date he has made the application to the Conciliation Officer of the appropriate Government for conciliation of the dispute, and in receipt of such application the Labour Court or Tribunal shall have powers and jurisdiction to adjudicate upon the dispute, as if it were a dispute referred to it by the appropriate Government in accordance with the provisions of this Act and all the provisions of this Act shall apply in relation to such adjudication as they apply in relation to an industrial dispute referred to it by the appropriate Government.
(3) The application referred to in sub-section (2) shall be made to the Labour Court or Tribunal before the expiry of three years from the date of discharge, dismissal, retrenchment or otherwise termination of service as specified in sub-section (1).”]
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1. Ins. by Act 35 of 1965, for section 3 (w.e.f. 1-12-1965).
2. Ins. By. Act. 24 of 2010 w.e.f. 18-8-2010.
Section 3. Works Committee
(1) In the case of any industrial establishment in which one hundred or more workmen are employed or have been employed on any day in the preceding twelve months, the appropriate Government may by general or special order require the employer to constitute in the prescribed manner a Works Committee consisting of representatives of employers and workmen engaged in the establishment so however that the number of representatives of workmen on the Committee shall not be less than the number of representatives of the employer. The representatives of the workmen shall be chosen in the prescribed manner from among the workmen engaged in the establishment and in consultation with their trade union, if any, registered under the Indian Trade Unions Act, 1926 (16 of 1926).
(2) It shall be the duty of the Works Committee to promote measures for securing and preserving amity and good relations between the employer and workmen and, to that end, to comment upon matters of their common interest or concern and endeavour to compose any material difference of opinion in respect of such matters.
Section 4. Conciliation officers
(1) The appropriate Government may, by notification in the Official Gazette, appoint such number of persons as it think–, fit, to be conciliation officers, charged with the duty of mediating in and promoting the settlement of industrial disputes.
(2) A conciliation officer may be appointed for a specified area or for specified industries in a specified area or for one or more specified industries and either permanently or for a limited period.
1[“(f) he is or has been a Deputy Chief Labour Commissioner (Central) or Joint Commissioner of the State Labour Department, having a degree in law and at least seven years’ experience in the labour department including three years of experience as Conciliation Officer:
Provided that no such Deputy Chief Labour Commissioner or Joint Labour Commissioner shall be appointed unless he resigns from the service of the Central Government or State Government, as the case may be, before being appointed as the presiding officer; or
(g) he is an officer of Indian Legal Service in Grade HI with three years’ experience in the grade.”.]
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1. Ins. by Act 24 of 2010 w.e.f. 18-8-2010.
Section 5. Boards of Conciliation
(1) The appropriate Government may as occasion arises by notification in the Official Gazette constitute a Board of Conciliation for promoting the settlement of an industrial dispute.
(2) A Board shall consist of a chairman and two or four other members, as the appropriate Government thinks fit.
(3) The chairman shall be an independent person and the other members shall be persons appointed in equal numbers to represent the parties to the dispute and any person appointed to represent a party shall be appointed on the recommendation of that party:
Provided that, if any party fails to make a recommendation as aforesaid within the prescribed time, the appropriate Government shall appoint such persons as it thinks fit to represent that party.
(4) A Board, having the prescribed quorum, may act notwithstanding the absence of the chairman or any of its members or any vacancy in its number:
Provided that if the appropriate Government notifies the Board that the services of the chairman or of any other member have ceased to be available, the Board shall not act until a new chairman or member, as the case may be, has been appointed.
Section 6. Courts of Inquiry
(1) The appropriate Government may as occasion arises by notification in the Official Gazette constitute a Court of Inquiry for inquiring into any matter appearing to be connected with or relevant to an industrial dispute.
(2) A Court may consist of one independent person or of such number of independent persons as the appropriate Government may think fit and where a Court consists of two or more members, one of them shall be appointed as the chairman.
(3) A Court, having the prescribed quorum, may act notwithstanding the absence of the chairman or any of its members or any vacancy in its number:
Provided that, if the appropriate Government notifies the Court that the services of the chairman have ceased to be available, the Court shall not act until a new chairman has been appointed.
Section 7. Labour Courts
1[7. Labour Courts. (1) The appropriate Government may, by notification in the Official Gazette, constitute one or more Labour Courts for the adjudication of industrial disputes relating to any matter specified in the Second Schedule and for performing such other functions as may be assigned to then-, under this Act.
(2) A Labour Court shall consist of one person only to be appointed by the appropriate Government.
(3) A person shall not be qualified for appointment as the presiding officer of a Labour Court, unless.
2[(a) He is, or has been, a Judge of a High Court; or
(b) He has, for a period of not less than three years, been a District judge or an Additional District Judge; or
3[ * * * * *]
4[(d)] He has held any judicial office in India for not less than seven years; or
4[(e)] He has been the presiding officer of a Labour Court constituted under any provincial Act or State Act for not less than five years.
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1. Subs. by Act 36 of 1956, sec. 4, for section 7 (w.e.f. 10-3-1957).
2. Ins. by Act 36 of 1964, sec. 3 (w.e.f. 19-12-1964).
3. Clause (c) omitted by Act 46 of 1982, sec. 3 (w.e.f. 21-8-1984).
4. Clauses (a) and (b) relettered as (d) and (e) respectively by Act 36 of 1964, sec. 3 (w.e.f. 19-12-1964).
Section 7A. Tribunals
(1) The appropriate Government may, by notification in the Official Gazette, constitute one or more Industrial Tribunals for the adjudication of industrial disputes relating to any matter, whether specified in the Second Schedule or the Third Schedule 1[and for performing such other functions as may be assigned to them under this Act].
(2) A Tribunal shall consist of one person only to be appointed by the appropriate Government.
(3) A person shall not be qualified for appointment as the presiding officer of a Tribunal unless-
(a) He is, or has been, a Judge of a High Court; or
2[(aa) He has, for a period of not less than three-years, been a District Judge or an Additional District Judge; 3[ * * * ]
5[“(b) he is or has been a Deputy Chief Labour Commissioner (Central) or Joint Commissioner of the State Labour Department, having a degree in law and at least seven years’ experience in the labour department including three years of experience as Conciliation Officer:
Provided that no such Deputy Chief Labour Commissioner or Joint Labour Commissioner shall be appointed unless he resigns from the service of the Central Government or State Government, as the case may be, before being appointed as the presiding officer; or
(c) he is an officer of Indian Legal Service in Grade III with three years’ experience in the grade.”]
4[* * * * * *]
(4) The appropriate Government may, if it so thinks fit, appoint two persons as assessors to advise the Tribunal in the proceeding before it.
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1. Ins. by Act 46 of 1982, sec. 4 (w.e.f. 21-8-1984).
2. Ins. by Act 36 of 1964, sec. 4 (w.e.f. 19-12-1964).
3. Omitted by Act 46 of 1982, sec. 4 (w.e.f. 21-8-1984).
4. Omitted by Act 46 of 1982, sec. 4 (w.e.f. 21-8-1984).
5. Ins. by Act. 24 of 2010 sec. 7A (w.e.f. 18-8-2010).
Section 7 B. National Tribunals
(1) The Central Government may, by notification in the Official Gazette, constitute one or more National Industrial Tribunals for the adjudication of industrial disputes which, in the opinion of the Central Government, involve questions of national importance or are of such a nature that industrial establishments situated in more than one State are likely to be interested in, or affected by, such disputes.
(2) A National Tribunal shall consist of one person only to be appointed by the Central Government.
(3) A person shall not be qualified for appointment as the presiding officer of a National Tribunal 1[ unless he is, or has been, a Judge of a High Court.]
(4) The Central Government may, if it so thinks fit, appoint two persons as assessors to advise the National Tribunal in the proceeding before it.
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1. Subs. by Act 46 of 1982, sec. 5 (w.e.f. 21-8-1984).
Section 7 C. Disqualifications for the presiding officers of Labour Courts, Tribunals and National Tribunals
No person shall be appointed to, or continue in, the office of the presiding officer of a Labour Court, Tribunal or National Tribunal, if-
(a) He is not an independent person; or
(b) He has attained the age of sixty-five years.]
Section 8. Filling of vacancies
1[8. Filling of vacancies. If, for any reason a vacancy (other than a temporary absence) occurs in the office of the presiding officer of a Labour Court, Tribunal or National Tribunal or in the office of the Chairman or any other member of a Board or Court, then, in the case of a National Tribunal, the Central Government and in any other case, the appropriate Government, shall appoint another person in accordance with the provisions of this Act to fill the vacancy, and the proceeding may be continued before the Labour Court, Tribunal, National Tribunal, Board or Court, as the case may be, from the stage at which the vacancy is filled.
——————–
1. Subs. by Act 36 of 1956, sec. 5, for sections 8 and 9 (w.e.f. 10-3-1957).
Section 9. Finality of orders constituting Boards, etc
(1) No order of the appropriate Government or of the Central Government appointing any person as the Chairman or any other member of a Board or Court or as the presiding officer of a Labour Court, Tribunal or National Tribunal shall be called in question in any manner; and no act or proceeding before any Board or Court shall be called in question in any manner on the ground merely of the existence of any vacancy in, or defect in the constitution of, such Board or Court.
(2) No settlement arrived at in the course of a conciliation proceeding shall be invalid by reason only of the fact that such settlement was arrived at after the expiry of the period referred to in sub-section (6) of section 12 or sub-section (5) of section 13, as the case may be.
(3) Where the report of any settlement arrived at in the course of conciliation proceeding before a Board is signed by the chairman and all the other members of the Board, no such settlement shall be invalid by reason only of the casual or unforeseen absence of any of the members (including the Chairman) of the Board during any stage of the proceeding.]
1[CHAPTER IIA
NOTICE OF CHANGE
——————–
1. Ins. by Act 36 of 1956, sec. 6 (w.e.f 10-3-1957).
Section 9 A. Notice of change
No, employer, who proposes to effect any change in the conditions of service applicable to any workman in respect of any matter specified in the Fourth Schedule, shall effect such change, -
(a) Without giving to the workmen likely to be affected by such change a notice in the prescribed manner of the nature of the change proposed to be effected; or
(b) Within twenty-one days of giving such notice
Provided that no notice shall be required for effecting any such change.
(a) Where the change is effected in pursuance of any 1[settlement or award]; or
(b) Where the workmen likely to be affected by the change are persons to whom the Fundamental and Supplementary Rules, Civil Services (Classification, Control and Appeal) Rules, Civil Services (Temporary Service) Rules, Revised Leave Rules, Civil Service Regulations, Civilians in Defence Services (Classification, Control and Appeal) Rules or the Indian Railway Establishment Code or any other rules or regulations that may be notified in this behalf by the appropriate Government in the Official Gazette, apply
——————–
1. Subs. by Act 46 of 1982, sec. 6, for certain words, brackets and figures (w.e.f. 21-8 1984).
Section 9 B. Power of Government to exempt
Where the appropriate Government is of opinion that the application of the provisions of section 9. A to any class of industrial establishments or to any class of workmen employed in any industrial establishment affect the employers in relation thereto so prejudicially that such application may cause serious repercussion on the industry concerned and that public interest so requires, the appropriate Government may, by notification in the Official Gazette, direct that the provisions of the said section shall not apply or shall apply, subject to such conditions as may be specified in the notification, to that class of industrial establishments or to that class of workmen employed in any industrial establishment.]1
——————–
1. On the enforcement of section 7 of Act 46 of 1982, a new chapter IIB shall stand inserted as directed in section 7 of that Act. For the Text of section 7 of that Act, see Appendix.
“Chapter II-B
GRIEVANCE REDRESSAL MACHINERY
9-C. Setting up of Grievance Redressal Machinery.
(1) Every industrial establishment employing twenty or more workmen shall have one or more Grievance Redressal Committee for the resolution of disputes arising out of individual grievances.
(2) The Grievance Redressal Committee shall consist of equal number of members from the employer and the workmen.
(3) The Chairperson of the Grievance Redressal Committee shall be selected from the employer and from among the workmen alternatively on rotation basis every year.
(4) The total number of members of the Grievance Redressal Committee shall not exceed more than six:
Provided that there shall be, as far as practicable, one woman member if the Grievance Redressal Committee has two members and in case the number of members are more than two, the number of women members may be increased proportionately.
(5) Notwithstanding anything contained in this section, the setting up of Grievance Redressal Committee shall not affect the right of the workman to raise industrial dispute on the same matter under the provisions of this Act.
(6) The Grievance Redressal Committee may complete its proceedings within thirty days on receipt of a written application by or on behalf of the aggrieved party.
(7) The workman who is aggrieved of the decision of the Grievance Redressal Committee may prefer an appeal to the employer against the decision of Grievance Redressal Committee and the employer shall, within one month from the date of receipt of such appeal, dispose of the same and send a copy of his decision to the workman concerned.
(8) Nothing contained in this section shall apply to the workmen for whom there is an established Grievance Redressal Mechanism in the establishment concerned.”
Section 10. Reference of dispute to Boards, Courts or Tribunals
(1) 1[Where the appropriate Government is of opinion that any industrial dispute exists or is apprehended, it may at any time], by order in writing-
(a) Refer the dispute to a Board for promoting a settlement thereof; or
(b) Refer any matter appearing to be connected with or relevant to the dispute to a Court for inquiry; or
2[(c) Refer the dispute or any matter appearing to be connected with, or relevant to, the dispute, if it relates to any matter specified in the Second Schedule, to a Labour Court for adjudication; or
(d) Refer the dispute or any matter appearing to be connected with, or relevant to, the dispute, whether it relates to any matter specified in the Second Schedule or the Third Schedule, to a Tribunal for adjudication:
Provided that where the dispute relates to any matter specified in the Third Schedule and is not likely to affect more than one hundred workmen, the appropriate Government may, if it so thinks fit, make the reference to a Labour Court under clause (c):]
3[Provided further that] where the dispute relates to a public utility service and a notice under section 22 has been given, the appropriate Government shall, unless it considers that the notice has been frivolously or vexatiously given or that it would be inexpedient so to do, make a reference under this sub-section notwithstanding that any other proceedings under this Act in respect of the dispute may have commenced:
4[Provided also that where the dispute in the relation to which the Central Government is the appropriate Government, it shall be competent for the Government to refer the dispute to a Labour Court or an Industrial Tribunal, as the case may be, constituted by the State Government.]
5[(l A) Where the Central Government is of opinion that any industrial dispute exists or is apprehended and the dispute involves any question of national importance or is of such a nature that industrial establishments situated in more than one State are likely to be interested in, or affected by, such dispute and that the dispute should be adjudicated by a National Tribunal, then, the Central Government may, whether or not it is the appropriate Government in relation to that dispute, at any time, by order in writing, refer the dispute or any matter appearing to be connected with, or relevant to, the dispute, whether it relates to any matter specified in the Second Schedule or the Third Schedule, to a National Tribunal for adjudication.]
(2) Where the parties to an industrial dispute apply in the prescribed manner, whether jointly or separately, for a reference of the dispute to a Board, Court, 6[Labour Court, Tribunal or National Tribunal], the appropriate Government, if satisfied that the persons applying represent the majority of each party, shall make the reference accordingly.
7[(2A) An order referring an industrial dispute to a Labour Court, Tribunal or National Tribunal under this section shall specify the period within which such Labour Court, Tribunal or National Tribunal shall submit it’s award on such dispute to the appropriate Government:
Provided that where such industrial dispute is connected with an individual workman, no such period shall exceed three months:
Provided further that where the parties to an industrial dispute apply in the prescribed manner, whether jointly or separately, to the Labour Court, Tribunal or National Tribunal for extension of such period or for any other reason, and the presiding officer of such Labour Court, Tribunal or National Tribunal considers it necessary or expedient to extend such period, he may for reasons to be recorded in writing, extend such period by such further period as he may think fit:
Provided also that in computing any period specified in this sub-section, the period, if any, for which the proceedings before the Labour Court, Tribunal or National Tribunal had been stayed by any injunction or order of a Civil Court shall be excluded:
Provided also that no proceedings before a Labour Court, Tribunal or National Tribunal shall lapse merely on the ground that any period specified under this sub-section had expired without such proceedings being completed.]
(3) Where an industrial dispute has been referred to a Board, 6[Labour Court, Tribunal or National Tribunal] under this section, the appropriate Government may by order prohibit the continuance of any strike or lock-out in connection with such dispute which may be in existence on the date of the reference.
8[(4) Wherein an order referring an industrial dispute to 9[a Labour Court, Tribunal or National Tribunal] under this section or in a subsequent order, the appropriate Government has specified the points of dispute for adjudication, 10[the Labour Court or the tribunal or the National Tribunal, as the case may be,] shall confine its adjudication to those points and matters incidental thereto.
(5) Where a dispute concerning any establishment or establishments has been, or is to be, referred to a 11[Labour Court, Tribunal or National Tribunal] under this section and the appropriate Government is of opinion, whether on an application made to it in this behalf or otherwise, that the dispute is of such a nature that any other establishment, group or class of establishments of a similar nature is likely to be interested in, or affected by, such dispute, the appropriate Government may, at the time of making the reference or at any time thereafter but before the submission of the award, include in that reference such establishment, group or class of establishments, whether or not at the time of such inclusion any dispute exists or is apprehended in that establishment, group or class of establishments.]
12[(6) Where any reference has been made under sub-section (1A) to a National Tribunal then notwithstanding anything contained in this Act, no Labour Court or Tribunal shall have jurisdiction to adjudicate upon any matter which is under adjudication before the National Tribunal, and accordingly, -
(a) If the matter under adjudication before the National Tribunal is pending in a proceeding before a Labour Court or Tribunal, the proceeding before the Labour Court or the Tribunal, as the case may be, in so far as it relates to such matter, shall be deemed to have been quashed on such reference to the National Tribunal; and
(b) It shall not be lawful for the appropriate Government to refer the matter under adjudication before the National Tribunal to any Labour Court or Tribunal for adjudication during the pendency of the proceeding in relation to such matter before the National Tribunal.
13 [Explanation.-In this sub-section, “Labour Court” or “Tribunal” includes any Court or Tribunal or other authority constituted under any law relating to investigation and settlement of industrial disputes in force in any State.]
(7) Where any industrial dispute, in relation to which the Central Government is not the appropriate Government, is referred to a National Tribunal, then, notwithstanding anything contained in this Act, any reference in section 15, section 17, section 19, section 33A, section 33B and section 36A to the appropriate Government in relation to such dispute shall be construed as a reference to the Central Government but, save as aforesaid and as otherwise expressly provided in this Act any reference in any other provision of this Act to the appropriate Government in relation to that dispute shall mean a reference to the State Government.]
14[(8) No proceedings pending before a Labour Court, Tribunal or National Tribunal in relation to an industrial dispute shall lapse merely by reason of the death of any of the parties to the dispute being a workman, and such Labour Court, Tribunal or National Tribunal shall complete such proceedings and submit its award to the appropriate Government.]
——————–
1. Subs. by Act 18 of 1952, sec. 3, for ‘if any industrial dispute exists or is apprehended, the appropriate Government may”.
2. Subs. by Act 36 of 1956, sec. 7, for clause (c) (w.e.f. 10-3-1957).
3. Subs. by Act 36 of 1956, sec. 7, for ‘Provided that’ (w.e.f. 10-3-1957).
4. Ins. by Act 46 of 1982, sec. 8 (w.e.f. 21-8-1984).
5. Ins. by Act 36 of 1956, sec. 7 (w.e.f. 10-3-1957).
6. Subs. by Act 36 of 1956, sec. 7, for “or Tribunal” (w.e.f. 10-3-1957).
7. Ins. by Act 46 of 1982, sec. 8, (w.e.f. 21-8-1984).
8. Ins. by Act 18 of 1952, sec. 3.
9. Subs. by Act 36 of 1956, sec. 7, for “a Tribunal” (w.e.f. 10-3-1957).
10. Subs. by Act 36 of 1956, sec. 7, for the ‘Tribunal” (w.e.f. 10-3-1957).
11. Subs. by Act 36 of 1956, sec. 7, for “Tribunal’ (w.e.f. 10-3-1957).
12. Ins. by Act 36 of 1956, sec. 7 (w.e.f. 10-3-1957).
13. Ins. by Act 36 of 1964, sec. 5 w.e.f. 19-12-1964).
14. Ins. by Act 46 of 1982, sec. 8 (w.e.f. 21-8-1984).
APD1. APPENDIX
Extracts from the Industrial Disputes (Amendment) Act, 1982
(46 OF 1982)
1. Short title and commencement.
(1) x x x x
(2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.
2. Amendment of section 2.
In section 2 of the Industrial Disputes Act, 1947 (14 of 1947) (hereinafter referred to as the principal Act),-
(c) for clause (j) the following clause shall be substituted, namely : -
(j) “Industry’ means any systematic activity carried on by co-operation between an employer and his workmen (whether such workmen are employed by such employer directly or by or through any agency, including a contractor) for the production, supply or distribution of goods or services with a view to satisfy human wants or wishes (not being wants or wishes which are merely spiritual or religious in nature), whether or not, -
(i) Any capital has been invested for the purpose of carrying on such activity; or
(ii) Such activity is carried on, with a motive to make any gain or profit, and includes-
(a) Any activity of the Dock Labour Board established under section5A of the Dock Workers (Regulation of Employment) Act, 1948 (9 of 1948);
(b) Any activity relating to the promotion of sales or business or both carried on by an establishment. but does not include.
(1) Any agricultural operation except where such agricultural operation is carried on in an integrated manner with any other activity (being any such activity as is referred to in the foregoing provisions of this clause) and such other activity is the predominant one.
Explanation.- For the purposes of this sub-clause, “agricultural operation” does not include any activity carried on in a plantation as defined in clause (f) of section 2 of the Plantations Labour Act, 1951 (69 of 1951); or
(2) Hospitals or dispensaries; or
(3) Educational, scientific, research or training institutions; or
(4) Institutions owned or managed by organisations wholly or substantially engaged in any charitable, social or philanthropic service; or
(5) Khadi or village industries; or
(6) Any activity of the Government relatable to the sovereign functions of the Government including all the activities carried on by the departments of the Central Government dealing with defence research, atomic energy and space; or
(7) Any domestic service; or
(8) Any activity being a profession practised by an individual or body of individuals, if the number of persons employed by the individual or body of individuals in relation to such profession is less than ten; or
(9) Any activity, being an activity carried on by a co-operative society or a club or any other like body of individuals, if the number of persons employed by the cooperative society, club or other like body of individuals in relation to such activity is less than ten;’
7. Insertion of new Chapter IIB.
After section 9B of tie principal Act, the following Chapter shall be inserted, namely
“CHAPTER IIB
REFERENCE OF CERTAIN INDIVIDUAL DISPUTES TO GRIEVANCE
SETTLEMENT AUTHORITIES
9C. Setting up of Grievance Settlement Authorities and reference of certain individual disputes to such authorities.
(1) The employer in relation to every industrial establishment in which fifty or more workmen are employed or have been employed on any day in the preceding twelve months, shall provide for in accordance with the rules made in that behalf under this Act, a Grievance Settlement Authority for the settlement of industrial disputes connected with an individual workman employed in the establishment.
(2) Where an industrial dispute connected with an individual workman arises in an establishment referred to in sub-section (1), a workman or any trade union of workmen of which such workman is a member, refer, in such manner as may be prescribed, such dispute to the Grievance Settlement Authority provided for by the employer under that sub-section for settlement.
(3) The Grievance Settlement Authority referred to in sub-section (1) shall follow such procedure and complete its proceedings within such period as may be prescribed.
(4) No reference shall be made under Chapter III with respect to any dispute referred to in this section unless such dispute has been referred to the Grievance Settlement Authority concerned and the decision of the Grievance Settlement Authority is not acceptable to any of the parties to the dispute.’
22. Amendment of section 38.
In sub-section (2) of section 38 of the principal Act, after clause (aaa), the following clause shall be inserted, namely: -
“[(ab) The constitution of Grievance Settlement Authorities referred to in section 9C, the manner in which industrial disputes may be referred to such authorities for settlement, the procedure to be followed by such authorities in the proceedings in relation to disputes referred to them and the period within which such proceedings shall be completed”.]
Section 10 A. Voluntary reference of disputes to arbitration
1[10A. Voluntary reference of disputes to arbitration. (1) Where any industrial dispute exists or is apprehended and the employer and the workmen agree to refer the dispute to arbitration, they may, at any time before the dispute has been referred under section 10 to a Labour Court or Tribunal or National Tribunal, by a written agreement, refer the dispute to arbitration and the reference shall be to such person or persons (including the presiding officer of a Labour Court or Tribunal or National Tribunal) as an arbitrator or arbitrators as may be specified in the arbitration agreement.
2[(1 A) Where an arbitration agreement provides for a reference of the dispute to an even number of arbitrators, the agreement shall provide for the appointment of another person as umpire who shall enter upon the reference, if the arbitrators are equally divided in their opinion, and the award of the umpire shall prevail and shall be deemed to be the arbitration award for the purpose of this Act.]
(2) An arbitration agreement referred to in sub-section (1) shall be in such form and shall be signed by the parties thereto in such manner as may be prescribed.
(3) A copy of the arbitration agreement shall be forwarded to the appropriate Government and the conciliation officer and the appropriate Government shall, within 3[one month] from the date of the receipt of such copy, publish the same in the Official Gazette.
4[(3A) Where an industrial dispute has been referred to arbitration and the appropriate Government is satisfied that the persons making the reference represent the majority of each party, the appropriate Government may, within the time referred to in sub-section (3), issue a notification in such manner as may be prescribed; and when any such notification is issued, the employers and workmen who are not parties to the arbitration agreement but are concerned in the dispute, shall be given an opportunity of presenting their case before the arbitrator or arbitrators.]
(4) The arbitrator or arbitrators shall investigate the dispute and submit to the appropriate Government the arbitration award signed by the arbitrator or all the arbitrators, as the case may be.
4[(4A) Where an industrial dispute has been referred to arbitration and a notification has been issued under sub-section (3A), the appropriate Government may, by order, prohibit the continuance of any strike or lock-out in connection with such dispute which may be in existence on the date of the reference.]
(5) Nothing in the Arbitration Act, 1940 (10 of 1940) shall apply to arbitrations under this section.]
——————–
1. Ins. by Act 36 of 1956, sec. 8 (w.e.f. 10-3-1957).
2. Ins. by Act 36 of 1964, sec. 6 (w.e.f. 19-12,1964).
3. Subs. by Act 36 of 1964, sec. 6, for “fourteen days” (w.e.f. 19-12-1964).
4. Ins. by Act 36 of 1964, sec. 6 (w.e.f 19-12-1964).
Section 11. Procedure and power of conciliation officers, Boards, Courts and Tribunals
1[(1) Subject to any rules that may be made in this behalf, an arbitrator, a Board, Court, Labour Court, Tribunal or National Tribunal shall follow such procedure as the arbitrator or other authority concerned may think fit.]
(2) A conciliation officer or a member of a Board, 2[ or Court or the presiding officer of a Labour Court, Tribunal or National Tribunal] may for the purpose of inquiry into any existing or apprehended industrial dispute, after giving reasonable notice, enter the premises occupied by any establishment to which the dispute relates.
(3) Every Board, Court, 3[Labour Court, Tribunal and National Tribunal] shall have the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit, in respect of the following matters, namely: -
(a) Enforcing the attendance of any person and examining him on oath;
(b) Compelling the production of documents and material object;
(c) Issuing commissions for the examination of witnesses;
(d) In respect of such other matters as may be prescribed,
And every inquiry or investigation by a Board, Court, 4[Labour Court, Tribunal or National Tribunal] shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 of the Indian Penal Code (45 of 1860).
(4) A conciliation officer 5[may enforce the attendance of any person for the purpose of examination of such person or call for] and inspect any document which he has ground for considering to be relevant to the industrial dispute 6[or to be necessary for the purpose of verifying the implementation of any award or carrying out any other duty imposed on him under this Act, and for the aforesaid purposes, the conciliation officer shall have the same powers as are vested in a Civil Court under the Code of Civil Procedure, 1908 (5 of 1908), 5[ in respect of enforcing the attendance of any person and examining him or of compelling the production of documents]].
7[(5) A Court, Labour Court, Tribunal or National Tribunal may, if it so thinks fit, appoint one or more persons having special knowledge of the matter under consideration as an assessor or assessors to advise it in the proceeding before it.
(6) All conciliation officers, members of a board or court and the presiding officers of a Labour Court, Tribunal or National Tribunal shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code (45 of 1860).
(7) Subject to any rules made under this Act, the costs of, and incidental to, any proceeding before a Labour Court, Tribunal or National Tribunal shall be in the discretion of that Labour Court, Tribunal or National Tribunal and the Labour Court, Tribunal or National Tribunal, as the case may be, shall have full power to determine by and to whom and to what extent and subject to what conditions, if any, such costs are to be paid, and to give all necessary directions for the purposes aforesaid and such costs may, on application made to the appropriate Government by the person entitled, be recovered by that Government in the same manner as an arrear of land revenue.]
8[(8) Every 9[Labour Court, Tribunal or National Tribunal] shall be deemed to be Civil Court for the purposes of 10[sections 345, 346 and 348 of the Code of Criminal Procedure, 1973 (2 of 1974)].]
11[“(9) Every award made, order issued or settlement arrived at by or before Labour Court or Tribunal or National Tribunal shall be executed in accordance with the procedure laid down for execution of orders and decree of a civil court under Order 21 of the Code of Civil Procedure, 1908 (5 of 1908).
(10) The Labour Court or Tribunal or National Tribunal, as the case may be, shall transmit any award, order or settlement to a civil court having jurisdiction and such civil court shall executed the award, order or settlement as if it were a decree passed by it.”]
——————–
1. Subs. by Act 36 of 1956, sec. 9, for sub-section (1) (w.e.f. 10-3-1957).
2. Subs. by Act 36 of 1956, sec. 9, for “Court or Tribunal” (w.e.f. 10-3-1957).
3. Subs. by Act 36 of 1956, sec. 9, for ‘and Tribunal’ (w.e.f. 10-3-1957).
4. Subs. by Act 36 of 1956, sec. 9, for ‘or Tribunal” (w.e.f. 10-3-1957).
5. Subs. by Act 46 of 1982, sec. 9, for certain words (w.e.f. 21-8-1984).
6. Ins. by Act 36 of 1956, sec. 9 (w.e.f. 17-9-1956).
7. Subs. by Act 36 of 1956, sec. 9, for sub-sections (5) to (7) (w.e.f. 10-3-1957), sub-section (7) was ins. by Act 48 of 1950, sec. 34 and Sch.
8. Ins. by Act 48 of 1950, sec. 34 and Sch.
9. Subs. by Act 36 of 1956, sec. 9, for ‘Tribunal” (w.e.f. 10-3-1957).
10. Subs. by Act 46 of 1982, sec. 9, for certain words and figures (w.e.f. 21-8-1984).
11. Ins. by Act. 24 of 2010, sec. 9 & 10 (w.e.f. 18-8-2010).
Section 11 A. Powers of Labour Court, Tribunals and National Tribunals to give appropriate relief in case of discharge or dismissal of workmen
1[11A. Powers of Labour Court, Tribunals and National Tribunals to give appropriate relief in case of discharge or dismissal of workmen. Where an industrial dispute relating to the discharge or dismissal of a workman has been referred to a Labour Court, Tribunal or National Tribunal for adjudication and, in the course of the adjudication proceedings, the Labour Court, Tribunal or National Tribunal, as the case may be, is satisfied that the order of discharge or dismissal was not justified, it may, by its award, set aside the order of discharge or dismissal and direct re-instatement of the workman on such terms and conditions, if any, as it thinks fit, or give such other relief to the workman including the award of any lesser punishment in lieu of discharge or dismissal as the circumstances of the case may require :
Provided that in any proceeding under this section the Labour Court, Tribunal or National Tribunal, as the case may be, shall rely only on the materials on record and shall not take any fresh evidence in relation to the matter.]
——————–
1. Ins. by Act 45 of 1971, sec. 3 (w.e.f. 15-12-1971).
Section 12. Duties of conciliation officers
(1) Where any industrial dispute exists or is apprehended, the conciliation officer may, or where the dispute relates to a public utility service and a notice under section 22 has been given, shall, hold conciliation proceedings in the prescribed manner.
(2) The conciliation officer shall, for the purpose of bringing about a settlement of the dispute without delay investigate the dispute and all matters affecting the merits and right settlement thereof and may do all such things as he thinks fit for the purpose of inducing the parties to come to a fair and amicable settlement of the dispute.
(3) If a settlement of the dispute or of any of the matters in dispute is arrived at in the course of the conciliation proceedings the conciliation officer shall send a report thereof to the appropriate Government 1[or an officer authorised in this behalf by the appropriate Government] together with a memorandum of the settlement signed by the parties to the dispute.
(4) If no such settlement is arrived at, the conciliation officer shall, as soon as practicable after the close of the investigation, send to the appropriate Government a full report setting forth the steps taken by him for ascertaining the facts and circumstances relating to the dispute and for bringing about a settlement thereof, together with a full statement of such facts and circumstances, and the reasons on account of which, in his opinion, a settlement could not be arrived at.
(5) If, on a consideration of the report referred to in sub-section (4), the appropriate Government is satisfied that there is a case for reference to a Board, 2[Labour Court, Tribunal or National Tribunal], it may make such reference. Where the appropriate Government does not make such a reference it shall record and communicate to the parties concerned its reasons therefor.
(6) A report under this section shall be submitted within fourteen days of the commencement of the conciliation proceedings or within such shorter period as may be fixed by the appropriate Government.
3[Provided that, 4[subject to the approval of the conciliation officer,] the time for the submission of the report may be extended by such period as may be agreed upon in writing by all the parties to the dispute.]
——————–
1. Ins. by Act 35 of 1965, sec. 4 (w.e.f. 1-12-1965).
2. Subs. by Act 36 of 1956, sec. 10, for “or Tribunal” (w.e.f. 10-3-1957).
3. Ins. by Act 36 of 1956, sec. 10 (w.e.f. 17-9-1956).
4. Ins. by Act 36 of 1964, sec. 8 (w.e.f. 19-12-1964).
Section 13. Duties of Board
(1) Where a dispute has been referred to a Board under this Act, it shall be the duty of the Board to endeavour to bring about a settlement of the same and for this purpose the Board shall, in such manner as it thinks fit and without delay, investigate the dispute and all matters affecting the merit and the right settlement thereof and may do all such things as it thinks fit for the purpose of inducing the parties to come to a fair and amicable settlement of the dispute.
(2) If a settlement of the dispute or of any of the matters in dispute is arrived at in the course of the conciliation proceedings, the Board shall send a report thereof to the appropriate Government together with a memorandum of the settlement signed by the parties to the dispute.
(3) If no such settlement is arrived at, the Board shall, as soon as practicable after the close of the investigation, send to the appropriate Government a full report setting for the proceedings and steps taken by the Board for ascertaining the facts and circumstances relating to the dispute and for bringing about a settlement thereof, together with a full statement of such facts and circumstances, its findings thereon, the reasons on account of which, in its opinion, a settlement could not be arrived at and its recommendations for the determination of the dispute.
(4) If, on the receipt of a report under sub-section (3) in respect of a dispute relating to a public utility service, the appropriate Government does not make a reference to a 1[Labour Court, Tribunal or National Tribunal] under section 10, it shall record and communicate to the parties concerned its reasons therefor.
(5) The Board shall submit its report under this section within two months of the date 2[on which the dispute was referred to it] or within such shorter period as may be fixed by the appropriate Government:
Provided that the appropriate Government may from time to time extend the time for the submission of the report by such further periods not exceeding two months in the aggregate:
Provided further that the time for the submission of the report may be extended by such period as may be agreed on in writing by all the parties to the dispute.
——————–
1. Subs. by Act 36 of 1956, sec. 11, for ‘Tribunal’ (w.e.f. 10-3-1957).
2. Subs. by Act 40 of 1951, sec. 6, for ‘of the notice under section 22”.
Section 14. Duties of Courts
A Court shall inquire into the matters referred to it and report thereon to the appropriate Government ordinarily within a period of six months from the commencement of its inquiry.
Section 15. Duties of Labour Courts, Tribunals and National Tribunals
1[15. Duties of Labour Courts, Tribunals and National Tribunals. Where an industrial dispute has been referred to a Labour Court, Tribunal or National Tribunal for adjudication, it shall hold its proceedings expeditiously and shal1, 2[within the period specified in the order referring such industrial dispute or the further period extended under the second proviso to sub-section (2A) of section 10], submit its award to the appropriate Government.
——————–
1. Subs. by Act 36 of 1956, sec. 12, for sections 15,16,17and 17A (w.e.f. 10-3-1957), Section 17A was ins. by Act 48 of 1950, sec. 34 and Sch.
2. Subs. by Act 46 of 1982, sec. 10, for certain words (w.e.f. 21-8-1984).
Section 16. Form of report or award
(1) The report of a Board or Court shall be in writing and shall be signed by all the members of the Board or Court, as the case may be:
Provided that nothing in this section shall be deemed to prevent any member of the Board or Court from recording any minute of dissent from a report or from any recommendation made therein.
(2) The award of a Labour Court or Tribunal or National Tribunal shall be in writing and shall be signed by its presiding officer.
Section 17. Publication of reports and awards
(1) Every report of a Board or Court together with any minute of dissent recorded therewith, every arbitration award and every award of a Labour Court, Tribunal or National Tribunal shall, within a period of thirty days from the date of its receipt by the appropriate Government, be published in such manner as the appropriate Government thinks fit.
(2) Subject to the provisions of section 17A, the award published under sub-section (1) shall be final and shall not be called in question by any Court in any manner whatsoever.
Section 17 A. Commencement of the award
(1) An award (including an arbitration award) shall become enforceable on the expiry of thirty days from the date of its publication under section 17):
Provided that-
(a) If the appropriate Government is of opinion, in any case where the award has been given by a Labour Court or Tribunal in relation to an industrial dispute to which it is a party; or
(b) If the Central Government is of opinion, in any case where the award has been given by a National Tribunal,
That it will be inexpedient on public grounds affecting national economy or social justice to give effect to the whole or any part of the award, the appropriate Government, or as the case may be, the Central Government may, by notification in the Official Gazette, declare that the award shall not become enforceable on the expiry of the said period of thirty days.
(2) Where any declaration has been made in relation to an award under the proviso to sub-section (1), the appropriate Government or the Central Government may, within ninety days from the date of publication of the award under section 17, make an order rejecting or modifying the award, and shall, on the first available opportunity, Jay the award together with a copy of the order before the Legislature of the State, if the order has been made by a State Government, or before Parliament, if the order has been made by the Central Government.
(3) Where any award as rejected or modified by an order made under subsection (2) is laid before the Legislature of a State or before Parliament, such award shall become enforceable on the expiry of fifteen days from the date on which it is so laid; and where no order under sub-section (2) is made in pursuance of a declaration under the proviso to sub-section (1), the award shall become enforceable on the expiry of the period of ninety days referred to in subsection (2).
(4) Subject to the provisions of sub-section (1) and sub-section (3) regarding the enforceability of an award, the award shall come into operation with effect from such date as may be specified therein, but where no date is so specified, it shall come into operation on the date when the award becomes enforceable under sub-section (1) or sub-section (3), as the case may be.]
Section 17 B. Payment of full wages to workman pending proceedings in higher courts
1[17B. Payment of full wages to workman pending proceedings in higher courts. Where in any case, a Labour Court, Tribunal or National Tribunal by its award directs reinstatement of any workman and the employer prefers any proceedings against such award in a High Court or the Supreme Court, the employer shall be liable to pay such workman, during the period of pendency of such proceedings in the High Court or the Supreme Court, full wages last drawn by him, inclusive of any maintenance allowance admissible to him under any rule if the workman had not been employed in any establishment during such period and an affidavit by such workman had been filed to that effect in such Court:
Provided that where it is proved to the satisfaction of the High Court or the Supreme Court that such workman had been employed and had been receiving adequate remuneration during any such period or part thereof, the Court shall order that no wages shall be payable under this section for such period or part, as the case may be.]
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1. Ins. by Act 46 of 1982, sec. 11 (w.e.f. 21-8-1984).
Section 18. Persons on whom settlements and awards are binding
1[(1) A settlement arrived at by agreement between the employer and workman otherwise than in the course of conciliation proceeding shall be binding on the parties to the agreement.
(2) 2[Subject to the provisions of sub-section (3), an arbitration award] which has become enforceable shall be binding on the parties to the agreement who referred the dispute to arbitration.]
3[(3)] A settlement arrived at in the course of conciliation proceedings under this Act 4[or an arbitration award in a case where a notification has been issued under sub-section (3A) of section IOA] or 5[an award 6[of a Labour Court, Tribunal or National Tribunal] which has become enforceable] shall be binding on-
(a) All parties to the industrial dispute;
(b) All other parties summoned to appear in the proceedings as parties to the dispute, unless the Board, 7[arbitrator] 8[Labour Court, Tribunal or National Tribunal], as the case may be, records the opinion that they were so summoned without proper cause;
(c) Where a party referred to in clause (a) or clause (b) is an employer, his heirs, successors or assigns in respect of the establishment to which the dispute relates;
(d) Where a party referred to in clause (a) or clause (b) is composed of workmen, all persons who were employed in the establishment or part of the establishment, as the case may be, to which the dispute relates on the date of the dispute and all persons who subsequently become employed in that establishment or part.
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1. Ins. by Act 36 of 1956, sec. 13 (w.e.f. 7-10-1956).
2. Subs. by Act 36 of 1964, sec. 9, for “An arbitration award” (w.e.f. 19-12-1964).
3. Section 18 re-numbered as sub-section (3) of that section by Act 36 of 1956, sec. 13 (w.e.f. 7-10-1956).
4. Ins. by Act 36 of 1964, sec. 9 (w.e.f. 19-12-1964).
5. Subs. by Act 48 of 1950, sec. 34 and Sch., for ‘an award which is declared by the appropriate Government to be binding under sub-section (2) of section 15”.
6. Ins. by Act 36 of 1956, sec. 13 (w.e.f. 10-3-1957).
7. Ins. by Act 36 of 1964, sec. 9 (w.e.f. 19-12-1964).
8. Subs. by Act 36 of 1956, sec. 13, for “or Tribunal” (w.e.f. 10-3-1957).
Section 19. Period of operation of settlements and awards
(1) A settlement 1[* * *] shall come into operation on such date as is agreed upon by the parties to the dispute, and if no date is agreed upon, on the date on which the memorandum of the settlement is signed by the parties to the dispute.
(2) Such settlement shall be binding for such period as is agreed upon by the parties, and if no such period is agreed upon, for a period of six months 2[from the date on which the memorandum of settlement is signed by the parties to the dispute], and shall continue to be binding on the parties after the expiry of the period aforesaid, until the expiry of two months from the date on which a notice in writing of an intention to terminate the settlement is given by one of the parties to the other party or parties to the settlement.
3[(3) An award shall, subject to the provisions of this section, remain in operation for a period of one year 4[from the date on which the award becomes enforceable under section 17A]:
Provided that the appropriate Government may reduce the said period and fix such period as it thinks fit:
Provided further that the appropriate Government may, before the expiry of the said period, extend the period of operation by any period not exceeding one year at a time as it thinks fit so, however, that the total period of operation of any award does not exceed three years from the date on which it came into operation.
(4) Where the appropriate Government, whether of its own motion or on the application of any party bound by the award, considers that since the award was made, there has been a material change in the circumstances on which it was based, the appropriate Government may refer the award or a part of it 5[to a Labour Court, if the award was that of a Labour Court or to a Tribunal, if the award was that of a Tribunal or of a National Tribunal], for decision whether the period of operation should not, by reason of such change, be shortened and the decision of 6[Labour Court or the Tribunal, as the case may be] on such reference shall, 7[***] be final.
(6) Nothing contained in sub-section (3) shall apply to any award which by its nature, terms or other circumstances does not impose, after it has been given effect to, any continuing obligation on the parties bound by the award.
(7) Notwithstanding the expiry of the period of operation under subsection (3), the award shall continue to be binding on the parties until a period of two months has elapsed from the date on which notice is given by any party bound by the award to the other party or parties intimating it intention to terminate the award.
4[(8) No notice given under sub-section (2) or sub-section (6) shall have effect, unless it is given by a party representing the majority of persons bound by the settlement or award, as the case may be.]
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1. The words “arrived at in the course of a conciliation proceedings under this Act” omitted by Act 36 of 1956, sec. 14, (w.e.f. 7-10-1956).
2. Ins. by Act 36 of 1956, sec. 14 (w.e.f. 7-10-1956).
3. Subs. by Act 48 of 1950, sec. 34 and sch., for sub-section (3).
4. Ins. by Act 36 of 1956, sec. 14 (w.e.f. 7-10-1956).
5. Subs. by Act 36 of 1956, sec. 14, for “to a Tribunal” (w.e.f. 10-3-1957).
6. Subs. by Act 36 of 1956, sec. 14, for “the Tribunal” (w.e.f. 10-3-1957).
7. The words ‘subject to the provision for appeal’ omitted by Act 36 of 1956, sec. 14, (w.e.f. 10-3-1957).
Section 20. Commencement and conclusion of proceedings
(1) A conciliation proceeding shall be deemed to have commenced on the date on which a notice of strike or lock-out under section 22 is received by the conciliation officer or on the date of the order referring the dispute to a Board, as the case may be.
(2) A conciliation proceeding shall be deemed to have concluded.
(a) Where a settlement is arrived at, when a memorandum of the settlement is signed by the parties to the dispute;
(b) Where no settlement is arrived at, when the report of the conciliation officer is received by the appropriate Government or when the report of the Board is published under section 17, as the case may be; or
(c) When a reference is made to a Court, 1[Labour Court, Tribunal or National Tribunal] under section 10 during the pendency of conciliation proceedings.
(3) Proceedings 2[before an arbitrator under section 10A or before a Labour Court, Tribunal or National Tribunal I shall be deemed to have commenced on the date of the 3[reference of the dispute for arbitration or adjudication, as the case may be] and such proceedings shall be deemed to have concluded 4[on the date on which the award becomes enforceable under section 17A].
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1. Subs. by Act 36 of 19Ei6, sec. 15, for ‘or Tribunal” (w.e.f. 10-3-1957).
2. Subs. by Act 36 of 1956, sec 15, for “before a Tribunal” (w.e.f. 10-3-1957).
3. Subs. by Act 36 of 1956, sec. 15, for “reference of a dispute for adjudication (w.e.f. 10-3-1957).
4. Subs. by Act 18 of 1952, sec. 4, for certain words and figures.
Section 21. Certain matters to be kept confidential
There shall not be included in any report or award under this Act, any information obtained by a conciliation officer, Board, Court, 1[Labour Court, Tribunal, National Tribunal or an arbitrator] in the course of any investigation or inquiry as to a trade union or as to any individual business (whether carried on by a person, firm or company) which is not available otherwise than through the evidence given before such officer, Board, Court, 1[Labour Court, Tribunal, National Tribunal or arbitrator], if the trade union, person, firm or company, in question has made a request in writing to the conciliation officer, Board, Court 1[Labour Court, Tribunal, National Tribunal or arbitrator], as the case may be, that such information shall be treated as confidential; nor shall such conciliation officer or any individual member of the Board , 2[ or Court or the presiding officer of the Labour Court, Tribunal or National Tribunal or the arbitrator] or any person present at or concerned in the proceedings disclose any such information without the consent in writing of the secretary of the trade union or the person, firm or company in question, as the case may be:
Provided that nothing contained in this section shall apply to a disclosure of any such information for the purposes of a prosecution under section 193 of the Indian Penal Code (45 of 1860).
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1. Subs. by Act 36 of 1956, sec. 16, for “or Tribunal” (w.e.f. 10-3-1957).
2. Subs. by Act 36 of 1956, sec. 16, for ‘court or Tribunal” (w.e.f 10-3-1957).
Section 22. Prohibition of strikes and lock-outs
(1) No person employed in a public utility service shall go on strike, in breach of contract-
(a) Without giving to the employer notice of strike, as hereinafter provided, within six weeks before striking; or
(b) Within fourteen days of giving such notice; or
(c) Before the expiry of the date of strike specified in any such notice as aforesaid; or
(d) During the pendency of any conciliation proceedings before a conciliation officer and seven days after the conclusion of such proceedings.
(2) No employer carrying on any public utility service shall lock-out any of his workman-
(a) Without giving them notice of lock-out as hereinafter provided, within six weeks before locking-out ; or
(b) Within fourteen days of giving such notice; or
(c) Before the expiry of the date of lock-out specified in any such notice as aforesaid ; or
(d) During the pendency of any conciliation proceedings before a conciliation officer and seven days after the conclusion of such proceedings.
(3) The notice of lock-out or strike under this section shall not be necessary where there is already in existence a strike or, as the case may be, lock-out in the public utility service, but the employer shall send intimation of such lockout or strike on the day on which it is declared, to such authority as may be specified by the appropriate Government either generally or for a particular area or for a particular class of public utility services.
(4) The notice of strike referred to in sub-section (1) shall be given by such number of persons to such person or persons and in such manner as may be prescribed.
(5) The notice of lock-out referred to in sub-section (2) shall be given in such manner as may be prescribed.
(6) If on any day an employer receives from any person employed by him any such notices as are referred to in sub-section (1) or gives to any persons employed by him any such notices as are referred to in sub-section (2), he shall within five days, thereof report to the appropriate Government or to such authority as that Government may prescribe the number of such notices received or given on that day.
Section 23. General prohibition of strikes and lock-outs
No workman who is employed in any industrial establishment shall go on strike in breach of contract and no employer of any such workman shall declare a lock-out.
(a) During the pendency of conciliation proceedings before a Board and seven days after the conclusion of such proceedings;
(b) During the pendency of proceedings before 1[a Labour Court, Tribunal or National Tribunal] and two months, after the conclusion of such proceedings; 2[* * *]
3[(bb) During the pendency of arbitration proceedings before an arbitrator and two months after the conclusion of such proceedings, where a notification has been issued under sub-section (3A) of section 10A; or]
(c) During any period in which a settlement or award is in operation, in respect of any of the matters covered by the settlement or award.
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1. Subs. by Act 36 of 1956, sec. 17, for ‘a Tribunal’ (w.e.f. 10-3-1957).
2. The word ‘or” omitted by Act 36 of 1964, sec. 11 (w.e.f. 19-12-1964).
3. Ins. by Act 36 of 1964, sec. 11, (w.e.f. 19-12-1964).
Section 24.Illegal strikes and lock-outs
(1) A strike or a lock-out shall be illegal if-
(i) It is commenced or declared in contravention of section 22 or section 23; or
(ii) It is continued in contravention of an order made under sub-section(3) of section 10 1[or sub-section (4A) of section 10 A].
(2) Where a strike or lock-out in pursuance of an industrial dispute has already commenced and is in existence at the time of the reference of the dispute to a Board, 1[an arbitrator, a] 2[Labour Court, Tribunal or national Tribunal], the continuance of such strike or lock-out shall not be deemed to be illegal, provided that such strike or lock-out was not at its commencement in contravention of the provisions of this Act or the continuance thereof was not prohibited under sub-section (3) of section 10 1[or sub-section (4A) of section 10A].
(3) A lock-out declared in consequence of an illegal strike or a strike declared in consequence of an illegal lock-out shall not be deemed to be illegal.
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1. Ins. by Act 36 of 1964, sec. 12, (w.e.f 19-12-1964).
2. Subs. by Act 36 of 1956, sec. 18, for ‘or Tribunal’ (w.e.f. 10-3-1957).
Section 25. Prohibition of financial aid to illegal strikes and lock-outs
No person shall knowingly expend or apply any money in direct furtherance or support of any illegal strike or lock-out.
1[CHAPTER VA
LAY-OFF AND RETRENCHMENT
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1. Ins. by Act 43 of 1953, sec. 3 (w.e.f. 2,4-10-1953).
Section 25 A.Application of sections 25C to 25E
(1) Sections 25C to 25E inclusive shall not apply to Industrial Establishments to which Chapter VB applies, or-
(a) To industrial establishments in which less than fifty workmen on an average per working day have been employed in the preceding calendar month; or
(b) To industrial establishments which are of a seasonal character or in which work is performed only intermittently.
(2) If a question arises whether an industrial establishment is of a seasonal character or whether work is performed therein only intermittently, the decision of the appropriate Government thereon shall be final.
Explanation.
In this section and in sections 25C, 25D and 25E, “industrial establishment” means.
(i) A factory as defined in clause (m) of section 2 of the Factories Act, 1948 (63 of 1948); or
(ii) A mine as defined in clause (o) of section 2 of the Mines Act, 1952 (35 of 1952); or
(iii) A plantation as defined in clause (o) of section 2 of the Plantations Labour Act, 1951 (69 of 1951)].
Section 25 B. Definition of continuous service
1[25B. Definition of continuous service. For the purposes of this Chapter, -
(1) A workman shall be said to be in continuous service for a period if he is, for that period, in uninterrupted service, including service which may be interrupted on account of sickness or authorised leave or an accident or as strike which is not illegal, or a lock-out or a cessation of work which is not due to any fault on the part of the workman;
(2) Where a workman is not in continuous service within the meaning of clause (1) for a period of one year or six months, he shall be deemed to be in continuous service under an employer.
(a) For a period of one year, if the workman, during a period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than-
(i) One hundred and ninety days in the case of a workman employed below ground in a mine; and
(ii) Two hundred and forty days, in any other case;
(b) For a period of six months, if the workman, during a period of six calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than.
(i) Ninety-five days, in the case of workman employed below ground in a mine; and
(ii) One hundred and twenty days, in any other case.
Explanation.
For the purposes of clause (2), the number of days on which a workman has actually worked under an employer shall include the days on which-
(i) He has been laid-off under an agreement or as permitted by standing orders made under the industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under the Act or under any other law applicable to the industrial establishment;
(ii) He has been on leave with full wages, earned in the previous years;
(iii) He has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and
(iv) In the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks.]
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1. Subs. by Act 36 of 1964, sec. 13, for section 25B (w.e.f. 19-12-1964).
Section 25 C. Right of workmen laid-off for compensation
1[25C. Right of workmen laid-off for compensation. Whenever a workman (other than a badli workman or a casual workman) whose name is borne on the muster rolls of an industrial establishment and who has completed not less than one year of continuous service under an employer is laid off, whether continuously or intermittently, he shall be paid by the employer for all days during which he is so laid-off, except for such weekly holidays as may intervene, compensation which shall be equal to fifty per cent, of the total of the basic wages and dearness allowance that would have been payable to him had he not been so laid-off :
Provided that if during any period of twelve months, a workman is so laid-off for more than forty-five days, no such compensation shall be payable in respect of any period of the lay-off after the expiry of the first forty-five days, if there is an agreement to that effect between the workman and the employer:
Provided further that it shall be lawful for the employer in any case falling within the foregoing proviso to retrench the workman in accordance with the provisions contained in section 25F at any time after the expiry of the first forty five days of the lay-off and when he does so, any compensation paid to the workman for having been laid-off during the preceding twelve months may be set off against the compensation payable for retrenchment.
Explanation.
‘Badli workman” means a workman who is employed in an industrial establishment in the place of another workman whose name is borne on the muster rolls of the establishment, but shall cease to be regarded as such for the purposes of this section, if he has completed one year of continuous service in the establishment.]
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1. Subs. by Act 35 of 1965, sec. 5, for the former section (w.e.f. 1-12-1965).
Section 25 D. Duty of an employer to maintain musters rolls of workmen
Notwithstanding that workmen in any industrial establishment have been laid-off, it shall be the duty of every employer to maintain for the purposes of this Chapter a muster roll, and to provide for the making of entries therein by workmen who may present themselves for work at the establishment at the appointed time during normal working hours.
Section 25 E. Workmen not entitled to compensation in certain cases
No compensation shall be paid to a workman who has been laid-off-
(i) If he refuses to accept any alternative employment in the same establishment from which he has been laid-off, or in any other establishment belonging to the same employer situate in the same town or village or situate within a radius of five miles from the establishment to which he belongs, if, in the opinion of the employer, such alternative employment does not call for any special skill or previous experience and can be done by the workman, provided that the wages which would normally have been paid to the workman are offered for the alternative employment also ;
(ii) If he does not present himself for work at the establishment at the appointed time during normal working hours at least once a day;
(iii) If such laying-off is due to a strike or slowing-down of production on the part of workmen in another part of the establishment.
Section 25 F. Conditions precedent to retrenchment of workmen
No workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until-
(a) The workman has been given one month’s notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice; 1[* * * * *]
(b) The workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days’ average pay 2[ for every completed year of continuous service] or any part thereof in excess of six months; and
(c) Notice in the prescribed manner is served on the appropriate Government 3[for such authority as may be specified by the appropriate Government by notification in the Official Gazette].
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1. The proviso omitted by Act 49 of 1984, sec. 32 (w.e.f. 18-8-1984).
2. Subs. by Act 36 of 1964, sec. 14, for “for every completed year of service” (w.e.f. 19-12-1964).
3. Ins. by Act 36 of 1964, sec. 14 (w.e.f. 19-12-1964).
Section 25 FF. Compensation to workmen in case of transfer of undertakings
1[25FF. Compensation to workmen in case of transfer of undertakings. Where the ownership of management of an undertaking is transferred, whether by agreement or by operation of law, from the employer in relation to or that undertaking to a new employer, every workman who has been in continuous service for not less than one year in that undertaking immediately before such transfer shall be entitled to notice and compensation in accordance with the provisions of section 25F, as if the workman had been retrenched :
Provided that nothing in this section shall apply to a workman in any case where there has been a change of employers by reason of the transfer, if-
(a) The service of the workman has not been interrupted by such transfer;
(b) The terms and conditions of service applicable to the workman after such transfer are not in any way less favourable to the workman than those applicable to him immediately before the transfer; and
(c) The new employer is, under the terms of such transfer or otherwise, legally 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.
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1. Subs. by Act 18 of 1957, sec. 3, for the former section (w.e.f. 28-11-1956). Section 25FF was originally ins. by Act 41 of 1956, sec. 3.
Section 25 FFA. Sixty days’ notice to be given of intention to close down any undertaking
1[25FFA. Sixty days’ notice to be given of intention to close down any undertaking. (1) An employer who intends to close down an undertaking shall serve, at least sixty days before the date on which the intended closure is to become effective, a notice, in the prescribed manner, on the appropriate Government stating clearly the reasons for the intended closure of the undertaking:
Provided that nothing in this section shall apply to-
(a) An undertaking in which-
(i) Less than fifty workmen are employed, or
(ii) Less than fifty workmen were employed on an average per working day in the preceding twelve months,
(b) An undertaking set up for the construction of buildings, bridges, roads, canals, and dams or for other construction work or project.
(2) Notwithstanding anything contained in sub-section (1), the appropriate Government, may, if it is satisfied that owing to such exceptional circumstances as accident in the undertaking or death of the employer or the like it is necessary so to do, by order, direct that provisions of sub-section (1) shall not apply in relation to such undertaking for such period as may be specified in the order.]
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1. Ins. by Act 32 of 1972, sec. 2 (w.e.f. 14-6-1972).
Section 25 FFF. Compensation to workmen in case of closing down of undertakings
(1) Where an undertaking is closed down for any reason whatsoever, every workman who has been in continuous service for not less than one year in that undertaking immediately before such closure shall, subject to the provisions of sub-section (2), be entitled to notice and compensation in accordance with the provisions of section 25F, as if the workman had been retrenched:
Provided that where the undertaking is closed down on account of unavoidable circumstances beyond the control of the employer, the compensation to be paid to the workman under clause (b) of section 25F, shall not exceed his average pay for three months.
1[Explanation.
An undertaking which is closed down by reason merely of-
(i) Financial difficulties (including financial losses); or
(ii) Accumulation of indisposed stocks; or
(iii) The expiry of the period of the lease or licence granted to it; or
(iv) In case where the undertaking is engaged in mining operations, exhaustion of the minerals in the area in which operations are carried on,
Shall not be deemed to be closed down on account of unavoidable circumstances beyond the control of the employer within the meaning of the proviso to this sub-section.]
2[(1A) Notwithstanding anything contained in sub-section (1), where an undertaking engaged in mining operations is closed down by reason merely of exhaustion of the minerals in the area in which such operations are carried on, no workman referred to in that sub-section shall be entitled to any notice or compensation in accordance with the provisions of section 25F, if-
(a) The employer provides the workman with alternative employment with effect from the date of closure at the same remuneration as he was entitled to receive, and on the same terms and conditions of service as were applicable to him, immediately before the closure;
(b) The service of the workman has not been interrupted by such alternative employment; and
(c) The employer is, under the terms of such alternative employment or otherwise, legally 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 such alternative employment.
(1B) For the purposes of sub-sections (1) and (IA), the expressions minerals’ and ‘mining operations” shall have the meanings respectively assigned to them in clauses (a) and (b) of section 3 of the Mines and Minerals (Regulation and Development) Act, 1957 (67 of 1957).]
(2) Where any undertaking set-up for the construction of buildings, bridges, roads, canals, dams or other construction work is closed down on account of the completion of the work within two years from the date on which the undertaking had been set-up, no workman employed therein shall be entitled to any compensation under clause (b) of section 25F, but if the construction work is not so completed within two years, he shall be entitled to notice and compensation under that section for every 3[completed year of continuous service] or any part thereof in excess of six months].
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1. Subs. by Act 45 of 1971, sec. 4, for the original Explanation (w.e.f. 15-l2-1971).
2. Ins. by Act 45 of 1971, sec. 4 (w.e.f. 15-12-1971).
3. Subs. by Act 36 of 1964, sec. 15, for “completed year of service’ (w.e.f. 19-12-1964).
Section 25 G. Procedure for retrenchment
Where any workman in an industrial establishment, who is a citizen of India, is to be retrenched and he belongs to a particular category of workmen in that establishment, in the absence of any agreement between the employer and the workman in this behalf, the employer shall ordinarily retrench the workman who was the last person to be employed in that category, unless for reasons to be recorded the employer retrenches any other workman.
Section 25 H. Re-employment of retrenched workmen
Where any workmen are retrenched, and the employer proposes to take into his employ any persons he shall, in such manner as may be prescribed, give an opportunity 1[to the retrenched workmen who are citizens of India to offer themselves for reemployment, and such retrenched workmen] who offer themselves for reemployment shall have preference over other persons,
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1. Subs. by Act 36 of 1964, sec. 16, for certain words (w.e.f 19-12-1964).
Section 25 I. Recovery of moneys due from employers under this Chapter
Rep. by The Industrial Disputes (Amendment and Miscellaneous Provisions) Act, 1956 (36 of 1956), sec. 19 (w.e.f. 10-3-1957).
Section 25 J. Effect of Laws inconsistent with this Chapter
(1) The provisions of this Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law [including standing orders made under the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946)]:
1[Provided that where under the provisions of any other Act or rules, orders or notifications issued thereunder or under any standing orders or any award, contract of service or otherwise, a workman is entitled to benefits in respect of any matter which are more favourable to him than those to which he would be entitled under this Act; the workman shall continue to be entitled to the more favourable benefits in respect of that matter, notwithstanding that he receives benefits in respect of other matters under this Act.]
(2) For the removal of doubts, it is hereby declared that nothing contained in this Chapter shall be deemed to affect the provisions of any other law for the time being in force in any State in so far as that law provides for the settlement of industrial disputes, but the rights and liabilities of employers and workmen in so far as they relate to lay-off and retrenchment shall be determined in accordance with the provisions of this Chapter.]
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1. Subs. by Act 36 of 1964, sec. 17, for the proviso (w.e.f. 19-12-1964).
1[CHAPTER VB
SPECIAL PROVISIONS RELATING TO LAY-OFF, RETRENCHMENT AND CLOSURE IN CERTAIN ESTABLISHMENTS
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1. Chapter VB added by Act 32 of 1976, sec. 3 (w.e.f. 5-3-1976).
Section 25 K. Application of Chapter VB
(1) The provisions of the chapter shall apply to an industrial establishment (not being an establishment of a seasonal character or in which work is performed only intermittently) in which not less than 1[one hundred] workmen were employed on an average per working day for the preceding twelve months.
(2) If a question arises whether an industrial establishment is of a seasonal character or whether work is performed therein only intermittently, the decision of the appropriate Government thereon shall be final.
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1. Subs. by Act 46 of 1982, sec. 12, for the words ‘three hundred” (w.e.f. 31-8-1984).
Section 25 L. Definitions
For the purposes of this Chapter, -
(a) ‘Industrial establishment’ means-
(i) A factory as defined in clause (m) of section 2 of the Factories Act, 1948 (63 of 1948);
(ii) A mine as defined in clause (o) of sub-section (1) of section 2 of the Mines Act, 1952 (35 of 1952); or
(iii) A plantation as defined in clause (f) of section 2 of the Plantations Labour Act, 1951 (69 of 1951);
(b) Notwithstanding anything contained in sub-clause (ii) of clause (a) of section 2,-
(i) In relation to any company in which not less than fifty-one per cent. of the paid-up share capital is held by the Central Government, or
(ii) In relation to any corporation not being a corporation referred to in sub-clause (i) of clause (a) of section 2 established by or under any law made by Parliament, the Central Government shall be the appropriate Government.
Section 25 M. Prohibition of lay-off
(1) No workman (other than a badli workman or a casual workman) whose name is borne on the muster rolls of an industrial establishment to which this Chapter applies shall be laid-off by his employer except 1[with the prior permission of the appropriate Government or such authority as may be specified by that Government by notification in the Official Gazette (hereafter in this section referred to as the specified authority), obtained on an application made in this behalf, unless such lay-off is due to shortage of power or to natural calamity, and in the case of a mine, such layoff is due also to fire, flood, excess of inflammable gas or explosion].
2[(2) An application for permission under sub-section (1) shall be made by the employer in the prescribed manner stating clearly the reasons for the intended lay-off and a copy of such application shall also be served simultaneously on the workmen concerned in the prescribed manner.
(3) Where the workmen (other than badli workmen or casual workmen) of an industrial establishment, being a mine, have been laid-off under subsection (I) for reasons of fire, flood or excess of inflammable gas or explosion, the employer, in relation to such establishment, shall, within a period of thirty days from the date of commencement of such lay-off, apply, in the prescribed manner, to the appropriate Government or the specified authority for permission to continue the lay-off.
(4) Where an application for permission under sub-section (1) or subsection (3) has been made, the appropriate Government or the specified authority, after making such enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen concerned and the persons interested in such lay-off, may, having regard to the genuineness and adequacy of the reasons for such lay-off, the interests of the workmen and all other relevant factors, by order and for reasons to be recorded in writing, grant or refuse to grant such permission and a copy of such order shall be communicated to the employer and the workmen.
(5) Where an application for permission under sub-section (1) or subsection (3) has been made and the appropriate Government or the specified authority does not communicate the order granting or refusing to grant permission to the employer within a period of sixty days from the date on which such application is made, the permission applied for shall be deemed to have been granted on the expiration of the said period of sixty days.
(6) An order of the appropriate Government or the specified authority granting or refusing to grant permission shall, subject to the provisions of subsection (7), be final and binding on all the parties concerned and shall remain in force for one year from the date of such order.
(7) The appropriate Government or the specified authority may, either on its own motion or on the application made by the employer or any workman, review its order granting or refusing to grant permission under sub-section (4) or refer the matter or, as the case may be, cause it to be referred, to a Tribunal for adjudication :
Provided that where a reference has been made to a Tribunal under this sub-section, it shall pass an award within a period of thirty days from the date of such reference.
(8) Where no application for permission under sub-section (1) is made, or where no application for permission under sub-section (3) is made within the period specified therein, or where the permission for any lay-off has been refused, such lay-off shall be deemed to be illegal from the date on which the workmen had been laid-off and the workmen shall be entitled to all the benefits under any law for the time being in force as if they had not been laid-off.
(9) Notwithstanding anything contained in the foregoing provisions of this section, the appropriate Government may, if it is satisfied that owing to such exceptional circumstances as accident in the establishment or death of the employer or the like, it is necessary so to do, by order, direct that the provisions of sub-section (1), or, as the case may be, sub-section (3) shall not apply in relation to such establishment for such period as may be specified in the order.]
3[10] The provisions of section 25C (other than the second proviso thereto) shall apply to cases of lay-off referred to in this section.
Explanation.
For the purposes of this section, a workman shall not be deemed to be laid-off by an employer if such employer offers any alternative employment (which in the opinion of the employer does not call for any special skill or previous experience and can be done by the workman) in the same establishment from which he has been laid-off or in any other establishment belonging to the same employer, situate in the same town or village, or situate within such distance from the establishment to which he belongs that the transfer will not involve undue hardship to the workman having regard to the facts and circumstances of his case, provided that the wages which would normally have been paid to the workman are offered for the alternative appointment also.
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1. Subs. by Act 49 of 1984, sec. 4, for certain words (w.e.f. 18-8-1984).
2. Subs. by Act 49 of 1984, sec. 4, for sub-sections (2) to (5) (w.e.f. 18-8-1984).
3. Sub-section (6) renumbered as sub-section (10) by Act 49 of 1984, sec. 4 (w.e.f. 18-8-1984).
Section 25 N. Conditions precedent to retrenchment of workmen
1[25N. Conditions precedent to retrenchment of workmen. (1) No workman employed in any industrial establishment to which this Chapter applies, who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until, -
(a) The workman has been given three months’ notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice; and
(b) The prior permission of the appropriate Government or such authority as may be specified by that Government by notification in the Official Gazette (hereafter in this section referred to as the specified authority) has been obtained on an application made in this behalf.
(2) An application for permission under sub-section (1) shall be made by the employer in the prescribed manner stating clearly the reasons for the intended retrenchment and a copy of such application shall also be served simultaneously on the workmen concerned in the prescribed manner.
(3) Where an application for permission under sub-section (1) has been made, the appropriate Government or the specified authority, after making such enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen concerned and the person interested in such retrenchment, may, having regard to the genuineness and adequacy of the reasons stated by the employer, the interests of the workmen and all other relevant factors, by order and for reasons to be recorded in writing, grant or refuse to grant such permission and a copy of such order shall be communicated to the employer and the workmen.
(4) Where an application for permission has been made under sub-section (1)and the appropriate Government or the specified authority does not communicate the order granting or refusing to grant permission to the employer within a period of sixty days from the date on which such application is made, the permission applied for shall be deemed to have been granted on the expiration of the said period of sixty days.
(5) An order of the appropriate Government or the specified authority granting or refusing to grant permission shall, subject to the provisions of subsection (6), be final and binding on all the parties concerned and shall remain in force for one year from the date of such order.
(6) The appropriate Government or the specified authority may, either on its own motion or on the application made by the employer or any workman, review its order granting or refusing to grant permission under sub-section (3) or refer the matter or, as the case may be, cause it to be referred, to a Tribunal for adjudication :
Provided that where a reference has been made to a Tribunal under this sub-section, it shall pass an award within a period of thirty days from the date of such reference.
(7) Where no application for permission under sub-section (1) is made, or where the permission for any retrenchment has been refused, such retrenchment shall be deemed to be illegal from the date on which the notice of retrenchment was given to the workman and the workman shall be entitled to all the benefits under any law for the time being in force as if no notice had been given to him.
(8) Notwithstanding anything contained in the foregoing provisions of this section, the appropriate Government may, if it is satisfied that owing to such exceptional circumstances as accident in the establishment or death of the employer or the like, it is necessary so to do, by order, direct that the provisions of sub-section (1) shall not apply in relation to such establishment for such period as may be specified in the order.
(9) Where permission for retrenchment has been granted under subsection (3) or where permission for retrenchment is deemed to be granted under sub-section (4), every workman who is employed in that establishment immediately before the date of application for permission under this section shall be entitled to receive, at the time of retrenchment, compensation which shall be equivalent to fifteen days’ average pay for every completed year of continuous service or any part thereof in excess of six months.]
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1. Subs. by Act 49 of 1984, sec. 5, for section 25 N (w.e.f. 18-8-1984).
Section 25 O. Procedure for closing down an undertaking
1[25O. Procedure for closing down an undertaking. (1) An employer who intends to close down an undertaking of an industrial establishment to which this Chapter applies shall, in the prescribed manner, apply, for prior permission at least ninety days before the date on which the intended closure is to become effective, to the appropriate Government, stating clearly the reasons for the intended closure of the undertaking and a copy of such application shall also be served simultaneously on the representatives of the workmen in the prescribed manner:
Provided that nothing in this sub-section shall apply to an undertaking set up for the construction of buildings, bridges, roads, canals, and dams or for other construction work.
(2) Where an application for permission has been made under sub-section (1) the appropriate Government, after making such enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen and the persons interested in such closure may, having regard to the genuineness and adequacy of the reasons stated by the employer, the interests of the general public and all other relevant factors, by order and for reasons to be recorded in writing, grant or refuse to grant such permission and a copy of such order shall be communicated to the employer and the workmen.
(3) Where an application has been made under sub-section (1) and the appropriate Government does not communicate the order granting or refusing to grant permission to the employer within a period of sixty days from the date on which such application is made, the permission applied for shall be deemed to have been granted on the expiration of the said period of sixty days.
(4) An order of the appropriate Government granting or refusing to grant permission shall, subject to the provisions of sub-section (5), be final and binding on all the parties and shall remain in force for one year from the date of such order.
(5) The appropriate Government may, either on its own motion or on the application made by the employer or any workman, review its order granting or refusing to grant permission under sub-section (2) or refer the matter to a tribunal for adjudication:
Provided that where a reference has been made to a Tribunal under this sub-section, it shall pass an award within a period of thirty days from the date of such reference.
(6) Where no application for permission under sub-section (1) is made within the period specified therein, or where the permission for closure has been refused, the closure of the undertaking shall be deemed to be illegal from the date of closure and the workmen shall be entitled to all the benefits under any law for the time being in force as if the undertaking had not been closed down.
(7) Notwithstanding anything contained in the foregoing provisions of this section, the appropriate Government may, if it is satisfied that owing to such exceptional circumstances as accident in the undertaking or death of the employer or the like, it is necessary so to do, by order, direct that the provisions of sub-section (1) shall not apply in relation to such undertaking for such period as may be specified in the order. (8) Where an undertaking is permitted to be closed down under sub-section (2) or where permission for closure is deemed to be granted under subsection (3), every workman who is employed in that undertaking immediately before the date of application for permission under this section, shall be entitled to receive compensation which shall be equivalent to fifteen days’ average pay for every completed year of continuous service or any part thereof in excess of six months.]
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1. Subs. by Act 46 of 1982, sec. 14, for section 250 (w.e.f. 21-8-1984).
Section 25 P. Special provision as to restarting undertakings closed down before commencement of the Industrial Disputes (Amendment) Act, 1976
If the appropriate Government is of opinion in respect of any undertaking or an industrial establishment, to which this Chapter applies and which closed down before the commencement of the Industrial Disputes (Amendment) Act, 1976 (32 of 1976)-
(a) That such undertaking was closed down otherwise than on account of unavoidable circumstances beyond the control of the employer;
(b) That there are possibilities of restarting the undertaking;
(c) That it is necessary for the rehabilitation of the workmen employed in such undertaking before its closure or for the maintenance of supplies and services essential to the life of the community to restart the undertaking or both; and
(d) That the restarting of the undertaking will not result in hardship to the employer in relation to the undertaking,
It may, after giving an opportunity to such employer and workmen, direct, by order published in the Official Gazette, that the undertaking shall be restarted within such time (not being less than one month from the date of the order) as may be specified in the order.
Section 25 Q. Penalty for lay-off and retrenchment without previous permission
Any employer who contravenes the provisions of section 25M or 1[* * *] of section 25N shall be punishable with imprisonment for a term, which may extend to one month, or with fine which may extend to one thousand rupees, or with both.
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1. Certain words omitted by Act 49 of 1984, sec. 6 (w.e.f. 18-8-1984).
Section 25 R. Penalty for closure
(1) Any employer who closes down an undertaking without complying with the provisions of sub-section (1) of section 250 shall be punishable with imprisonment for a term, which may extend to six months, or with fine, which may extend to five thousand rupees, or with both.
(2) Any employer, who contravenes 1[an order refusing to grant permission to close down an undertaking under sub-section (2) of section 25O or a direction given under section 25P], shall be punishable with imprisonment for a term which may extend to one year, or with fine which may extend to five thousand rupees, or with both, and where the contravention is a continuing one, with a further fine which may extend to two thousand rupees for every day during which the contravention continues after the conviction.
2[* * * * *]
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1. Subs. by Act 46 of 1982, sec. 15, for certain words (w.e.f. 21-8-1984).
2. Sub-section (3) omitted by Act 46 of 1982, sec. 15 (w.e.f. 21-8-1984).
Section 25 S. Certain provisions of Chapter VA to apply to industrial establishment to which this Chapter applies
The provisions of sections 25B, 25D, 25FF, 25G, 25H and 25J in Chapter VA shall, so far as may be, apply also in relation to an industrial establishment to which the provisions of this Chapter apply.]
1[CHAPTER VC]
UNFAIR LABOUR PRACTICES
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1. Ins. by Act 46 of 1982, sec. 16 (w.e.f. 21-8-1984).
Section 25 T. Prohibition of unfair labour practice
No employer or workman or a trade union, whether registered under the Trade Unions Act, 1926 (16 of 1926), or not, shall commit any unfair labour practice.
Section 25 U. Penalty for committing unfair labour practices
Any person who commits any unfair labour practice 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.
Section 26. Penalty for illegal strikes and lock-outs
(1) Any workman who commences, continues or otherwise acts in furtherance of, a strike which is illegal under this Act, shall be punishable with imprisonment for a term which may extend to one month, or with fine which may extend to fifty rupees, or with both.
(2) Any employer who commences, continues, or otherwise acts in furtherance of a lock-out which is illegal under this Act, shall be punishable with imprisonment for a term which may extend to one month, or with fine which may extend to one thousand rupees, or with both.
Section 27. Penalty for instigation, etc
Any person who instigates or incites others to take part in, or otherwise acts in furtherance of, a strike or lock-out which is illegal under this Act, 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.
Section 28. Penalty forgiving financial aid to illegal strikes and lock-outs
Any person who knowingly expends or applies any money in direct furtherance or support of any illegal strike or lock-out 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.
Section 29. Penalty for breach of settlement or award
1[29. Penalty for breach of settlement or award. Any person who commits a breach of any term of any settlement or award, which is binding on him under this Act, shall be punishable with imprisonment for a term which may extend to six months, or with fine, or with both, 2[and where the breach is a continuing one, with a further fine which may extend to two hundred rupees for every day during which the breach continues after the conviction for the first] and the Court trying the offence, if it fines the offender, may direct that the whole or any part of the fine realised from him shall be paid, by way of compensation, to any person who, in its opinion has been injured by such breach.]
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1. Subs. by Act 36 of 1956, sec. 20, for section 29 (w.e.f. 17-9-1956).
2. Ins. by Act 35 of 1965, sec. 6 (w.e.f. 1-12-1965).
Section 30. Penalty for disclosing confidential information
Any person who wilfully discloses any such information as is referred to in section 21 in contravention of the provisions of that section shall, on complaint made by or on behalf of the trade union or individual business affected, 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.
Section 30 A. Penalty for closure without notice
1[30A. Penalty for closure without notice. Any employer who closes down any undertaking without complying with the provisions of section 25FFA shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both.]
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1. Ins. by Act 32 of 1972, sec. 3 (w.e.f. 14-6-1972).
Section 31. Penalty for other offences
(1) Any employer who contravenes the provisions of section 33 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) Whoever contravenes any of the provisions of this act or any rule made thereunder shall, if no other penalty is elsewhere provided by or under this Act for such contravention, be punishable with fine, which may extend to one hundred rupees.
Section 32. Offence by companies, etc
Where a person committing an offence under this Act is a company, or other body corporate, or an association of persons (whether incorporated or not), every director, manager, secretary, agent or other officer or person concerned with the management thereof shall, unless he proves that the offence was committed without his knowledge or consent, be deemed to be guilty of such offence.
Section 33. Conditions of service, etc., to remain unchanged under certain circumstances during pendency of proceedings
1[33. Conditions of service, etc., to remain unchanged under certain circumstances during pendency of proceedings. (1) During the pendency of any conciliation proceeding before a conciliation officer or a Board or of any proceeding before 2[an arbitrator or] a Labour Court or Tribunal or National Tribunal in respect of an industrial dispute, no employer shall-
(a) In regard to any matter connected with the dispute, alter, to the prejudice of the workmen concerned in such dispute, the conditions of service applicable to them immediately before the commencement of such proceeding; or
(b) For any misconduct connected with the dispute, discharge or punish, whether by dismissal or otherwise, any workmen concerned in such dispute, save with the express permission in writing of the authority before which the proceeding is pending.
(2) During the pendency any such proceeding in respect of an industrial dispute, the employer may, in accordance with standing orders applicable to a workman concerned in such dispute 2[or, where there are no such standing orders, in accordance with the terms of the contract, whether express or implied, between him and the workman]-
(a) Alter, in regard to any matter not connected with the dispute, the conditions of service applicable to that workman immediately before the commencement of such proceeding; or
(b) For any misconduct not connected with the dispute, discharge or punish, whether by dismissal or otherwise, that workman:
Provided that no such workman shall be discharged or dismissed, unless he has been paid wages for one month and an application has been made by the employer to the authority before which the proceeding is pending for approval of the action taken by the employer
(3) Notwithstanding anything contained in sub-section (2), no employer shall, during the pendency of any such proceeding in respect of an industrial dispute, take any action against any protected workman concerned in such dispute-
(a) By altering, to the prejudice of such protected workman, the conditions of service applicable to him immediately before the commencement of such proceedings; or
(b) By discharging or punishing, whether by dismissal or otherwise, such protected workman, save with the express permission in writing of the authority before which the proceeding is pending.
Explanation.
For the purposes of this sub-section, a “protected workman”, in relation to an establishment, means a workman who, being 3[a member of the executive or other office bearer] of a registered trade union connected with the establishment, is recognised as such in accordance with rules made in this behalf.
(4) In every establishment, the number of workmen to be recognised as protected workmen for the purposes of sub-section (3) shall be one per cent. of the total number of workmen employed therein subject to a minimum number of five protected workmen and a maximum number of one hundred protected workmen and for the aforesaid purpose, the appropriate Government may make rules providing for the distribution of such protected workmen among various trade unions, if any, connected with the establishment and the manner in which the workmen may be chosen and recognised as protected workmen.
(5) Where an employer makes an application to a conciliation officer, Board, 4[an arbitrator, a Labour Court, Tribunal or National Tribunal under the proviso to sub-section (2) for approval of the action taken by him, the authority concerned shall, without delay, hear such application and pass, 5[within a period of three months from the date of receipt of such application], such order in relation thereto as it deems fit :]
6[Provided that where any such authority considers it necessary or expedient so to do, it may, for reasons to be recorded in writing, extend such period by such further period as it may think fit:
Provided further that no proceedings before any such authority shall lapse merely on the ground that any period specified in this sub-section had expired without such proceedings being completed.]
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1. Subs. by Act 36 of 1956, sec. 21, for section 33 (w.e.f. 10-3-1957).
2. lns. by Act 36 of 1964, sec. 18 (w.e.f. 19-12-1964).
3. Subs. by Act 45 of 1971, sec. 5, for ‘an officer’ (w.e.f. 15-12-1971).
4. Ins. by Act 36 of 1964, sec. 18 (w.e.f. 19-12-64).
5. Subs. by Act 46 of 1982, sec. 17, for certain words (w.e.f. 21-8-1984).
6. Ins. by Act 46 of 1982, sec. 17 (w.e.f. 21-8-1984).
Section 33 A. Special provision for adjudication as to whether conditions of service, etc., changed during pendency of proceeding
1[33A. Special provision for adjudication as to whether conditions of service, etc., changed during pendency of proceeding. Where an employer contravenes the provisions of section 33 during the pendency of proceedings 2[before a conciliation officer, Board, an arbitrator, Labour Court, Tribunal or National Tribunal] any employee aggrieved by such contravention, may make a complaint in writing, 2[in the prescribed manner, -
(a) To such conciliation officer or Board, and the conciliation officer or Board shall take such complaint into account in mediating in, and promoting the settlement of, such industrial dispute; and
(b) To such arbitrator, Labour Court, Tribunal or National Tribunal and on receipt of such complaint, the arbitrator, Labour Court, Tribunal or National Tribunal, as the case may be, shall adjudicate upon the complaint as if it were a dispute referred to or pending before it, in accordance with the provisions of this Act and shall submit his or its award to the appropriate government and the provisions of this Act shall apply accordingly.]
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1. Ins. by Act 48 of 1950, sec. 34 and sch.
2. Subs. by Act 46 of 1982, sec. 18 (w.e.f. 21-8-1984).
Section 33 B. Power to transfer certain proceedings
1[33B. Power to transfer certain proceedings. (1) The appropriate Government may, by order in writing and for reasons to be stated therein, withdraw any proceeding under this Act pending before a Labour Court, Tribunal or National Tribunal and transfer the same to another Labour Court, Tribunal or National Tribunal, as the case may be, for the disposal of the proceeding and the Labour Court, Tribunal or National Tribunal to which the proceeding is so transferred may, subject to special directions in the order of transfer, proceed either de novo or from the stage at which it was so transferred:
Provided that where a proceeding under section 33 or section 33A is pending before a Tribunal or National Tribunal, the proceeding may also be transferred to a Labour Court.
(2) Without prejudice to the provisions of sub-section (1), any Tribunal or National Tribunal, if so authorised by the appropriate Government, may transfer any proceeding under section 33 or section 33A pending before it to any one of the Labour Courts specified for the disposal of such proceedings by the appropriate Government by notification in the Official Gazette and the Labour Court to which the proceeding is so transferred shall dispose of the same.]
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1. Ins. by Act 36 of 1956, sec. 23 (w.e.f. 10-3-1957).
Section 33 C. Recovery of Money Due from an Employer
1[33C. Recovery of Money Due from an Employer. (1) Where any money is due to a workman from an employer under a settlement or an award or under the provisions of 2[Chapter VA or Chapter VB] the workman himself or any other person authorised by him in writing in this behalf, or, in the case of the death of the workman, his assignee or heirs may, without prejudice to any other mode of recovery, make an application to the appropriate Government for the recovery of the money due to him, and if the appropriate Government is satisfied that any money is so due, it shall issue certificate for that amount to the Collector who shall proceed to recover the same in the same manner as an arrear of land revenue :
Provided that every such application shall be made within one year from the date on which the money became due to the workman from the employer:
Provided further that any such application may be entertained after the expiry of the said period of one year, if the appropriate Government is satisfied that the applicant had sufficient cause for not making the application within the said period.
(2) Where any workman is entitled to receive from the employer any money or any benefit which is capable of being computed in terms of money and if any question arises as to the amount of money due or as to the amount at which such benefit should be computed, then the question may, subject to any rules that may be made under this Act, be decided by such Labour Court as may be specified in this behalf by the appropriate Government 3[within a period not exceeding three months.]
4[Provided that where the presiding officer of a Labour Court considers it necessary or expedient so to do, he may, for reasons to be recorded in writing, extend such period by such further period as he may think fit.]
(3) For the purposes of computing the money value of a benefit, the Labour Court may, if it so thinks fit, appoint a Commissioner who shall, after taking such evidence as may be necessary, submit a report to the Labour Court and the Labour Court shall determine the amount after considering the report of the Commissioner and other circumstances of the case.
(4) The decision of the Labour Court shall be forwarded by it to the appropriate Government and any amount found due by the Labour Court may be recovered in the manner provided for in sub-section (1).
(5) Where workmen employed under the same employer are entitled to receive from him any money or any benefit capable of being computed in terms of money, then, subject to such rules as may be made in this behalf, a single application for the recovery of the amount due may be made on behalf of or in respect of any number of such workmen.
Explanation.
In this section ‘Labour Court’ includes any court constituted under any law relating to investigation and settlement of industrial disputes in force in any State.]
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1. Subs. by Act 36 of 1964, sec. 19, for the former section (w.e.f. 19-12,1964).
2. Subs. by Act 32 of 1976, sec. 4 (w.e.f. 5-3-1976).
3. Ins. by Act 46 of 1982, sec. 19 (w.e.f. 21-8-1984).
4. Added by Act 46 of 1982, sec. 19 (w.e.f. 21-8-1984).
Section 34. Cognizance of offences
(1) No Court shall take cognizance of any offence punishable under this Act or of the abetment of any such offence, save on complaint made by or under the authority of the appropriate Government.
(2) No Court inferior to that of 1[a Metropolitan Magistrate or a judicial Magistrate of the first class] shall try any offence punishable under this Act.
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1. Subs. by Act 46 of 1982, sec. 20, for certain words (w.e.f. 21-8-1984).
Section 35. Protection of persons
(1) No person refusing to take part or to continue to take part in any strike or lock-out which is illegal under this Act shall, by reason of such refusal or by reason of any action taken by him under this section, be subject to expulsion from any trade union or society, or to any fine or penalty, or to deprivation of any right or benefit to which he or his legal representatives would otherwise be entitled, or be liable to be placed in any respect, either directly or indirectly, under any disability or at any disadvantage as compared with other members of the union or society, anything to the contrary in the rules of a trade union or society notwithstanding.
(2) Nothing in the rules of a trade union or society requiring the settlement of disputes in any manner shall apply to any proceeding for enforcing any right or exemption secured by this section, and in any such proceeding the Civil Court may, in lieu of ordering a person who has been expelled from membership of a trade union or society to be restored to membership, order that he be paid out of the funds of the trade union or society such sum by way of compensation or damages as that Court thinks just.
Section 36. Representation of parties
1[36.Representation of parties. (1) A workman who is a party to dispute shall be entitled to be represented in any proceeding under this Act by-
(a) 2[Any member of the executive or other office bearer] of a registered trade union of which he is a member;
(b) 2[Any member of the executive or other office bearer] of a federation of trade unions to which the trade union referred to in clause (a) is affiliated;
(c) Where the worker is not a member of any trade union, by 2[any member of the executive or other office bearer] of any trade union connected with, or by any other workman employed in, the Industry in which the worker is employed and authorised in such manner as may be prescribed.
(2) An employer who is a party to a dispute shall be entitled to be represented in any proceeding under this Act by-
(a) An officer of an association of employers of which he is a member;
(b) An officer of a federation of association of employers to which the association referred to in clause (a) is affiliated-
(c) Where the employer is not a member of any association of employers, by an officer of any association of employers connected with, or by any other employer engaged in, the industry in which the employer is engaged and authorised in such manner as may be prescribed.
(3) No party to a dispute shall be entitled to be represented by a legal practitioner in any conciliation proceedings under this Act or in any proceedings before a Court.
(4) In any proceeding 3[before a Labour Court, Tribunal or National Tribunal], a party to a dispute may be represented by a legal practitioner with the consent of the other parties to the proceeding and 4[with the leave of the Labour Court, Tribunal or National Tribunal, as the case may be].]
——————–
1. Subs. by Act 48 of 1950, sec. 34 and Sch., for the original section.
2. Subs. by Act 45 of 1971, sec. 6, for ‘an officer” (w.e.f. 15-12-1971).
3. Subs. by Act 36 of 1956, sec. 24, for “before a Tribunal” (w.e.f. 10-3-1957).
4. Subs. by Act 36 of 1956, sec. 24, for “with the leave of the Tribunal” (w.e.f. 10-3-1957).
Section 36 A. Power to remove difficulties
1[36A. Power to remove difficulties. (1) If, in the opinion of the appropriate Government, any difficulty or doubt arises as to the interpretation of any provision of an award or settlement, it may refer the question to such Labour Court, Tribunal or National Tribunal as it may think fit.
(2) The Labour Court, Tribunal or National Tribunal to which such question is referred shall, after giving the parties an opportunity of being heard, decide such question and its decision shall be final and binding on all such parties.]
——————–
1. Ins. by Act 36 of 1956, sec. 25, (w.e.f. 10-3-1957).
Section 36 B. Power to exempt
1[36B. Power to exempt. Where the appropriate government is satisfied in relation to any industrial establishment or undertaking or any class of industrial establishments or undertakings carried on by a department of that Government that adequate provisions exist for the investigation and settlement of industrial disputes in respect of workmen employed in such establishment or undertaking or class of establishments or undertakings, it may by notification in the Official Gazette, exempt, conditionally or unconditionally such establishment or undertaking or class of establishments or undertakings from all or any of the provisions of this Act.].
——————–
1. Ins. by Act 46 of 1982, sec.21 (w.e.f. 21-8-1984).
Section 37. Protection of action taken under the Act
No suit, prosecution or other legal proceeding shall lie against any person for anything which is in good faith done or intended to be done in pursuance of this Act or any rules made thereunder.
Section 38. Power to make rules
138. Power to make rules. (1) The appropriate Government may, subject to the condition of previous publication, make rules for the purpose of giving effect to 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.
[1(a)10[***]
(b) [***]]
4[11“(c) the salaries and allowances and the terms and conditions for appointment of the presiding officers of the Labour Court, Tribunal and the National Tribunal including the allowances admissible to members of courts, Boards and to assessors and witnesses;”]
(d) The ministerial establishment which may be allotted to a Court, Board, 4[Labour Court, Tribunal or National Tribunal] and the salaries and allowances payable to members of such establishment;
(e) The manner in which and the persons by and to whom notice of strike or lock-out may be given and the manner in which such notices shall be communicated;
(f) The conditions subject to which parties may be represented by legal practitioners in proceedings under this Act before a Court, 5[Labour Court, Tribunal or National Tribunal];
(g) Any other matter which is to be or may be prescribed.
(3) Rules made under this section may provide that a contravention thereof shall be punishable with fine not exceeding fifty rupees.
6[(4) All rules made under this section shall, as soon as possible after they are made, be laid before the State Legislature or, where the appropriate Government is the Central Government, before both Houses of Parliament.]
7[(5) Every rule made by the Central Government under this section 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 8[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.]
——————–
1. Subs. by Act 36 of 1956, sec. 26, for ‘and Tribunal” (w.e.f. 10-3-1957).
2. Ins. by Act 36 of 1956, sec. 26 (w.e.f. 10-3-1957).
3. Ins. by Act 36 of 1964, sec. 20 (w.e.f. 19-12-1964).
4. Subs. by Act 36 of 1956, sec. 26, for “Boards and Tribunals” (w.e.f. 10-3-1957).
5. Subs. by Act 36 of 1956, sec. 26, for “or Tribunal” (w.e.f. 10-3-1957).
6. Ins. by Act 36 of 1956, sec. 26 (w.e.f. 10-3-1957).
7. Ins. by Act 36 of 1964, sec, 20 (w.e.f. 19-12-64).
8. Subs. by Act 32 of 1976, sec. 5 (w.e.f. 5-3-1976).
9. On the enforcement of section22 of Act 46of l982, a new Clause (ab) shall stand inserted in section 38 as directed in section 22 of that Act. For the text of section, 22 of that Act see Appendix.
10. Omitted by Act 24 of 2010 w.e.f. 18-8-2010.
11. Subs. by Act 24 of 2010 w.e.f. 18-8-2010.
Section 39. Delegation of powers
1[39. Delegation of powers. The appropriate Government may, by notification in the official Gazette, direct that any power exercisable by it under this Act or rules made thereunder shall, in relation to such matters and subject to such conditions, if any, as may be specified in the direction, be exercisable also,-
(a) Where the appropriate Government is the Central Government, by such officer or authority subordinate to the Central Government or by the State Government, or by such officer or authority subordinate to the State Government, as may be specified in the notification; and
(b) Where the appropriate Government is a State Government, by such officer or authority subordinate to the State Government as may be specified in the notification.]
——————–
1. Subs. by Act 36 of 1956, sec. 27, for section 39 ( w.e.f. 17-9-1956).
Section 40. Power to amend Schedules
1[40. Power to amend Schedules. (1) The appropriate Government may, if it is of opinion that it is expedient or necessary in the public interest so to do, by notification in the Official Gazette, add to the First Schedule any industry, and on any such notification being issued, the First Schedule shall be deemed to be amended accordingly.
(2) The Central Government may, by notification in the Official Gazette, add to or alter or amend the Second Schedule or the Third Schedule and on any such notification being issued, the Second Schedule or the Third Schedule, as the case may be, shall be deemed to be amended accordingly
(3) Every such notification shall, as soon as possible after it is issued, be laid before the Legislature of the State, if the notification has been issued by a State Government, or before Parliament, if the notification has been issued by the Central Government.]
——————–
1. Subs. by Act 36 of 1964, sec. 21, for sec. 40 (w.e.f. 19-12-1964) which was ins. by Act 36 of 1956, sec. 28, original section 40 was rep. by Act 35 of 1950, sec. 2 and Sch. I.
SCH1. THE FIRST SCHEDULE
1[THE FIRST SCHEDULE
[See Section 2 (n) (vi)]
Industries which may be declared to be Public Utility Services under sub-clause (vi) of clause (n) of section 2
1 . Transport (other than railways) for the carriage of passengers or good S, 2[by land or water];
2. Banking;
3. Cement;
4. Coal;
5. Cotton textiles;
6. Food stuffs;
7. Iron and Steel;
8. Defence establishments;
9. Service in hospitals and dispensaries;
10. Fire Brigade Service;
3[11. India Government Mints;
12. India Security Press;]
4[13. Copper Mining;
14. Lead Mining;
15. Zinc Mining;]
5[16. Iron Ore Mining;]
6[17. Service in any oilfield;]
7[*** ]
8[19. Service in the Uranium Industry;]
9[20 Pyrites Mining;]
21. Security Paper Mill, Hoshangabad;
10[22. Services in the Bank Note Press, Dewas;]
11[23. Phosphorite Mining;]
12[24. Magnesite Mining;]
13[ 25. Currency Note Press;]
14[26. Manufacture or production of mineral oil (crude oil), motor and aviation spirit, diesel oil, kerosene oil, fuel oil, diverse hydrocarbon oils and their blends including synthetic fuels, lubricating oils and the like;]
15[27. Service in the International Airports Authority of India.]
——————–
1. Subs. by Act 36 of 1956, sec. 29, for the original Sch. (w.e.f. 10-3-1957).
2. Subs. by Act 36 of 1964, sec. 22, for “by land, water or air” (w.e.f. 19-12-1964).
3. Ins. by Notification No. S.O. 2193, dated 30th June 1965, published in Gazette of India, pt. 11, sec. 3(ii), dated 10th July 1965, and p. 2340.
4. Items, 13 to 15 added by Notification No. 1444 (w.e.f. 3-5-1966).
5. Ins. by Notification No. S.O. 726, published in Gazette of India, pt. 11, sec. 3 (ii), dated 4th March 1967.
6. Ins. by Notification No. 1776, dated 10th May 1967.
7. Entry 18 omitted by Act 45 of 1971, sec. 7 (w.e.f. 15-12-1971).
8. Ins. by Notification No. S.O. 1471 published in Gazette of India, dated 27th April, 1968, pt. 11, sec. 3 (ii), p. 2004.
9. Ins. by Notification No. S.O. 2061, dated 30th May, 1970, published in Gazette of India, dated 6th June, 1970, pt. 11, sec. 3 (ii), and p. 2616.
10. Ins. by Notification No. S.,C). 4697, dated 26th November, 1976, published in Gazette of India, dated 11th December, 1976, pt. 11, sec. 3 (ii), p. 4286.
11. Ins. by Notification No. S.O. 47, dated 17thDecember, 1976, published in Gazette of India, dated lst January, 1977, pt. 11, sec. 3 (ii), p. 69.
12. Ins. by Notification No. S.C). 2474, published in Gazette of India, pt. 11, sec. 3 (ii), dated 4th September, 1980.
13. Ins. by Notification No. S.C). 946, dated 7th March, 1981.
14. Ins. by Notification No. S.C). 4207, dated 20th November, 1984.
15. Ins. by Notification No. S.O. 1919, dated 8th July, 1987.
SCH2. THE SECOND SCHEDULE
(See Section 7)
Matters within the jurisdiction of Labour Courts
1. The propriety or legality of an order passed by an employer under the standing orders;
2. The application and interpretation of standing order;
3. Discharge or dismissal of workmen including reinstatement of, or grant of relief to, workmen wrongfully dismissed;
4. Withdrawal of any customary concession or privilege;
5. Illegality or otherwise of a strike or lock-out; and
6. All matters other than those specified in the Third Schedule.
SCH3. THE THIRD SCHEDULE
(See Section 7A)
Matters within the jurisdiction of Industrial Tribunals
1. Wages, including the period and mode of payment;
2. Compensatory and other allowances;
3. Hours of work and rest intervals;
4. Leave with wages and holidays;
5. Bonus, profit sharing, provident fund and gratuity;
6. Shift working otherwise than in accordance with standing orders;
7. Classification by grades;
8. Rules of discipline;
9. Rationalisation;
10. Retrenchment of workmen and closure of establishment; and
11. Any other matter that may be prescribed.
SCH4. THE FOURTH SCHEDULE
(See Section 9A)
Conditions of Service for Change of which Notice is to be given
1. Wages, including the period and mode of payment;
2. Contribution paid, or payable, by the employer to any provident fund or pension fund or for the benefit of the workmen under any law for the time being in force;
3. Compensatory and other allowances;
4. Hours of work and rest intervals;
5. Leave with wages and holidays;
6. Starting alteration or discontinuance of shift working otherwise than in accordance with standing orders;
7. Classification by grades;
8. Withdrawal of any customary concession or privilege or change in usage;
9. Introduction of new rules of discipline, or alteration of existing rules, except in so far as they are provided in standing orders;
10. Rationalisation, standardisation or improvement of plant or technique which is likely to lead to retrenchment of workmen;
11. Any increases or reduction (other than casual) in the number of persons employed or to be employed in any occupation or process or department or shift, 1[not occasioned by circumstances over which the employer has no control].]
——————–
1. Subs. by Act No. 36 of 1964, sec. 2,3, for ‘not due to forced matters’ (w.e.f. 19-12-1964).
SCH5. THE FIFTH SCHEDULE
1[THE FIFTH SCHEDULE
[See Section 2(ra)]
Unfair Labour Practices
I. On the part of employers and trade unions of employers
1. To interfere with, restrain from, or coerce, workmen in the exercise of their right to organise, form, join or assist a trade union or to engage in concerted activities for the purposes of collective bargaining or other mutual aid or protection, that is to say :-
(a) Threatening workmen with discharge or dismissal, if they join a trade union;
(b) Threatening a lock-out or closure, if a trade union is organised;
(c) Granting wage increase to workmen at crucial periods of trade union Organisations, with a view to undermining the efforts of the trade union Organisations.
2. To dominate, interfere with or contribute support, financial or otherwise, to any trade union, that is to say :-
(a) An employer taking an active interest in organising a trade union of his workmen; and
(b) An employer showing partiality or granting favour to one of several trade unions attempting to organise his workmen or to its members, where such a trade union is not a recognised trade union.
3. To establish employer sponsored trade unions of workmen.
4. To encourage or discourage membership in any trade union by discriminating against any workman, that is to say :-
(a) Discharging or punishing a workman, because he urged other workmen to join or organise a trade union;
(b) Discharging or dismissing a workman for taking part in any strike (not being a strike which is deemed to be an illegal strike under this Act);
(c) Changing seniority rating of workmen because of trade union activities;
(d) Refusing to promote workmen to higher posts on account of their trade union activities;
(e) Giving unmerited promotions to certain workmen with a view to creating discord amongst other workmen, or to undermine the strength of their trade union;
(f) Discharging office-bearers or active members of the trade union on account of their trade union activities.
5. To discharge or dismiss workmen-
(a) By way of victimisation;
(b) Not in good faith, but in the colourable exercise of the employer’s rights;
(c) By falsely implicating a workman in a criminal case on false evidence or on concocted evidence;
(d) For patently false reasons;
(e) On untrue or trumped up allegations of absence without leave;
(f) In utter disregard of the principles of natural justice in the conduct of domestic enquiry or with undue haste;
(g) For misconduct of a minor or technical character, without having any regard to the nature of the particular misconduct or the past record or service of the workman, thereby leading to a disproportionate punishment.
6. To abolish the work of a regular nature being done by workmen, and to give such work to contractors as a measure of breaking a strike.
7. To transfer a workman mala fide from one place to another, under the guise of following management policy
8. To insist upon individual workmen, who are on a legal strike to sign a good conduct bond, as a pre-condition to allowing them to resume work.
9. To show favouritism or partiality to one set of workers regardless of merit.
10. To employ workmen as ‘badlis”, casuals or temporaries and to continue them as such for years, with the object of depriving them of the status and privileges of permanent workmen.
11. To discharge or discriminate against any workman for filing charges or testifying against an employer in any enquiry or proceeding relating to any industrial dispute.
12. To recruit workmen during a strike which is not an illegal strike.
13. Failure to implement award, settlement or agreement.
14. To indulge in act,, of force or violence.
15. To refuse to bargain collectively, in good faith with the recognised trade unions.
16. Proposing or continuing a lock-out deemed to be illegal under this Act.
——————–
1. Ins. by Act No. 46 of 1982, sec. 23 (w.e.f. 21-8-1984).
II.-On the part of workmen and trade unions of workmen
1. To advise or actively support or instigate any strike deemed to be illegal under this Act.
2. To coerce workmen in the exercise of their right to self-organisations or to join a trade union or refrain from joining any trade union, that is to say :-
(a) For a trade union or its members to picketing in such a manner that non-striking workmen are physically debarred from entering the work places;
(b) To indulge in acts of force or violence or to hold out threats of intimidation in connection with a strike against non-striking workmen or against managerial staff.
3. For a recognised union to refuse to bargain collectively in good faith with the employer.
4. To indulge in coercive activities against certification of a bar-gaining representative.
5. To stage, encourage or instigate such forms of coercive actions as wilful go slow”, squatting on the work premises after working hours or ‘gherao’ of any of the members of the managerial or other staff.
6. To stage demonstrations at the residences of the employers or the managerial staff members.
7. To incite or indulge in wilful damage to employer’s property connected with the industry.
8. To indulge in acts of force or violence or to hold out threats of intimidation against any workman with a view to prevent him from attending work.]
November 30, 2014
Section 1. Short title, extent and commencement
(1) This Act may be called the Arms Act, 1959.
(2). It extends to the whole of India.
(3). It shall come into force on such date [ Note: 1st October, 1962, vide Notification No. G.S.R. 992, dated 13-7-1962, see Gazette of India, Pt. II, sec. 3(i) p. 1092. ] as the Central Government may, by notification in the Official Gazette, appoint.
———————————
1. Came into force on 1-10-1962 vide G.S.R. 992, dated 13th July, 1962.
Section 2. Definition and interpretation
(1) In this Act, unless the context otherwise requires,—
(a) “acquisition” with its grammatical variations and cognate expressions, includes hiring, borrowing, or accepting as a gift;
(b) “ammunition” means ammunition for any firearm, and includes—
(i) rockets, bombs, grenades, shells 1[and other missiles],
(ii) articles designed for torpedo service and submarine mining,
(iii) other articles containing, or designed or adapted to contain, explosive, fulminating or fissionable material or noxious liquid, gas or other such thing, whether capable of use with firearms or not,
(iv) charges for firearms and accessories for such charges,
(v) fuses and friction tubes,
(vi) parts of, and machinery for manufacturing, ammunition, and
(vii) such ingredients of ammunition as the Central Government may, by notification in the Official Gazette, specify in this behalf;
(c) “arms” means articles of any description designed or adapted as weapons for offences, or defence, and includes firearms, sharp-edged and other deadly weapons, and parts of, and machinery for manufacturing arms, but does not include articles designed solely for domestic or agricultural uses such as a lathi or an ordinary walking stick and weapons incapable of being used otherwise than as toys or of being converted into serviceable weapons;
2[(d) “district magistrate” in relation to any area for which a Commissioner of Police has been appointed, means the Commissioner of Police thereof and includes any such Deputy Commissioner of Police, exercising jurisdiction over the whole or any part of such area, as may be specified by the State Government in this behalf in relation to such area or parts;]
(e) “firearms” means arms of any description designed or adapted to discharge a projectile or projectiles of any kind by the action of any explosive or other forms of energy, and includes,—
(i) artillery, hand-grenades, riot-pistols or weapons of any kind designed or adapted for the discharge of any noxious liquid, gas or other such things,
(ii) accessories for any such firearm designed or adapted to diminish the noise or flash caused by the firing thereof,
(iii) parts of, and machinery for manufacturing, firearms, and
(iv) carriages, platforms and appliances for mounting, transporting and serving artillery;
(f) “licensing authority” means an officer or authority empowered to grant or renew licences under rules made under the Act, and includes, the Government;
3[(ff) “magistrate” means an Executive Magistrate under the Code of Criminal Procedure, 1973 (2 of 1974);]
(g) “prescribed” means prescribed by rules made under this Act;
(h) “prohibited ammunition” means any ammunition, containing, or designed or adapted to contain, any noxious liquid, gas or other such thing, and includes rockets, bombs, grenades, shells, 4[missiles] articles designed for torpedo service and submarine mining and such other articles as the Central Government may, by notification in the Official Gazette, specify to be prohibited ammunition;
(i) “prohibited arms” means—
(i) firearms so designed or adapted that, if pressure is applied to the trigger, missiles continue to be discharged until pressure is removed from the trigger or the magazine containing the missiles is empty, or
(ii) weapons of any description designed or adapted for the discharge of any noxious liquid, gas or other such thing,
and includes artillery, anti-aircraft and anti-tank firearms and such other arms as the Central Government may, by notification in the Official Gazette, specify to be prohibited arms;
(j) “public servant” has the same meaning as in section 21 of the Indian Penal Code (45 of 1860);
(k) “transfer” with its grammatical variations and cognate expressions, includes letting on hire, lending, giving and parting with possession.
(2) For the purposes of this Act, the length of the barrel of a firearm shall be measured from the muzzle to the point at which the charge is exploded on firing.
(3) Any reference in the Act to any law which is not in force in any area shall, in relation to that area, be construed as a reference to the corresponding law, if any, in force in that area.
(4) Any reference in this Act to any officer or authority shall, in relation to any area in which there is no officer or authority with the same designation, be construed as a reference to such officer or authority as may be specified by the Central Government by notification in the Official Gazette.
————————————–
1. Subs. by Act 42 of 1988, sec. 2, for “and other like missiles” (w.r.e.f. 27-5-1988).
2. Subs. by Act 55 of 1971, sec. 2, for clause (d) (w.e.f. 13-12-1971).
3. Ins. by Act 25 of 1983, sec. 2 (w.r.e.f. 22-6-1983).
4. Ins. by Act 42 of 1988, sec. 2 (w.r.e.f. 27-5-1988).
Chapter II – ACQUISITION, POSSESSION, MANUFACTURE, SALE, IMPORT, EXPORT AND TRANSPORT OF ARMS AND AMMUNITION
Section 3. Licence for acquisition and possession of firearms and ammunition
[ Note: S. 3 renumbered as sub section (1) thereof by Act 25 of 1983, s. 3 (w.e.f. 22-6-1983) ] (1) No person shall acquire, have in his possession, or carry any firearm or ammunition unless he holds in this behalf a licence issued in accordance with the provisions of this Act and the rules made there under :
Provided that a person may, without himself holding a licence carry any firearms or ammunition in the presence, or under the written authority, of the holder of the licence for repair or for renewal of the licence or for use by such holder.
(2) [ Note: Ins. by s. 3., ibid., (w.e.f. 22-6-1983) ] Notwithstanding anything contained in sub-section (1), no person, other than a person referred to in sub-section (3), shall acquire, have in his possession to carry, at any time, more than three firearms:
Provided that a person who has in his possession more firearms than three at the commencement of the Arms (Amendment) Act, 1983, may retain with him any three of such firearms and shall deposit, within ninety days from such, commencement the remaining firearms with the officer in charge of the nearest police station or, subject to the conditions prescribed for the purposes of sub-section(1) of section 21, with a licensed dealer or, where such person is a member of the armed forces of the Union, in a unit armoury referred to in that sub-section.
(3) Nothing contained in sub-section (2) shall apply to any dealer in firearms or to any member of a rifle club or rifle association licensed or recognised by the Central Government using a point 22 bore rifle or an air rifle for target practice.
(4) The provisions of sub-section (2) to (6) (both inclusive) of section 21 shall apply in relation to any deposit of firearms under the proviso to sub-section(2) as they apply in relation to the deposit of any arms or ammunition under sub-section (1) of that section.]
——————————
1. Section 3 re-numbered as sub-section (1) thereof by Act 25 of 1983, sec. 3 (w.r.e.f. 22-6-1983).
2. Ins. by Act 25 of 1983, sec. 3 (w.r.e.f. 22-6-19830).
*. 22nd day of June, 1983.
Section 4. Licence for acquisition and possession of arms of specified description in certain cases
If the Central Government is of opinion that having regard to the circumstances prevailing in any area it is necessary or expedient in the public interest that the acquisition, possession or carrying of arms other than firearms should also be regulated, it may, by notification in the Official Gazette, direct that this section shall apply to the area specified in the notification and thereupon no person shall acquire, have in his possession or carry in that area arms of such class or description as may be specified in that notification unless he holds in this behalf a licence issued in accordance with the provisions of this Act and the rules made there under.
Section 5. Licence for manufacture, sale, etc., of arms and ammunition
1[(1)] No person shall—
(a) 2[use, manufacture], sell, transfer, convert, repair, test or prove, or
(b) expose or offer for sale or transfer or have in his possession for sale, transfer, conversion, repair, test or proof,
any firearms or any other arms of such class or description as may be prescribed or any ammunition unless he holds in this behalf a licence issued in accordance with the provisions of this Act and the rules made thereunder.
3[***]
4[(2) Notwithstanding anything contained in sub-section (1), a person may, without holding a licence in this behalf, sell or transfer any arms or ammunition which he lawfully possesses for his own private use to another person who is entitled by virtue of this Act, or any other law for the time being in force to have, or is not prohibited by this Act or such other law from having in his possession such arms or ammunition:
Provided that no firearm or ammunition in respect of which a licence is required under section 3 and no arms in respect of which a licence is required under section 4 shall be sold or transferred by any person unless—
(a) he has informed in writing the district magistrate having jurisdiction or the officer in charge of the nearest police station of his intention to sell or transfer such firearms, ammunition or other arms and the name and address of the person to whom he intends to sell or transfer such firearms, ammunition or the other arms, and
(b) a period of not less than forty-five days has expired after the giving of such information.]
——————————-
1. Section 5 re-numbered as sub-section (1) thereof by Act 25 of 1983, sec. 4 (w.r.e.f. 22-6-1983).
2. Subs. by Act 42 of 1988, sec. 3, for “manufacture” (w.r.e.f. 27-5-1988).
3. Proviso omitted by Act 25 of 1983, sec. 4 (w.r.e.f. 22-6-1983).
4. Ins. by Act 25 of 1983, sec. 4 (w.r.e.f. 22-6-1983).
Section 6. Licence for the shortening of guns or conversion of imitation firearms into firearms
No person shall shorten the barrel of a firearm or convert an imitation firearm into a firearm unless he holds in this behalf a licence issued in accordance with the provisions of this Act and the rules made there under.
Explanation – In this section, the expression ‘imitation firearms” means anything which has the appearance of being a firearm, whether it is capable of discharging any shot, bullet or other missile or not.
Section 7. Prohibition of acquisition or possession, or of manufacture or sale, or prohibited arms or prohibited ammunition
No person shall –
(a) acquire, have in his possession or carry; or
(b) 1[ Note: Subs. by Act 42 of 1988, s. 4 (w.e.f. 27-5-1988) ] use, manufacture,] sell, transfer, convert, repair, test or prove ; or
(c) expose or offer for sale or transfer or have in his possession for sale, transfer, conversion, repair test for proof,
any prohibited arms or prohibited ammunition unless he has been specially authorised by the Central Government in this behalf.
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1. Subs. by Act 42 of 1988, sec. 4, for “manufacture” (w.r.e.f. 27-5-1988).
Section 8. Prohibition of sale or transfer of firearms not bearing identification marks
(1) No person, shall obliterate, remove, alter or forge any name, number or other identification mark stamped or otherwise shown on a firearm.
(2) No person shall sell or transfer any firearm which does not bear the name of the maker, manufacturer’s number or other identification mark stamped or otherwise shown thereon in a manner approved by the Central Government.
(3) Whenever any person has in his possession any firearms without such name, number or other identification mark on which such name, number or other identification mark has been obliterated, removed, altered or forged, it shall be presumed unless the contrary is proved, that he has obliterated, removed, altered or forged that name, number or other identification mark ;
Provided that in relation to a person who has in his possession at the commencement of this Act any firearms without such name, number or other identification mark stamped or otherwise shown thereon, the provisions of this sub-section shall not take effect until after the expiration of one year from such commencement.
Section 9. Prohibition of acquisition or possession by, or of sale or transfer to young persons and certain other persons of fire arms, etc,
(1) Notwithstanding anything in the foregoing provisions of this Act –
(a) No person,-
(i) Who has not completed the age of 1[twenty-one years], or
(ii) Who has been sentenced on conviction of any offence involving
violence or moral turpitude to imprisonment for 2any terms] at any time during a period of five years after the expiration of the sentence, or
(iii) Who has been ordered to execute under Chapter VIII of the3 Code of Criminal Procedure, 1973 (2of 1974)] a bond for keeping the peace or for good behavior, at any time during the term of the bond.
Shall acquire, have in his possession or carry any firearm or ammunition;
(b) No person shall sell or transfer any firearm or ammunition to , or convert, repair, test or prove any firearm or ammunition for, any other person whom he knows, or has reason to believe—
(i) To be prohibited under clause (a) from acquiring, having in his possession or carrying any firearm or ammunition, or
(ii) To be of unsound mind at the time of such sale or transfer, or such conversion, repair, test of proof.
(2) Notwithstanding anything in sub-clause (I) of clause (a) of sub-section (1), a person who has attained the prescribed age – limit may use under prescribed condition such firearms as may be prescribed in the course of his training in the use of such firearms:
Provided that different age –limits may be prescribed in relation to different types of firearms.
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1. Subs. by Act 25 of 1983, sec. 5, for “sixteen years” (w.e.f. 22-6-1983).
2. Subs. by Act 25 of 1983, sec. 5, for “a term of not less than six months” (w.r.e.f. 22-6-1983).
3. Subs. by Act 25 of 1983, sec. 5, for “Code of Criminal Procedure, 1898 (5 of 1898)” (w.r.e.f. 22-6-1983).
Section 10. Licence for import and export of arms , etc.
(1) No person shall bring into, or take out of India by sea, land or air any arms or ammunition unless he holds in this behalf a licence issued in accordance with the provisions of this Act and the rules made there under:
Provided that –
(a) a person who is entitled by virtue of this Act or any other law for the time being in force to have, or is not prohibited by this Act or such other law from having , in his possession any arms or ammunition, may without a licence in this behalf bring into, or take out of, India such arms or ammunition in reasonable quantities for his own private use;
(b) a person being a bona fide tourist belonging to any such country as the Central Government may, by notification in the Official Gazette, specify, who is not prohibited by the laws of that country from having in his possession any arms or ammunition, may, without a licence under this section but in accordance with such conditions as may be prescribed, bring with him into India arms and ammunition in reasonable quantities for use by him for purposes only of sport and for no other purpose.
Explanation-For purpose of clause (b) of this proviso, word “tourist” means a person who not being a citizen of India visits India for a period not exceeding six months with no other object than recreation, sight-seeing, or participation in a representative capacity in meetings convened by the Central Government or in international conferences, associations or other bodies.
(2) Notwithstanding anything contained in the proviso to subsection (1) where the collector of customs or any other officer empowered by the Central Government in this behalf has any doubt as to the applicability of clause (a) or clause (b) of that proviso to any person who claims that such clause is applicable to him or as to the reasonableness of the quantities of arms or ammunition in the possession of any person referred to in such clause, or as to the use to which such arms or ammunition in the possession of such person until he receives the orders of the Central Government in relation thereto.
(3) Arms and ammunition taken from one part of India to another by sea or air or across any intervening territory not forming a part of India, are taken out of, and brought into, India within the meaning of this section.
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1. Subs. by Act 22 of 1995, sec. 89, for “Collector of Customs” (w.e.f. 26-5-1995).
Section 11. Power to prohibit import or export of arms, etc.
The Central Government may, by notification in the Official Gazette prohibit the bringing into, or the taking out of, India, arms or ammunition of such classes and descriptions as may be specified in the notification.
Section 12. Power to restrict or prohibit transport of arms
(1) The Central Government may, by notification if the Official Gazette, –
(a) Direct that no person shall transport over India or any part thereof arms or ammunition of such classes and descriptions as may be specified in the notification unless he holds in this behalf a licence issued a accordance with provisions of this Act, and rules made there under; or
(b) Prohibit such transport altogether.
(2) Arms or ammunition trans-shipped at a seaport or an airport in India are transported within the meaning of this section.
Chapter III – PROVISIONS RELATING TO LICENCES
Section 13. Grant of licences
(1) An application for the grant of a licence under Chapter II shall be made to the licensing authority and shall be in such form, contain such particulars and be accompanied by such fee, if any, as may be prescribed.
(2) [ Note: Subs. by Act 25 of 1983, s. 6 (w.e.f. 22-6-1983) ] On receipt of an application, the licensing authority shall call for the report of the officer in charge of the nearest police station on that application, and such officer shall send his report within the prescribed time.
(2A) The licensing authority, after such inquiry, if any, as it may, consider necessary, and after considering the report received under sub-section(2), shall, subject to the other provisions of this Chapter, by order in writing either grant the licence or refuse to grant the same.
Provided that where the officer in charge of the nearest police station does not send his report on the application within the prescribed time, the licensing authority may, if it deem fit, make such order, after the expiry of the prescribed time, without further waiting for the report].
(3) The licensing authority shall grant –
(a) A licence under section 3 where the licence is required –
(i) By a citizen of India in respect of a smooth bore gun having a barrel of not less than twenty inches in length to be used for protection or sport or in respect of muzzle loading gun to be used for bona fide crop protection:
Provided that where having regard to the circumstances of any case, the licensing authority is satisfied that in muzzle loading gun will not be sufficient for crop protection, the licensing authority may grant a licence in respect of any other smooth bore gun a aforesaid for such protection, or
(ii) In respect of a point 22 bore rifle or an air rifle to be used for target practice by a member of rifle club or rifle association licensed or recognised by the Central Government ;
(b) A licence under section 3 in any other case or licence under section 4, section 5, section 6, section 10 or section 12, if the licensing authority is satisfied that the person by whom the licence is required has a good reason for obtaining the same.
Section 14. Refusal of licences
(1) Notwithstanding anything in section 13, licensing authority shall refuse to grant –
(a) a licence under section 3, section 4, or section 5 where such licence is required in respect of any prohibited arms or prohibited ammunition:
(b) A licence in any other case under Chapter II,-
(i) where such licence is required by a person whom then licensing authority has reason to believe-
(1) to be prohibited by this Act or by any other law for the time being in force from acquiring, having in his possession or carrying any arms or ammunition, or
(2) to be of unsound mind, or
(3) to be for any reason unfit for a licence under this Act, or
(ii) where the licensing authority deems it necessary for the sec
urity of the public peace or for public safety to refuse to grant such licence.
(2) The licensing authority shall not refuse to grant any licence to any person merely on the ground that such person does not own or possess sufficient property.
(3) Where the licensing authority refuses to grant a licence to any person it shall record in writing the reasons for such refusal and furnish to that person on demand a brief statement of the same unless in any case the licensing authority is of the opinion that it will not be in the public interest to furnish such statement.
Section 15. Duration and renewal of licence
(1) A licence under section3 shall, unless revoked earlier, continue in force for a period of three years from the dare on which it is granted:
Provided that such a licence may be granted for a shorter period if the person by whom the licence is required so desires or if the licensing authority for reasons to be recorded in writing considers in any case that the licence should be granted for a shorter period.
(2) A licence under any other provision of Chapter II shall, unless revoked earlier, continue in force for such period from the dare on which it is granted as the licensing authority may in each case determine.
(3) Every licence shall, unless the licensing authority for reasons to be recorded in writing otherwise decides in any case, be renewable for the same period for which the licence was originally granted and shall be so renewable from time to time, and the provisions of section 13 and 14 shall apply to the renewal of a licence as they apply to the grant thereof.
Section 16. Fees, etc., for licence
The fees on payment of which, the condition subject to which and the form in which a licence shall be granted or renewed shall be such as may be prescribed:
Provided that different fee, different conditions and different forms may be prescribed for different types of licences:
Provided further that a licence may contain in addition to prescribed conditions such other conditions as may be considered necessary by the licensing authority in any particular case.
Section 17. Variation, suspension and revocation of licences
(1) The licensing authority may very the conditions subject to which a licence has been granted except such of them as have been prescribed and may for that purpose require the licence holder by notice in writing to deliver-up the licence to it within such time as may be specified in the notice.
(2) The licensing authority may, on the application of the holder of a licence, also vary the conditions of the licence except such of them as have been prescribed.
(3) The licensing authority may by order in writing suspend a licence for such periods it thinks fit or revoke a licence –
(a) if the licensing authority is satisfied that the holder of the licence is prohibited by this Act or by any other law for the time being in force, from acquiring, having in his possession or carrying any arms or ammunition, or is of unsound mind, or is for any reason unfit for a licence under this Act; or
(b) if the licensing authority deems it necessary for the security of the public peace or for public safety to suspend or revoke the licence; or
(c) if the licence was obtained by the suppression of material information or on the basis of wrong information provided by the holder of the licence or any other person on his behalf at the time of applying for it; or
(d) if any of the conditions of the licence has been contravened; or
(e) if the holder of the licence has failed to comply with a notice under sub-section (1) requiring him to deliver-up the licence.
(4) The licensing authority may also revoke a licence on the application of the holder thereof.
(5) Where the licensing authority makes an order varying a licence under sub-section (1) or an order suspending or revoking a licence under sub-section (3), it shall record in writing the reasons therefor and furnish tot he holder of the licence on demand a brief statement of the same unless in any case the licensing authority is of the opinion that it will not be in the public interest to furnish such statement.
(6) The authority to whom the licensing authority is subordinate may by order in writing suspend for revoke a licence on any ground on which it may be suspended or revoked by the licensing authority; and the foregoing provisions of this section shall, as far as may be, apply in relation to the suspension or revocation of a licence by such authority.
(7) A court conviction the holder of a licence of any offence under this Act or the rules made there under may also suspend or revoke the licence :
Provided that if the conviction is set aside on appeal or otherwise, the suspension or revocation shall become void.
(8) An order of suspension or revocation under sub-section (7) may also be made by an appellate court or by the High Court when exercising its powers of revision.
(9) The Central Government may, by order in the Official Gazette, suspend or revoke or direct any licensing authority to suspend or revoke all or any licences granted under this Act throughout India or any part thereof.
(10) On the suspension or revocation of a licence under this section the holder thereof shall without delay surrender the licence to the authority by whom it has been suspended or revoked or to such other authority as may be specified in this behalf in the order of suspension or revocation.
Section 18. Appeals
(1) Any person aggrieved by an order of the licensing authority refusing to grant a licence or varying the conditions of a licence or by an order of the licensing authority is subordinate, suspending or revoking a licence may prefer an appeal against that order to such authority (hereinafter referred to as the appellate authority) and within such period as may be prescribed:
Provided that no appeal shall lie against any order made by, or under the direction of the Government. (1) No appeal shall be admitted if it is preferred after the expiry of the period prescribed therefore:
Provided that an appeal may be admitted after the expiry of the period prescribed therefore if the appellant satisfies the appellate authority that he had sufficient cause for not preferring the appeal within that period.
(3) The period prescribed for an appeal shall be computer in accordance with the provision of the Indian Limitation Act, 1908 (9 of 1908), with respect to the computation of periods of limitation there under .
(4) Every appeal under this section shall be made by a petition in writing ahs shall be accompanied by a brief statement of the reasons for the order appealed against where such statement has been furnished to the appellant and by such fee as may be prescribed.
(5) In disposing of an appeal the appellate authority shall follow such procedure as may be prescribed :
Provided that no appeal shall be disposed of unless the appellant has been given a reasonable opportunity of being heard.
(6) The order appealed against shall, unless the appellate authority conditionally or unconditionally directs otherwise, be in force pending the disposal of the appeal against such order.
(7) Every order of the appellate authority confirming, modifying or reversing the order appealed against shall be final.
Chapter IV – POWERS AND PROCEDURE
Section 19. Power to demand production of licence, etc.
(1) Any police officer or any other officer specially empowered in this behalf by the Central Government may demand the production of his licence from any person who is carrying any arms or ammunition.
(2) If the person upon whom a demand is made refuses for fails to produce the licence or to show that he is entitled by virtue of this Act or any other law for the time being in force to carry such arms or ammunition without a licence, the officer concerned may require him to give his name and address and if such officer considers it necessary, seize from t hat person the arms or ammunition which he is carrying.
(3) If that person refuses to give his name and address or if the officer concerned suspects that person of giving a false name or address or of intending to abscond, such officer may arrest him without warrant
Section 20. Arrest of persons conveying arms, etc., under suspicious circumstances
Where any person found carrying or conveying any arms or ammunition whether covered by a licence or not, in such manner or under such circumstances as to afford just grounds of suspicion that the same are or is being carried by him with intent to use them, or that the same may be used, for any unlawful purpose any magistrate, any police officer or any other public officer or any other public servant or any person employed or working, upon a railway, aircraft, vessel, vehicle or any other means of conveyance, may arrest him without warrant and seize from him such arms or ammunition.
Section 21. Deposit of arms, etc., on possession ceasing to be lawful
(1) Any person having in his possession any arms or ammunition the possession whereof has, in consequence of the expiration of the duration of a licence or of the suspension or revocation of a licence or by the issue of a notification under section 4 or by any reason whatever, ceased to be lawful, shall without unnecessary delay deposit the same either with the officer in charge of the nearest police station or subject to such conditions as may be prescribed, with a licensed dealer or where such person is a member of the armed force of the Union, in a unit armory.
Explanation –In this sub-section “unitarmoury” includes and armory in a ship or establishment of the Indian Navy.
(2) Where arms or ammunition have or has been deposited under sub-section (1) the depositor or in the case of his death, his legal representative, shall, at any time before the expiry of such period as may be prescribed, be entitled-
(a) to receive back anything so deposited on his becoming entitled by virtue of this Act or any other law for the time being in force to have the same in his possession, or
(b) to dispose, or authorise the disposal, of anything so deposited by sale or otherwise to any person entitled by virtue of this Act or any other law for the time being in force to have, or not prohibited by this Act or such other law from having, the same in his possession and to receive the proceeds of any such disposal :
Provided that nothing in this sub-section be deemed to authorise the return or disposal of anything of which confiscation has been directed under section 32.
(3) All things deposited and not received back or disposed of under sub-section (2) within the period therein referred to shall be forfeited to Government by order of the district magistrate :
Provided that in the case of suspension of a licence no such forfeiture shall be ordered in respect of a thing covered by the licence during the period of suspension.
(4) Before making an order sub-section (3) the district magistrate shall by notice in writing to be served upon the depositor or in the case of his death, upon his legal representative, in the prescribed manner, require him to show cause within thirty days from the service of the notice why the things specified in the notice should not be forfeited.
(5) After considering the cause, if any, shown by the depositor or as the case may be, his legal representative, district magistrate shall pass such order as he thinks fit.
(6) The Government may any time return to the depositor or his legal representative things forfeited to it or the proceeds of disposal thereof wholly or in part.
Section 22. Search and seizure by magistrate
(1) Whenever any magistrate has reason to believe –
(a) That any person residing within the local limits of his jurisdiction has in his possession any arms or ammunition for any unlawful purpose, or
(b) That such person cannot be left in the possession of any arms or ammunition without danger to the public peace or safety, the magistrate may, after having recorded the reasons for his belief, cause a search to be made of the house or premises occupied by such arms or ammunition are or is to be found and may have such arms or ammunition, if any, seized and detain the same in sate custody for such period as he thinks necessary, although that person may be entitled by virtue of this Act or any other law for the time being in force to have the same in his possession.
(2) Every search under this section shall be conducted by or in the presence of a magistrate or by or in the presence of some officer specially empowered in this behalf by the Central Government.
Section 23. Search of vessels, vehicles for arms, etc.
Any magistrate, any police officer or any other officer specially empowered in this behalf by the Central Government, may for the purpose of ascertaining whether any contravention of this Act or the rules made there under is being or is likely to be committed, stop and search any vessel, vehicle or other means of conveyance and seize any arms or ammunition that may be found therein along with such vessel, vehicle or other means of conveyance.
Section 24. Seizure and detention under orders of the Central Government
The Central Government may at any time order the seizure of any arms or ammunition in the possession of any person, notwithstanding that such person is entitled by virtue of this Act or any other law for the time being in force to have the same in his possession, any may detain the same for such period as it thinks necessary for the public peace and safety.
Section 24 A. Prohibition as to possession of notified arms in disturbed areas, etc.
[ Note: Ss. 24A and 24B Ins. by Act 25 of 1983, s. 7 (w.e.f 22-6-1983) ] (1) Where the Central Government is satisfied that there is extensive disturbance of public peace and tranquility or imminent danger of such disturbance in any area and that for the prevention of offences involving the use or arms in such area, it is necessary or expedient so to do, it may by notification in the Official Gazette-
(a) Specify the limits of such area;
(b) Direct that before the commencement for the period specified in the notification (which period shall be a period commencing from a date not earlier than the fourth day after the date of publication of the notification in the Official Gazette), every person having in his possession in such area any arms of such description as may be specified in the notification (the arms so specified being hereafter in this section referred to as notified arms), shall deposit the same before such commencement in accordance with the provision of section 21 and for this purpose the possession by such person of any notified arms, shall, notwithstanding anything contained in any other provision of this Act (except section 41) or in any other law for the time being in force, as from the date of publication such notification in the Official Gazette be deemed to have ceased to be lawful;
(c) Declare that as from the commencement of, and until the expiry of, the period specified in the notification, it shall not be lawful for any person to have in his possession in such area any notified arms;
(d) Authorise any such office subordinate to the Central Government or a State Government may be specified in the notification.-
(i) To search at any time during the period specified in the notification any person in, or passing through, or any premises in, or any animal or vessel or vehicle or other conveyance of whatever nature in or passing through, or any receptacle or other container of whatever nature in or passing through in, such area if such officer has been to believe that any notified arms are secreted by such person or in such premises or on such animal or in such vessel, vehicle or other conveyance or in such receptacle or other container;
(ii) To seize at any time during the period specified in the notification any notified arms in the possession of any person in such area or discovered through a search under sub-clause (I), and detain the same during the period specified in the notification.
(2) The period specified in a notification issued under sub-section (1) in respect of any area shall not, in the first instance, exceed ninety days, but in the Central Government may amend such notification to extend such period from time to time by any period not exceeding ninety days at any one time if, in the opinion of that Government, there continues to be in such area such disturbance of public peace and tranquility as if referred to in sub-section (1) or imminent danger thereof and that for the prevention of offences involving the sue of arms in such area it is necessary or expedient so to do.
(3) The provision of the Code of Criminal Procedure, 1973 (2 of 1974), relating to searches and seizures shall, so far as may be, apply to any search or seizure made under sub-section.-(1).
(4) For the purposes of this section,-
(a) “Arms” includes ammunition;
(b) Where the period specified in a notification, as originally issued under sub-section (1), is extended under sub-section (2), then, in relation to such notification, reference in sub-section (1) to “the period of specified in the notification” shall be construed as references to the period as so extended.
Section 24 B. Prohibition as to carrying of notified arms in or through public places in disturbed areas, etc.
(1) Where the Central Government is satisfied that there is extensive disturbance in any area and that for the prevention of offences involving the sue of arms in such area and that for the prevention of offences involving the use of arms in such area it is necessary or expedient so to do –
It may, by notification in the Official Gazette,-
(a) Specify the limits of such area;
(b) Direct that during the period specified in the notification (which period commencing from a date not earlier than the second day after the date of publication of the notification in the Official Gazette), no person shall carry or otherwise have in his possession any arms of such description as may be specified in the notification (the arms so specified being hereafter in this section referred to as notified arms) through or in any public place in such area;
(c) Authorise any such officer subordinate to the Central Government or a State Government as may be specified in the notification,-
(i) To search at any time during the period specified in the notification any person in or passing through, or any premises in or forming part of, of any animal or vessel or vehicle or other conveyance of whatever nature, in or passing through, or any receptacle or other container of whatever nature in, any public place in such area if such officer has reason to believe that any notified arms are secreted by such person or in such premises or on such animal or in such person or in such premises or on such animal or in such vessel, vehicle or other conveyance or in such receptacle or other container;
(ii) To seize at any time during the period specified in the notification any notified arms being carried by or otherwise in the possession of any person, through a search under such-clause (I), and detain the same during the period specified in the notification.
(2) The period specified in a notification issued under sub-section (1) in respect of any area shall not, in the first instance, exceed ninety days, but the Central Government may amend such notification to extend such period from time to time by any period not exceeding ninety days at any one time if, in the opinion of that Government, there continues to be in such area such disturbance of public peace and tranquility as is referred to in sub-section (1) or imminent danger thereof and that for the prevention of offences involving the use of arms in such area it is necessary or expedient so to do.
(3) The provisions of the Code of Criminal Procedure, 1973, (2 of 1974), relating to searches and seizures shall, so far as may be, apply to any search or seizure made under sub-section (1).
(4) For the purposes of this section,-
(a) “Arms” includes ammunition;
(b) “Public place” means any place intended for use by, or accessible to, the public or any section of the public ; and
(c) Where the period specified in a notification, as originally issued under sub-section (1), is extended under sub-section (2), then, in relation to such notification, reference in sub-section (I) to “the period specified in the notification” shall be construed as reference to the period as so extended.]
Chapter V – OFFENCES AND PENALTIES
Section 25. Punishment for certain offences- [Note: Subs. by Act 25 of 1983, s. 8 (w.e.f. 22-6-1983) ]
(1) Whoever –
(a) Manufactures sells, transfers, converts, repairs, tests or proves, or exposes or offers for sale or transfer, or has in his possession for sale, transfer, conversion, repair ,test or proof, any arms or ammunition in contravention of section 5; or
(b) Shortens the barrel of a firearm or converts an imitation firearm into a firearm in contravention of section 6; or
(c) [ Note: Omitted by Act 42 of 1988, s. 5 (w.e.f. 27-5-1988) ]
(d) Bring into, or takes out of India, any arms or ammunition of any class or description in contravention of section 11, shall be punishable with imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine.
[ (1A) [ Note: Renumbered and Ins. by s. 5, ibid. (w.e.f. 27-5-1988) Whoever acquires, has in his possession or carries any prohibited arms or prohibited ammunition in contravention of section 7 shall be punishable with imprisonment for a term which shall not be less than five years, but which may extend to ten years and shall also be liable to fine.
[(1AA) Whoever manufactures, sells, transfers, converts, repairs, tests or proves, or exposes or offers for sale or transfer or has in his possession for sale, transfer, conversion, repair, test or proof, any prohibited arms or prohibited ammunition in contravention of section 7 shall be punishable with imprisonment for life and shall also be liable to fine.]
[(1AAA)] [ Note: Renumbered and Ins. by s. 5, ibid. (w.e.f. 27-5-1988) Whoever has in contravention of a notification issued under section 24A in his possession or in contravention of a notification issued under section 24B carries or otherwise has in his possession, any arms or ammunition shall be punishable with imprisonment for a term whish shall not be less than [ [Note: Subs. by Act 39 of 1985, s. 2 for certain words.] three years, but which may extend to seven years] shall also be liable to fine.
(IB) Whoever-
(a) Acquires, has in his possession or carries any firearm or ammunition in contravention of section3, or
(b) Shortens the barrel of a firearm or converts an imitation firearm in any place specified by notification under section 4 any arms of such class or description as has been specified in that notification in contravention of that section ; or
(c) Sells or transfer any firearm which does not bear the name of the maker stamped or otherwise shown thereon as required by sub-section (2) of section 8 or does any act in contravention of sub-section (1) of that section; or
(d) Being a person to whom sub-clause (ii) or sub-section (iii) of clause (a) of sub-section (1) of section 9 applies, acquires, has in his possession or carries any firearms or ammunition contravention of that section;
(e) Sells or transfers, or converts, repairs, tests or proves any firearm or ammunition in contravention of clause (b) of sub-section (1) of section 9; or
(f) Brings into, or takes out of, India, any arms or ammunition in contravention of section 10; or
(g) Transport any arms or ammunition in contravention of section 12; or
(h) Fails to deposit arms or ammunition as required by sub-section (2) of section 3, or sub-section (1) of section 21; or
(i) Being a manufacturer of, or dealer in, arms or ammunition, fails, on being required to do so by rules made under section 44, to maintain a record or account or to make therein all such entries as are required by such rules or intentionally makes a false entry therein or prevents or obstructs the inspection of such record or account or the making of copies of entries therefrom or prevents or obstructs the entry into any premises or other place where arms or ammunition are or is manufactured or kept or intentionally fails to exhibit or conceals such arms or ammunition or refuses to point out where the same are or is manufactured or kept,
Shall be punishable with imprisonment for a term which shall not be less than [ [Note: Subs. by Act 39 of 1985, s. 2 for “six months”.] one year] but which may extend to three years and shall also be liable to fine:
Provided that Court may for any adequate and special reasons to be recorded in the judgment impose a sentence of imprisonment for a term of less than [one year]
(IC) [ Note : Ins. by s. 2, ibid.] Notwithstanding anything contained in sub-section (1B), whoever commits an offence punishable under that sub-section in any disturbed are shall be punishable with imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine.
Explanation –For the purposes of this sub-section, :”disturbed area” means any area declared to be a disturbed area under any enactment, for the time being in force, making provision for the suppression of disorder and restoration and maintenance of public order, and includes any areas specified by notification under section 24A or section 24B.]
(2) Whoever being a person to whom sub-clause (I) of clause (a) of sub-section (1) of section 9 applies, acquires, has in his possession or carries any firearm or ammunition in contravention of that section shall be punishable with imprisonment for term which may extend to one year, or with fine or with both.
(3) [ Note: Subs. by Act 25 of 1983, s. 8 (w.e.f. 22-6-1983) ] Whoever sells or transfers any firearm, ammunition or other arms –
(i) Without informing the district magistrate having jurisdiction or the officer in charge of the nearest police station, of the intended sale or transfer of the firearm, ammunition or other arms; or
(ii) Before the expiration of the period of forty five days from the date of giving such information to such district magistrate or the officer in charge of the police station.
In contravention of the provisions of clause (a) or clause (b) of the proviso to sub-section (2) of section 5, shall be punishable with imprisonment for a term which may extend to five hundred rupees, or with both].
(4) Whoever fails to deliver-up a licence when so required by the licensing authority under sub-section (1) of section 17 for the purpose of varying the conditions specified in the licence or fails to surrender a licence to the appropriate authority under sub-section (10) of that section on its suspension or revocation shall be punishable with imprisonment for a term which may extend to six months, or with fine of an amount which may extend to five hundred rupees, or with both.
(5) Whoever, when required under section 19 to give his name and address, rupees, refuses to give such name and address to gives a name or address which subsequently transpires to be false shall be punishable with imprisonment for a term which may extend to six months, or with fine of an amount which may extend to two hundred rupees, or with both.
Section 26. Secret contraventions
[ Note: Subs. by Act 25 of 1983, s.9 (w.e.f. 22-6-1983) ] (1) Whoever does any act in contravention of any of the provisions of section 3,4,10 or 12 in such manner as to indicate an intention that such act may not be known to any public servant or to any person employed or working upon a railway, aircraft, vessel, vehicle or any other means or conveyance, shall be punishable with imprisonment for a term which shall not be less than six months but which may extend to seven years and also with fine.
(2) Whoever does any act in contravention of any of the provisions of section 5,6,7 or 11 in such manner as to indicate an intention that such act may not be known to any public servant or to any person employed or working upon a railway, aircraft, vessel, vehicle or any other means of conveyance, shall be punishable with imprisonment for a term which shall not less than five years but which may extend to ten years and also with fine.
(3 ) Whoever on any search being made under section 22 conceals or attempts to conceal any arms or ammunition, shall be punishable with imprisonment for a term which may extend to ten years and also with fine.
Section 27. Punishment for using arms, etc.
[ Note: Subs. by Act 42 of 1988, s. 6 (w.e.f. 27-5-1988) ] (1) Whoever uses any arms or ammunition in contravention of section 5 shall be punishable with imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine.
(2) Whoever uses any prohibited arms or prohibited ammunition in contravention of section 7 shall be punishable with imprisonment for a term which shall not be less than seven years but which may extend to imprisonment for life and shall also be liable to fine.
(3) [Whoever uses any prohibited arms or prohibited ammunition or does any act in contravention of section 7 and such use or act results in the death of any other person, shall be punishable with death.]
Section 28. punishment for use and possession of firearms of limitation firearms in certain cases
Whoever makes or attempts to make any use whatsoever or a firearm or an imitation firearm with intent to resist or prevent the lawful arrest or detention of himself or any other person shall be punishable with imprisonment for a term which may extend to seven years [ [ Note: Subs. by Act 25 of 1983, s. 10 (w.e.f 22-6-1983). ] and with fine].
Explanation-In this section the expression “imitation firearm” has the same meaning as in section 6.
Section 29. Punishment for knowingly purchasing arms, etc., from unlicensed person or for delivering arms, etc., to person not entitled to possess the same
Whoever –
(a) Purchase any firearms or any other arms of such class or description as may be prescribed or any ammunition from any other person knowing that such other person is not licensed or authorised under section 5; or
(b) Delivers any arms or ammunition into the possession of another person is entitled by virtue of this Act or any other law for the time being in force to have, and is not prohibited by this Act or such other law from having, in his possession the same, shall be punishable with imprisonment for a term which may extend to[ [ Note: Subs. by s. 11, ibid., (w.e.f. 22-6-1983) ] three years, or with fine, or with both].
Section 30. Punishment for contravention of licence or rule
Whoever contravenes any condition of a licence or any provision of this Act or any rule made there under, for which no punishment is porvide4d elsewhere in this Act shall be punishable with imprisonment for a term which may extend to [ [ Note: Subs. by Act 25 of 1983, s. 12 (w.e.f. 22-6-1983) ] six months], or with fine which may extend to [ [ Note: Subs. by Act 25 of 1983, s. 12 (w.e.f. 22-6-1983) two thousand] rupees, or with both.
Section 31. Punishment for subsequent offences
Whoever having been convicted of an offence under this Act is again convicted of an offence under this Act shall be punishable with double the penalty provided for the letter offence.
Section 32. Power to confiscate
(1) When any person is convicted under this Act of any offence committed by him in respect of any arms or ammunition, it shall be in the discretion of the convicting Court further to direct that the whole or any portion of such arms or ammunition, and any vessel, vehicle or other means of conveyance and any receptacle shall be confiscated:
Provided that if the conviction is set aside on appeal or otherwise, the order of confiscation shall become void.
(2) An order of confiscation may also be made by the appellate Court or by the High Court when exercising its powers of revision.
Section 33. Offence by companies
(1) Whenever 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, or 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 under this Act if he proves that the offence was committed without his knowledge and that he exercised all due diligence to prevent the commission of such office.
(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 or the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the offence 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 or individuals; and
(b) “Director”, in relation to a firm, means a partner in the firm.
Chapter VI – MISCELLANEOUS
Section 34. Sanction of the Central Government for Warehousing of Arms
Notwithstanding anything contained in the [ [ Note: Subs. by Act 25 of 1983, s. 13 (w.e.f. 22-6-1983) ] Customs Act, 1962, (52 of 1962)] no arms or ammunition shall be deposited in any warehouse licensed under [[ Note: Subs. by Act 25 of 1983, s. 13 (w.e.f. 22-6-1983) ] section 58] of that Act without the sanction of the Central Government.
Section 35. Criminal responsibility of person in occupation of premises in certain cases
Where any arms or ammunition in respect of which any offences under this Act has been or is being committed are or is found in any premises, vehicle or other place in the joint occupation or under the joint control of several persons, each of such persons in respect of whom there is reason to believe that he was aware of the existence of the arms or ammunition in the premises, vehicle or other place shall, unless the contrary is proved, be liable for that offence in the same manner as if it has been or is being committed by him alone.
Section 36. Information to be given regarding certain offences
(1) Every person aware of the commission of any offence under this Act shall, in the absence of reasonable excuse the burden of proving which shall lie upon such person, give information of the same to the officer in charge of the nearest police station or the magistrate having jurisdiction.
(2) Every person employed or working upon any railway, aircraft, vessel, vehicle or other means of conveyance shall, in the absence of reasonable excuse the burden of proving which shall, in the absence of reasonable excuse the burden of proving which shall lie upon such person, give information to the officer in charge of the nearest police station regarding any box, package or bale in transit which he may have reason to suspect contains arms or ammunition in respect of which an offence under this Act has been or is being committed.
Section 37. Arrest and searches- Save as otherwise provided in this Act,
(a) All arrests and searches made under this act or under any rules made there under shall be carried out in accordance with the provisions of the [ [Note: Subs. by Act 25 of 1983, s. 14, (w.e.f. 22-6-1983) ] Code of Criminal Procedure, 1973 (2 of 1974)], relating respectively to arrests and searches made under that Code;
(b) Any person arrested and any arms or ammunition seized under this Act by a person not being a magistrate or a police officer shall be delivered without delay to the officer in charge of the nearest police station and that officer shall-
(i) Either release that person on his executing a bond with or without sureties to appear before a magistrate and keep the things seized in the custody till the appearance of that person before the magistrate, or
(ii) Should that person fail to execute the bond and to furnish, if so required, sufficient sureties, produce that person and those things without delay before the magistrate.
Section 38. Offences to be cognizable
Every offence under this Act shall be cognizable within the meaning of the [ [ Note: Subs. by Act 25 of 1983, s. 14 (w.e.f. 22-6-1983) ] Code of Criminal Procedure, 1973 (2 of 1974)].
Section 39. Previous sanction of the district magistrate necessary in certain case
No prosecution shall be instituted against any person in respect of any offence under section 3 without the previous sanction of the district magistrate.
Section 40. Protection of action taken in good faith
No suit, prosecution or other legal proceeding shall lie against any person for anything which is in good faith done or intended to be done under this Act.
Section 41. Power to exempt
Where the Central Government is of the opinion that it is necessary or expedient in the public interest so to do, it may, by notification in he Official Gazette and subject to such conditions, if any, as it any specify in the notification,-
(a) [ Note: Subs. by Act 25 of 1983, s. 13 (w.e.f. 22-6-1983) ] [exempt any person or class of person (either generally or in relation to such description of arms and ammunition as may be specified in the notification)], or exclude any description of arms or ammunition, or withdraw any part of India, from the operation of all or any or the provisions of this Act; and
(b) As often as may be, cancel any such notification and again the subject, by a like notification, the person or class or persons or the description of arms and ammunition or the part of India to the operation of such provisions.
Section 42. Power to take census of fire-arms
(1) The Central Government may, by notification in the Official Gazette, direct a census to be taken of all firearms in any area and empower any officer of Government to take such census.
(2) On the issue of any such notification all persons having in their possession any firearms in that area shall furnish to the officer concerned such information as he may require in relation thereto and shall produce before him such firearms if he so requires.
Section 43. Power to delegate
(1) The Central Government may, by notification in the Official Gazette, direct that any power or function which may be exercised or performed by it under this Act other than the power under Section 41 or the power under section 44 may, in relation to such matters and subject to such conditions, if any, as it may specify in the notification, be exercised or performed also by –
(a) Such officer or authority subordinate to the Central Government, or
(b) Such State Government or such officer or authority subordinate to the State Government as may be specified in the notification.
(2) Any rules made by the Central Government under this Act may confer powers or impose duties or authorise the conferring of powers or imposition of duties upon any State Government or any officer or authority subordinate thereto.
Section 44. Power to make rules
(1) The Central government 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, such rules may provide for all or any of the following matters, namely :-
(a) The appointment, jurisdiction, control and functions of licensing authorities 1 including the areas and the categories of arms and ammunition for which they may grant licences] ;
(b) The form and particulars of application for the grant or renewal of a licence and where the application is for the renewal of a licence, the time within which it shall be made ;
(c) The form in which and the conditions subject to which any licence may be granted or refused, renewed, varied, suspended or revoked ;
(d) Where no period has been specified in this Act, the period for which any licence shall continue to be in force ;
(e) The fees payable in respect of any application for the grant or renewal of a licence and in respect of any licence granted or renewed and the manner of paying the same ;
(f) The manner in which the maker’s name, the manufacturer’s number or other identification mark of a firearm shall be stamped or otherwise shown thereon ;
(g) The procedure for the test or proof of any firearms ;
(h) The firearms that may be used in the course of training, the age limits of persons who may use them and the conditions for their use by such persons ;
(i) The authority to whom appeals may be preferred under section 18, the procedure to be followed by such authority and the period within which appeals shall be preferred, the fees to be paid in respect of such appeals and the refund of such fees ;
(j) The maintenance of records or accounts of anything done under a licence other than a licence under section 3 or section 4, the form of, and the entries ot be made in, such records or accounts and the exhibition of such records or accounts to any police officer or to any officer of Government empowered in this behalf ;
(k) The entry and inspection by any police officer or by any officer of Government empowered in this behalf of any premises or other place in which arms or ammunition are or is manufactured or in which arms or ammunition are or is kept by a manufacturer of or dealer in such arms or ammunition and the exhibition of the same to such officer ;
(l) The conditions subject to which arms or ammunition may be deposited with a licensed dealer or in a unit armory as required by sub-section (1) of section 21 and the period on the expiry of which the things so deposited may be forfeited.
(m) Any other matter is to be, or may be, prescribed.
(3) Every rule made under this section 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 2two 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. Ins. by Act 25 of 1983, sec. 16 (w.r.e.f. 22-6-1983).
2. Subs. by Act 25 of 1983, sec. 16, for certain words (w.r.e.f. 22-6-1983).
Section 45. Act not to apply in certain cases
Nothing in this Act shall apply to –
(a) Arms or ammunition on board any sea-going vessel or any aircraft and forming part of the ordinary armament or equipment of such vessel or aircraft ;
(b) The acquisition, possession or carrying, the manufacture, repair, conversion, test or proof, the sale or transfer or the import, export or transport of arms or ammunition –
(i) By or under orders of the Central Government, or
(ii) By a public servant in the course of his duty as such public servant, or
(iii) By a member of the National Cadet Corps raised and maintained under the National Cadet Corps Act, 1948 (31 of 1948), or by any officer, enrolled person of the Territorial Army raised and maintained under the Territorial Army Act, 1948 (56 of 1948) or by any member of any other forces raised and maintained or that may hereafter be raised and maintained under any Central Act, or by any member of such other forces as the Central Government may, by notification in the Official Gazette, specify, in the course of his duty as such member, officer or enrolled persons.
(c) Any weapon of an obsolete pattern or of antiquarian value or in disrepair which is not capable of being used as a firearm either with or without repair ;
(d) The acquisition, possession or carrying by a person of minor parts of arms or ammunition which are not intended to be used along with complementary parts acquired or possessed by that or any other person.
Section 46. Repeal of Act 11 of 1878.
(1) The Indian Arms Act, 1878, is hereby repealed.
(2) Notwithstanding the repeal of the Indian Arms Act, 1878 (11 of 1878), and without prejudice to the provisions of sections 6 and 24 of the General Clauses Act, 1897 (10 of 1897), every licence granted or renewed under the first mentioned Act and in force immediately before the commencement of this Act shall, unless sooner revoked, continue in force after such commencement for the unexpired portion of the period for which it has been granted or renewed.
November 30, 2014
Chapter I – Preliminary
The following Act of Parliament received the assent of the President on the 11th September, 2003, and is hereby published for general information: -
(ACT NO. 45 OF 2003)
[11th September, 2003]
An Act to provide for the constitution of a Central Vigilance Commission to inquire or cause inquiries to be conducted into offences alleged to have been committed under the Prevention of Corruption Act, 1988 by certain categories of public servants of the Central Government, corporations established by or under any Central Act, Government companies, societies and local authorities owned or controlled by the Central Government and for matters connected therewith or incdental thereto.
Be it enacted by Parliament in the Fifty – fourth year of the Republic of India as follows:-
Section 1. Short title.
This Act may be called the Central Vigilance Commission Act, 2003.
Section 2. Definitions.
In This Act, unless the context otherwise requirs,:-
(a) “Central Vigilance Commissioner” means the Central Vigilance Commissioner appointed under sub-section (1) of section 4;
(b) “Commission” means the Central Vigilance Commission constituted under sub-section (1) of section 3;
(c) “Delhi Special Police Establishment” means the Delhi Special Police Establishment constituted under sub-section (1) of section 2 of the Delhi Special Police Establishment Act, 1946; (25 of 1946)
(d) “Government company” means a Government company within the meaning of the Companies Act, 1956; (1 of 1956)
(e) “prescribed” means prescribed by rules made under this Act;
(f) “Vigilance Commissioner” means a Vigilance Commissioner appointed under sub-section (1) of section 4.
Chapter II – THE CENTRAL VIGILANCE COMMISSION
Section 3. Constitution of Central Vigilance Commission.
(1) There shall be constituted a body to be known as the Central Vigilance Commission to exercise the powers conferred upon, and to perform the functions assigned to it under this Act and the Central Vigilance Commission constituted under sub-section (1) of section 3 of the Central Vigilance Commission Ordinance, 1999 which ceased to operate, and continued under the Government of India in the Ministry of Personnel, Public Grievances and Pensions (Department of Personnel and Training) Resolution No. 371/20/99-AVD. III, dated the 4th April, 1999 as amended vide Resolution of even number, dated the 13th August, 2002 shall be deemed to be the Commission constituted under this Act. (Ord. 4 of 1999).
(2) The Commission shall consist of—
(a) a Central Vigilance Commissioner — Chairperson;
(b) not more than two Vigilance Commissioners — Members.
(3) The Central Vigilance Commissioner and the Vigilance Commissioners shall be appointed from amongst persons—
(a) who have been or are in an All-India Service or in any civil service of the Union or in a civil post under the Union having knowledge and experience in the matters relating to vigilance, policy making and administration including police administration; or
(b) who have held office or are holding office in a corporation established by or under any Central Act or a Government company owned or controlled by the Central Government and persons who have expertise and experience in finance including insurance and banking, law, vigilance and investigations:
Provided that, from amongst the Central Vigilance Commissioner and the Vigilance Commissioners, not more than two persons shall belong to the category of persons referred to either in clause (a) or clause (b):
(4) The Central Government shall appoint a Secretary to the Commission on such terms and conditions as it deems fit to exercise such powers and discharge such duties as the Commission may by regulations specify in this behalf.
(5) The Central Vigilance Commissioner, the other Vigilance Commissioners and the Secretary to the Commission appointed under the Central Vigilance Commission Ordinance, 1999 or the Resolution of the Government of India in the Ministry of Personnel, Public Grievances and Pensions (Department of Personnel and Training) Resolution No. 371/20/99-AVD. III, dated the 4th April, 1999 as amended vide Resolution of even number, dated the 13th August, 2002 shall be deemed to have been appointed under this Act on the same terms and conditions including the term of office subject to which they were so appointed under the said Ordinance or the Resolution, as the case may be. (Ord. 4 of 1999).
Explanation.- For the purposes of this sub-section, the expression “term of office” shall be construed as the term of office with effect from the date the Central Vigilance Commissioner or any Vigilance Commissioner has entered upon his office and continued as such under this Act.
(6) The headquarters of the Commission shall be at New Delhi.
Section 4. Appointment of Central Vigilance Commissioner and Vigilance Commissioners.
(1) The Central Vigilance Commissioner and the Vigilance Commissioners shall be appointed by the President by warrant under his hand and seal:
Provided that every appointment under this sub-section shall be made after obtaining the recommendation of a Committee consisting of—
(a) the Prime Minister — Chairperson;
(b) the Minister of Home Affairs — Member;
(c) the Leader of the Opposition in the House of the People —Member.
Explanation.- For the purposes of this sub-section, “the Leader of the Opposition in the House of the People” shall, when no such Leader has been so recognised, include the Leader of the single largest group in opposition of the Government in the House of the People.
(2) No appointment of a Central Vigilance Commissioner or a Vigilance Commissioner shall be invalid merely by reason of any vacancy in the Committe.
Section 4A. Superintendence and administration of Special Police Establishment.
(1) The superintendence of the Delhi Special Police Establishment in so far as it relates to investigation of offences alleged to have been committed under the Prevention of Corruption Act, 1988, shall vest in the Commission. (49 of 1988)
(2) Save as otherwise provided in sub-section (1), the superintendence of the said police establishment in all other matters shall vest in the Central Government.
(3) The administration of the said police establishment shall vest in an officer appointed in this behalf by the Central Government (hereinafter referred to as the Director) who shall exercise in respect of that police establishment such of the powers exercisable by an Inspector-General of Police in respect of the police force in a State as the Central Government may specify in this behalf.
Section 4B. Committee for appointment of Director.
(1) The Central Government shall appoint the Director on the
recommendation of the Committee consisting of—
(a) the Central Vigilance Commissioner — Chairperson;
(b) Vigilance Commissioners — Members;
(c) Secretary to the Government of India incharge of the Ministry of Home Affairs in the Central Government — Member;
(d) Secretary (Coordination and Public Grievances) in the Cabinet Secretariat — Member.
(2) While making any recommendation under sub-section (1), the
Committee shall take into consideration the views of the outgoing Director.
(3) The Committee shall recommend a panel of officers—
(a) on the basis of seniority, integrity and experience in the investigation of anti-corruption cases; and
(b) chosen from amongst officers belonging to the Indian Police Service constituted under the All-India Services Act, 1951, for being considered for appointment as the Director. (61 of 1951).
Section 4C. Terms and conditions of service of Director.
(1) The Director shall, notwithstanding anything to the contrary contained in the rules relating to his conditions of service, continue to hold office for a period of not less than two years from the date on which he
assumes office.
(2) The Director shall not be transferred except with the previous consent of the Committee referred to in sub-section (1) of section 4A.
Section 4D. Appointment for posts of Superintendent of Police and above, extension and curtailment of their tenure, etc.
(1) The Committee referred to in section 4A shall, after consulting the Director, recommend officers for appointment to the posts of the level of Superintendent of Police and above and also recommend the extension or curtailment of the tenure of such officers in the Delhi Special Police Establishment.
(2) On receipt of the recommendation under sub-section (1), the Central Government shall pass such orders as it thinks fit to give effect to the said recommendation.”;
(c) after section 6, the following section shall be inserted, namely:—
Section 5. Terms and other conditions of service of Central Vigilance Commissioner.
(1) Subject to the provisions of sub-sections (3) and (4), the Central Vigilance Commissioner shall hold office for a term of four years from the date on which he enters upon his office or till he attains the age of sixty-five years, whichever is earlier. The Central Vigilance Commissioner, on ceasing to hold the office, shall be ineligible for reappointment in the Commission.
(2) Subject to the provisions of sub-sections (3) and (4), every Vigilance Commissioner shall hold office for a term of four years from the date on which he enters upon his office or till he attains the age of sixty-five years, whichever is earlier:
Provided that every Vigilance Commissioner, on ceasing to hold the office, shall be eligible for appointment as the Central Vigilance Commissioner in the manner specified in sub-section (1) of section 4:
Provided further that the term of the Vigilance Commissioner, if appointed as the Central Vigilance Commissioner, shall not be more than four years in aggregate as the Vigilance Commissioner and the Central Vigilance Commissioner.
(3) The Central Vigilance Commissioner or a Vigilance Commissioner shall, before he enters upon his office, make and subscribe before the President, or some other person appointed in that behalf by him, an oath or affirmation according to the form set out for the purpose in Schedule to this Act.
(4) The Central Vigilance Commissioner or a Vigilance Commissioner may, by writing under his hand addressed to the President, resign his office.
(5) The Central Vigilance Commissioner or a Vigilance Commissioner may be removed from his office in the manner provided in section 6.
(6) On ceasing to hold office, the Central Vigilance Commissioner and every other Vigilance Commissioner shall be ineligible for—
(a) any diplomatic assignment, appointment as administrator of a Union territory and such other assignment or appointment which is required by law to be made by the President by warrant under his hand and seal.
(b) further employment to any office of profit under the Government of India or the Government of a State.
(7) The salary and allowances payable to and the other conditions of service of—
(a) the Central Vigilance Commissioner shall be the same as those of the Chairman of the Union Public Service Commission;
(b) the Vigilance Commissioner shall be the same as those of a Member of the Union Public Service Commission:
Provided that if the Central Vigilance Commissioner or any Vigilance Commissioner is, at the time of his appointment, in receipt of a pension (other than a disability or wound pension) in respect of any previous service under the Government of India or under the Government of a State, his salary in respect of the service as the Central Vigilance Commissioner or any Vigilance Commissioner shall be reduced by the amount of that
pension including any portion of pension which was commuted and pension equivalent of other forms of retirement benefits excluding pension equivalent of retirement gratuity:
Provided further that if the Central Vigilance Commissioner or any Vigilance Commissioner is, at the time of his appointment, in receipt of retirement benefits in respect of any previous service rendered in a corporation established by or under any Central Act or a Government company owned or controlled by the Central Government, his salary in respect of the service as the Central Vigilance Commissioner or, as the case may be, the Vigilance Commissioner shall be reduced by the amount of pension equivalent to the retirement benefits:
Provided also that the salary, allowances and pension payable to, and the other conditions of service of, the Central Vigilance Commissioner or any Vigilance Commissioner shall not be varied to his disadvantage after his appointment.
Section 6. Removal of Central Vigilance Commissioner and Vigilance Commissioner.
(1) Subject to the provisions of sub-section (3), the Central Vigilance Commissioner or any Vigilance Commissioner shall be removed from his office only by order of the President on the ground of proved misbehaviour or incapacity after the Supreme Court, on a reference made to it by the President, has, on inquiry, reported that the Central Vigilance Commissioner or any Vigilance Commissioner, as the case may be, ought on such ground be removed.
(2) The President may suspend from office, and if deem necessary prohibit also from attending the office during inquiry, the Central Vigilance Commissioner or any Vigilance Commissioner in respect of whom a reference has been made to the Supreme Court under sub-section (1) until the President has passed orders on receipt of the report of the Supreme Court on such reference.
(3) Notwithstanding anything contained in sub-section (1), the President may by order remove from office the Central Vigilance Commissioner or any Vigilance Commissioner if the Central Vigilance Commissioner or such Vigilance Commissioner, as the case may be,—
(a) is adjudged an insolvent; or
(b) has been convicted of an offence which, in the opinion of the Central Government, involves moral turpitude; or
(c) engages during his term of office in any paid employment outside the duties of his office; or
(d) is, in the opinion of the President, unfit to continue in office by reason of infirmity of mind or body; or
(e) has acquired such financial or other interest as is likely to affect prejudicially his functions as a Central Vigilance Commissioner or a Vigilance Commissioner.
(4) If the Central Vigilance Commissioner or any Vigilance Commissioner is or becomes in any way, concerned or interested in any contract or agreement made by or on behalf of the Government of India or participates in any way in the profit thereof or in any benefit or emolument arising therefrom otherwise than as a member and in common with the other members of an incorporated company, he shall, for the purposes of sub-section (1), be deemed to be guilty of misbehaviour.
Section 6A. Approval of Central Government to conduct inquiry or investigation.
(1) The Delhi Special Police Establishment shall not conduct any inquiry or investigation into any offence alleged to have been committed under the Prevention of Corruption Act, 1988 except with the previous approval of the Central Government where such allegation relates to— (49 fo 1988).
(a) the employees of the Central Government of the level of Joint Secretary and above; and
(b) such officers as are appointed by the Central Government in corporations established by or under any Central Act, Government companies, societies and local authorities owned or controlled by that Government.
(2) Notwithstanding anything contained in sub-section (1), no such approval shall be necessary for cases involving arrest of a person on the spot on the charge of accepting or attempting to accept any gratification other than legal remuneration referred to in clause (c) of the Explanation to section 7 of the Prevention of Corruption Act, 1988.”.
Section 7. Power to make rules by Central Government for staff.
The Central Government may, in consultation with the Commission, make rules with respect to the number of members of the staff of the Commission and their conditions of service.
Chapter III – FUNCTIONS AND POWERS OF THE CENTRAL VIGILANCE COMMISSION
Section 8. Functions and powers of Central Vigilance Commission.
(1) The functions and powers of the Commission shall be to—
(a) exercise superintendence over the functioning of the Delhi Special Police Establishment in so far as it relates to the investigation of offences alleged to have been committed under the Prevention of Corruption Act, 1988 or an offence with which a public servant specified in sub-section (2) may, under the Code of Criminal Procedure, 1973, be charged at the same trial; (49 of 1988 & 2 of 1974).
(b) give directions to the Delhi Special Police Establishment for the purpose of discharging the responsibility entrusted to it under sub-section (1) of section 4 of the Delhi Special Police Establishment Act, 1946: (25 of 1946).
Provided that while exercising the powers of superintendence under clause (a) or giving directions under this clause, the Commission shall not exercise powers in such a manner so as to require the Delhi Special Police Establishment to investigate or dispose of any case in a particular manner;
(c) inquire or cause an inquiry or investigation to be made on a reference made by the Central Government wherein it is alleged that a public servant being an employee of the Central Government or a corporation established by or under any Central Act, Government company, society and any local authority owned or controlled by that Government, has committed an offence under the Prevention of Corruption Act, 1988 or an offence with which a public servant may, under the Code of Criminal Procedure, 1973, be charged at the same trial; (49 of 1988 & 2 of 1974).
(d) inquire or cause an inquiry or investigation to be made into any complaint against any official belonging to such category of officials specified in sub-section (2) wherein it is alleged that he has committed an offence under the Prevention of Corruption Act, 1988 and an offence with which a public servant specified in subsection (2) may, under the Code of Criminal Procedure, 1973, be charged at the same trial; (49 of 1988 & 2 of 1974).
(e) review the progress of investigations conducted by the Delhi Special Police Establishment into offences alleged to have been committed under the Prevention of Corruption Act, 1988 or the public servant may, under the Code of Criminal Procedure, 1973, be charged at the same trial; (49 of 1988 & 2 of 1974).
(f) review the progress of applications pending with the competent authorities for sanction of prosecution under the Prevention of Corruption Act, 1988; (49 of 1988).
(g) tender advice to the Central Government, corporations established by or under any Central Act, Government companies, societies and local authorities owned or controlled by the Central Government on such matters as may be referred to it by that Government, said Government companies, societies and local authorities owned or controlled by the Central Government or otherwise;
(h) exercise superintendence over the vigilance administration of the various Ministries of the Central Government or corporations established by or under any Central Act, Government companies, societies and local authorities owned or controlled by that Government:.
Provided that nothing contained in this clause shall be deemed to authorise the Commission to exercise superintendence over the Vigilance administration in a manner not consistent with the directions relating to vigilance matters issued by the Government and to confer power upon the Commission to issue directions relating to any policy matters;
(2) The persons referred to in clause (d) of sub-section (1) are as follows:—
(a) members of All-India Services serving in connection with the affairs of the Union and Group ‘A’ officers of the Central Government;
(b) such level of officers of the corporations established by or under any Central Act, Government companies, societies and other local authorities, owned or controlled by the Central Government, as that Government may, by notification in the Official Gazette, specify in this behalf:
Provided that till such time a notification is issued under this clause, all officers of the said corporations, companies, societies and local authorities shall be deemed to be the persons referred to in clause (d) of sub-section (1).
Section 9. Proceedings of Commission.
(1) The proceedings of the Commission shall be conducted at its headquarters.
(2) The Commission may, by unanimous decision, regulate the procedure for transaction of its business as also allocation of its business amongst the Central Vigilance Commissioner and other Vigilance Commissioners.
(3) Save as provided in sub-section (2), all business of the Commission shall, as far as possible, be transacted unanimously.
(4) Subject to the provisions of sub-section (3), if the Central Vigilance Commissioner and other Vigilance Commissioners differ in opinion on any matter, such matter shall be decided according to the opinion of the majority.
(5) The Central Vigilance Commissioner, or, if for any reason he is unable to attend any meeting of the Commission, the senior-most Vigilance Commissioner present at the meeting, shall preside at the meeting.
(6) No act or proceeding of the Commission shall be invalid merely by reason of—
(a) any vacancy in, or any defect in the constitution of, the Commission; or
(b) any defect in the appointment of a person acting as the Central Vigilance Commissioner or as a Vigilance Commissioner; or
(c) any irregularity in the procedure of the Commission not affecting the merits of the case.
Section 10. Vigilance Commissioner to act as Central Vigilance Commissioner in certain circumstances.
(1) In the event of the occurrence of any vacancy in the office of the Central Vigilance Commissioner by reason of his death, resignation or otherwise, the President may, by notification, authorise one of the Vigilance Commissioners to act as the Central Vigilance Commissioner until the appointment of a new Central Vigilance Commissioner to fill such vacancy.
(2) When the Central Vigilance Commissioner is unable to discharge his functions owing to absence on leave or otherwise, such one of the Vigilance Commissioners as the President may, by notification, authorise in this behalf, shall discharge the functions of the Central Vigilance Commissioner until the date on which the Central Vigilance Commissioner resumes his duties..
Section 11. Power relating to inquiries.
The Commission shall, while conducting any inquiry referred to in clauses (b) and (c) of sub-section (1) of section 8, have all the powers of a civil court trying a suit under the Code of Civil Procedure, 1908 and in particular, in respect of the following matters, namely:— (5 of 1908).
(a) summoning and enforcing the attendance of any person from any part of India and examining him on oath;
b) requiring the discovery and production of any document;
(c) receiving evidence on affidavits;
(d) requisitioning any public record or copy thereof from any court or office;
(e) issuing commissions for the examination of witnesses or other documents; and
(f) any other matter which may be prescribed.
Section 12. Proceedings before Commission to be judicial proceedings.
The Commission shall be deemed to be a civil court for the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 and every proceeding before the Commission shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228 and for the purposes of section 196 of the Indian Penal Code. (2 of 1974 & 45 of 1860).
Chapter IV – EXPENSES AND ANNUAL REPORT
Section 13. Expences of Commission to be charged on the Consolidated Fund of India.
The expenses of the Commission, including any salaries, allowances and pensions payable to or in respect of the Central Vigilance Commissioner, the Vigilance Commissioners, Secretary and the staff of the Commission, shall be charged on the Consolidated Fund of India.
Section 14. Annual report.
(1) It shall be the duty of the Commission to present annually to the President a report as to the work done by the Commission within six months of the close of the year under report.
(2) The report referred to in sub-section (1) shall contain a separate part on the functioning of the Delhi Special Police Establishment in so far as it relates to sub-section (1) of section 4 of the Delhi Special Police Establishment Act, 1946. (25 of 1946)
(3) On receipt of such report, the President shall cause the same to be laid before each House of Parliament.
Chapter V – MISCELLANEOUS
Section 15. Protection of action taken in good faith.
No suit, prosecution or other legal proceeding shall lie against the Commission, the Central Vigilance Commissioner, any Vigilance Commissioner, the Secretary or against any staff of the Commission in respect of anything which is in good faith done or intended to be done under this Act.
Section 16. Central Vigilance Commissioner, Vigilance Commissioner and staff to be public servants.
The Central Vigilance Commissioner, every Vigilance Commissioner, the Secretary and every staff of the Commission shall be deemed to be a public servant within the meaning of section 21 of the Indian Penal Code.
( 45 of 1860).
Section 17. Report of any inquiry made on reference by Commission to be forwarded to that Commission.
(1) The report of the inquiry undertaken by any agency on a reference made by the Commission shall be forwarded to the Commission.
(2) The Commission shall, on receipt of such report and after taking into consideration any other factors relevant thereto, advise the Central Government and corporations established by or under any Central Act, Government companies, societies and local authorities owned or controlled by that Government, as the case may be, as to the further course of action.
(3) The Central Government and the corporations established by or under any Central Act, Government companies, societies and other local authorities owned or controlled by that Government, as the case may be, shall consider the advice of the Commission and take appropriate action:
Provided that where the Central Government, any corporation established by or under any Central Act, Government company, society or local authority owned or controlled by the Central Government, as the case may be, does not agree with the advice of the Commission, it shall, for reasons to be recorded in writing, communicate the same to the Commission.
Section 18. Power to call for information.
The Commission may call for reports, returns and statements from the Central Government or corporations established by or under any Central Act, Government companies, societies and other local authorities owned or controlled by that Government so as to enable it to exercise general supervision over the vigilance and anti-corruption work in that Government and in the said corporations, Government companies, societies
and local authorities.
Section 19. Consultation with Commission in certain matters.
The Central Government shall, in making any rules or regulations governing the vigilance or disciplinary matters relating to persons appointed to public services and posts in connection with the affairs of the Union or to members of the All-India Services, consult the Commission.
Section 20. Power to make rules.
(1) The Central Government may, by notification in the Official Gazette, make rules for the purpose of carrying 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 number of members of the staff and their conditions of service under section 7;
(b) any other power of the civil court to be prescribed under clause (f) of section 11; and
(c) any other matter which is required to be, or may be, prescribed.
Section 21. Power to make regulations.
(1) The Commission may, with the previous approval of the Central Government, by notification in the Official Gazette, make regulations not inconsistent with this Act and the rules made thereunder to provide for all matters for which provision is expedient for the purposes of giving effect to the provisions 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 duties and the powers of the Secretary under sub-section (4) of section 3; and
(b) the procedure to be followed by the Commission under sub-section (2) of section 9.
Section 22. Notification, rule, etc., to be laid before Parliament.
Every notification issued under clause (b) of sub-section (2) of section 8 and every rule made by the Central Government and every regulation made by the Commission under this Act shall be laid, as soon as may be after it is issued or 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 notification or the rule or the regulation, or both Houses agree that the notification or the rule or the regulation should not be made, the notification or the rule or 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 notification or rule or regulation.
Section 23. Power to remove difficulties.
(1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order, not inconsistent with the provisions of this Act, remove the difficulty:
Provided that no such order shall be made after the expiry of a period of two years from the date of commencement of this Act.
(2) Every order made under this section shall, as soon as may be after it is made, be laid before each House of Parliament.
Section 24. Provisions relating to existing Vigilance Commission.
With effect from the constitution of the Commission under sub-section (1) of section 3, the Central Vigilance Commission set up by the Resolution of the Government of India in the Ministry of Home Affairs No. 24/7/64-AVD, dated the 11th February, 1964 (hereafter referred to in this section as the existing Vigilance Commission) shall, in so far as its functions are not inconsistent with the provisions of this Act, continue to discharge the said functions and—
(a) all actions and decisions taken by the Vigilance Commission insofar as such actions and decisions are relatable to the functions of the Commission constituted under this Act shall be deemed to have been taken by the Commission;
(b) all proceedings pending before the Vigilance Commission, insofar as such proceedings relate to the functions of the Commission, shall be deemed to be transferred to the Commission and shall be dealt with in accordance with the provisions of this Act;
(c) the employees of the Vigilance Commission shall be deemed to have become the employees of the Commission on the same terms and conditions;
(d) all the assets and liabilities of the Vigilance Commission shall be transferred to the Commission.
Section 25. Appointments, etc., of officers of Directorate of Enforcement.
Notwithstanding anything contained in the Foreign Exchange Management Act, 1999 or any other law for the time being in force,— (42 of 1999).
(a) the Central Government shall appoint a Director of Enforcement in the Directorate of Enforcement in the Ministry of Finance on the recommendation of the Committee consisting of—
(i) the Central Vigilance Commissioner — Chairperson;
(ii) Vigilance Commissioners — Members;
(iii) Secretary to the Government of India in-charge of the Ministry of Home Affairs in the Central Government — Member;
(iv) Secretary to the Government of India in-charge of the Ministry of Personnel in the Central Government — Member;
(v) Secretary to the Government of India in-charge of the Department of Revenue, Ministry of Finance in the Central Government — Member;
(b) while making a recommendation, the Committee shall take into consideration the integrity and experience of the officers eligible for appointment;
(c) no person below the rank of Additional Secretary to the Government of India shall be eligible for appointment as a Director of Enforcement;
(d) a Director of Enforcement shall continue to hold office for a period of not less than two years from the date on which he assumes office;
(e) a Director of Enforcement shall not be transferred except with the previous consent of the Committee referred to in clause (a);
(f) the Committee referred to in clause (a) shall, in consultation with the Director of Enforcement, recommend officers for appointment to the posts above the level of the Deputy Director of Enforcement and also recommend the extension or curtailment of the tenure of such officers in the Directorate of Enforcement;
(g) on receipt of the recommendation under clause (f), the Central Government shall pass such orders as it thinks fit to give effect to the said recommendation.
Section 26. Amendment of Act 25 of 1946. Interpretation section.
In the Delhi Special Police Establishment Act, 1946,—
(a) after section 1, the following section shall be inserted, namely:— “1A. Words and expressions used herein and not defined but defined in the Central Vigilance Commission Act, 2003, shall have the meanings,
respectively, assigned to them in that Act.”;
(b) for section 4, the following sections shall be substituted, namely:—
Section 27. Repeal and saving.
(1) The Government of India in the Ministry of Personnel, Public Grievances and Pensions (Department of Personnel and Training) Resolution No. 371/20/99-AVD. III, dated the 4th April, 1999 as amended vide Resolution of even number, dated the 13th August, 2002 is hereby repealed. (Ord. 4 of 1999).
(2) Notwithstanding such repeal and the cesser of operation of the Central Vigilance Commission Ordinance, 1999, anything done or any action taken under the said Resolution and the said Ordinance including the appointments made and other actions taken or anything done or any action taken or any appointment made under the Delhi Special Police Establishment Act, 1946 and the Foreign Exchange Regulation Act, 1973 as amended by the said Ordinance shall be deemed to have been made or done or taken under this Act or the Delhi Special Police Establishment Act, 1946 and the Foreign Exchange Regulation Act, 1973 as if the amendments made in those Acts by this Act were in force at all material times. (25 of 1946 & 46 of 1973).
Schedule
[See section 5(3)]
Form of oath or affirmation to be made by the Central Vigilance Commissioner or Vigilance Commissioner:—
“I, A. B., having been appointed Central Vigilance Commissioner (or Vigilance Commissioner) of the Central Vigilance Commission do that
swear in the name of God
————————————— I will bear true faith and allegiance to the
solemnly affirm
Constitution of India as by law established, that I will uphold the sovereignty and integrity of India, that I will duly and faithfully and to the best of my ability, knowledge and judgment perform the duties of my office without fear or favour, affection or ill-will and that I will uphold the constitution and the laws.”.
SUBHASH C. JAIN,
Secy. to the Govt. of India.
November 30, 2014
Preamble
An Act to constitute a Reserve Bank of India
Whereas it is expedient to constitute a Reserve Bank for India to regulate the issue of Bank notes and the keeping of reserves with a view to securing monetary stability in India and generally to operate the currency any credit system of the country to its advantage;
And whereas in the present disorganisation of the monetary systems of the world it is not possible to determine what will be suitable as a permanent basis for the Indian monetary system;
But whereas it is expedient to make temporary provision on the basis of the existing monetary system, and to leave the question of the monetary standard best suited to India to be considered when the international monetary position has become sufficiently clear and stable to make it possible to frame permanent measures;
It is hereby enacted as follows: -
Section 1. Short title, extent and commencement
(1) This Act may be called the Reserve Bank of India Act, 1934.
(2) It extends to the whole of India.
(3) This section shall come into force at once, and the remaining provisions of this Act shall came into force on such date or dates as the Central Government may, by notification in the Gazette of India, appoint.
Section 2. Definitions
In this Act, unless there is anything repugnant in the subject or context, -
(a) 1[***]
(ai) 1[***]
(aii) “The Bank” means the Reserve Bank of India constituted by this Act;
(aiii) “Bank for International Settlements”, means the body corporate established with the said name under the law of Switzerland in pursuance of an agreement, dated the 20th January, 1930, signed at the Hague;
(b) “The Central Board” means the Central Board of Directors of the Bank;
(bi) 1[***]
(bii) 1[***]
(biii) 1[***]
(biv) 1[***]
(bv) 1[***]
(bvi) “Deposit Insurance Corporation” means the Deposit Insurance Corporation established under section 3 of the Deposit Insurance Corporation Act, 1961 (47 of 1961);
(bvii) “Development Bank” means the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964);
(bviii) 1[***]
2[(bviiia) “Exim Bank” means the Export-Import Bank of India established under the Export – Import Bank of India Act, 1981 (28 of 1981);]
(bix) “Foreign currency” and “foreign exchange” have the meanings respectively assigned to them in the Foreign Exchange Regulation Act, 1973 (46 of 1973);
(c) “Industrial Finance Corporation” means the Industrial Finance Corporation of India established under the Industrial Finance Corporation Act, 1948 (15 of 1948);
(ca) “International Development Association” means the “Association” referred to in the International Development Association (Status, Immunities and Privileges) Act, 1960 (32 of 1960);
(cb) “International Finance Corporation” means the “Corporation” referred to in the International Finance Corporation (Status, Immunities and Privileges) Act, 1958 (42 of 1958);
(cc) “International Monetary Fund” and “International Bank for Reconstruction and Development” means respectively the “International Fund” and the “International Bank”, referred to in the International Monetary Fund and Bank Act, 1945;
1[(ccc) “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);]
3[(cccc) “National Housing Bank” means the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987);]
(ci)-(civ) 1[***]
4[(cv) “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);]
(d) “Rupee coin” means rupees which are legal tender in India under the provisions of the Indian Coinage Act, 1906 (3 of 1906);
(e) “Scheduled bank” means a bank included in the Second Scheduled;
5[(e1) “Small Industries Bank” means the Small Industries Development Bank of India established under section 3 of the Small Industries Development Bank of India Act, 1989;]
(ea) “Sponsor Bank” means a Sponsor Bank as defined in the Regional Rural Banks Act, 1976 (21 of 1976);
(eb) “State Bank” means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955);
(f) 1[***]
(f1) “State Financial Corporation” means any State Financial Corporation established under the State Financial Corporations Act, 1951 (63 of 1951);
(g) “Unit Trust” means the Unit Trust of India established under section 3 of the Unit Trust of India Act, 1963 (25 of 1963);
6[(h) “Agricultural operations”, “central co-operative bank”, “co-operative society”, “crops”, “marketing of crops”, “pisciculture”, “regional rural bank” and “State co-operative bank” shall have the meanings respectively assigned to them in the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981);
(i) “Co -operative bank”, “co-operative credit society”, “director”, “primary agricultural credit society”, “primary co-operative bank” and “primary credit society” shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949).]
——————–
1. Omitted by Act No. 61 of 1981, w.e.f. 1/5/1982.
2. Inserted by Act No. 28 of 1981, w.e.f. 1/1/1982.
3. Inserted by Act No. 53 of 1987, w.e.f. 9/7/1988.
4. Inserted by Act No. 62 of 1984, w.e.f. 20/3/1985.
5. Inserted by Act No. 39 of 1989, w.e.f. 7/3/1990.
6. Inserted by Act No. 61 of 1981, w.e.f. 1/5/1982.
Section 3. Establishment and incorporation of Reserve Bank
(1) A bank to be called the Reserve Bank of India shall be constituted for the purposes of taking over the management of the currency from the Central Government and of carrying on the business of banking in accordance with the provisions of this Act.
(2) The Bank shall be a body corporate by the name of the Reserve Bank of India, having perpetual succession and a common seal, and shall by the said name sue and be sued.
Section 4. Capital of the Bank
The capital of the bank shall be five crores of rupees.
Section 5. Section
[Section 5. repealed by Act No. 62 of 1948, w.e.f. 1st January, 1949]
Section 6. Offices, branches and agencies
The Bank shall as soon as may be, establish offices in Bombay, Calcutta, Delhi and Madras and may establish branches or agencies in any other place in India or, with the previous sanction of the Central Government elsewhere.
Section 7. Management
(1) The Central Government may from time to time give such directions to the Bank as it may, after consultation with the Governor of the Bank, consider necessary in the public interests.
(2) Subject to any such directions, the general superintendence and direction of the affairs and business of the Bank shall be entrusted to a Central Board of Directors which may exercise all powers and do all acts and things which may be exercised or done by the Bank.
(3) Save as otherwise provided in regulations made by the Central Board, the Governor and in his absence the Deputy Governor nominated by him in his behalf, shall also have powers of general superintendence and direction of the affairs and the business of the Bank, and may exercise all powers and do all acts and things which may be exercised or done by the Bank.
Reserve Bank of India Act, 1934
Section 8. Composition of the Central Board, and term of office of directors
(1) The Central Board shall consist of the following Directors, namely: -
(a) A Governor and not more than four Deputy Governors to be appointed by the Central Government;
(b) Four Directors to be nominated by the Central Government, one from each of the four Local Boards as constituted by section 9;
(c) Ten Directors to be nominated by the Central Government; and
(d) One Government official to be nominated by the Central Government.
(2) The Governor and Deputy Governors shall devote their whole time to the affairs of the Bank, and shall receive such salaries and allowances as may be determined by the Central Board, with the approval of the Central Government:
PROVIDED that the Central Board may, if in its opinion it is necessary in the public interest so to do, permit the Governor or a Deputy Governor to undertake, at the request of the Central Government or any State Government, such part-time honorary work, whether related to the purposes of this Act or not, as is not likely to interfere with his duties as Governor or Deputy Governor, as the case may be:
1[PROVIDED FURTHER that the Central Government may, in consultation with the Bank, appoint a Deputy Governor as the Chairman of the National Bank, on such terms and conditions as that Government may specify.]
(3) A Deputy Governor and the Director nominated under clause (d) of sub-section (1) may attend any meeting of the Central Board and take part in its deliberations but shall not be entitled to vote:
PROVIDED that when the Governor is, for any reason, unable to attend any such meeting, a Deputy Governor authorised by him in this behalf in writing may vote for him at that meeting.
(4) The Governor and a Deputy Governor shall hold office for such term not exceeding five years as the Central Government may fix when appointing them, and shall be eligible for re-appointment.
A Director nominated under clause (c) of sub-section (1) shall hold office for a period of four years and thereafter until his successor shall have been nominated.
A Director nominated under clause (d) of sub-section (1) shall hold office during the pleasure of the Central Government.
(5) No act or proceeding of the Board shall be questioned on the ground merely of the existence of any vacancy in, or any defect in the constitution, of the board.
(6) 2[***]
(7) A retiring director shall be eligible for re-nomination.
——————–
1. Inserted by Act No. 61 of 1981, w.e.f. 1/5/1982.
2. Omitted by Act No. 18 of 1964, w.e.f. 1/7/1964.
Section 9. Local Boards, their constitution and functions
(1) A Local Board shall be constituted for each of the four areas specified in Schedule I and shall consist of five members to be appointed by the Central Government to represent, as far as possible, territorial and economic interests and the interests of co-operative and indigenous banks.
(2) The members of the Local Board shall elect from amongst themselves one person to be the Chairman of the Board.
(3) Every member of a Local Board shall hold office for a term of four years and thereafter until his successor shall have been appointed and shall be eligible for re-appointment.
(4) A Local Board shall advise the Central Board on such matters as may be generally or specifically referred to it and shall perform such duties as the Central Board may delegate to it.
Section 10. Disqualifications of directors and members of Local Boards
(1) No person may be a Director or a member of a Local Board who-
(a) Is a salaried Government official; or
(b) Is, or at any time has been, adjudicated an insolvent, or has suspended payment or has compounded with his creditors; or
(c) Is found lunatic or becomes of unsound mind; or
(d) Is an officer or employee of any bank; or
(e) Is a Director of banking company within the meaning of clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), or of a co-operative bank.
(2) No two persons who are partners of the same mercantile firm, or are Directors of the same private company, or one of whom is the general agent of or holds a power of procuration from the other, or from a mercantile firm of which the other is a partner, may be Directors or members of the same Local Board at the same time.
(3) Nothing in clause (a), clause (d) or clause (e) of sub-section (1) shall apply to the Governor, or to a Deputy Governor or to the Director nominated under clause (d) of sub-section (1) of section 8.
Section 11. Removal from and vacation of office
(1) The Central Government may remove from office the Governor, or a Deputy Governor or any other Director or any member of a Local Board.
(2) A Director nominated under clause (b) or clause (c) of sub-section (1) of section 8 shall cease to hold office if without leave from the Central Board he absents himself from three consecutive meetings of the Board convened under sub-section (1) of section 13.
(3) The Central Government shall remove from office any Director, and the Central Board shall remove from office any member of a Local Board, if such Director or member becomes subject to any of the disqualifications specified in sub-section (1) or sub-section (2) of section 10.
(4) A director or member of Local Board removed or ceasing to hold office under the foregoing sub-sections shall not be eligible for re-appointment either as Director or as member of a Local Board until the expiry of the term for which his appointment was made.
(5) The nomination as Director or member of a Local Board of any person who is a Member of Parliament or the Legislature of any State shall be void, unless within two months of the date of his nomination he ceases to be such member, and if any Director or member of a Local Board is elected or nominated as a member at Parliament or any such Legislature, he shall cease to be a Director or member of the Local Board as from the date of such election or nomination, as the case may be.
(6) A director may resign his office to the Central Government, and a member of a Local Board may resign his office to the Central Board, and on the acceptance of the resignation the office shall become vacant.
Section 12. Casual vacancies and absences
(1) If the Governor or a Deputy Governor by infirmity or otherwise is rendered incapable of executing his duties or is absent on leave or otherwise in circumstances not involving the vacation of his appointment, the Central Government may, after consideration of the recommendations made by the Central Board in this behalf, appoint another person to officiate for him, and such person may, notwithstanding anything contained in clause (d) of sub-section (1) of section 10, be an officer of the Bank.
(2) 1[***]
(3) Where any casual vacancy in the office of any member of a Local Board occurs, the Central Board may nominate thereto any person recommended by the other members of the Local Board.
(4) Where any casual vacancy occurs in the office of a Director other than the vacancies provided for in sub-section (1), the vacancy shall be filled by the Central Government.
(5) A person nominated under this section to fill a casual vacancy shall hold office for the unexpired portion of the term of his predecessor.
——————–
1. Omitted by Act No. 62 of 1948, w.e.f. 1/1/1949.
Section 13. Meetings of the Central Board
(1) Meetings of the Central Board shall be convened by the Governor at least six times in each year and at least once in each quarter.
(2) Any four Directors may require the Governor to convene a meeting of the Central Board at any time and the Governor shall forthwith convene a meeting accordingly.
(3) The Governor or if for any reason, he is unable to attend, the Deputy Governor authorised by the Governor under the proviso to sub-section (3) of Section 8 to vote for him, shall preside at meetings of the Central Board, and, in the event of an equality of voter, shall have a second or casting vote.
Section 14. General meetings
1 [General meetings]
——————–
1. Omitted by Act No. 62 of 1948, w.e.f. 1/1/1949.
Section 15. First constitution of the Central Board
1[First constitution of the Central Board]
——————–
1. Omitted by Act No. 62 of 1948, w.e.f. 1/1/1949.
Section 16. First constitution of Local Boards
1[First constitution of Local Boards]
——————–
1. Omitted by Act No. 62 of 1948, w.e.f. 1/1/1949.
Section 17. Business which the Bank may transact
The Bank shall be authorised to carry on and transact the several kinds of business hereinafter specified, namely:-
(1) The accepting of money on deposit without interest from, and the collection of money for, the Central Government, the State Governments, local authorities, banks and any other persons;
(2)
(a) The purchase, sale and rediscount of bills of exchange and promissory notes, drawn on and payable in India and arising out of bona fide commercial or trade transactions bearing two or more good signatures, one of which shall be that of a scheduled bank or a State co-operative bank or any financial institution, which is predominantly engaged in the acceptance or discounting of bills of exchange and promissory notes and which is approved by the Bank in this behalf and maturing-
(i) In the case of bills of exchange and promissory notes arising out of any such transaction relating to the export of goods from India, within one hundred and eighty days, and
(ii) In any other case, within ninety days,
From the date of such purchase or rediscount exclusive of days of grace;
(b) The purchase, sale and rediscount of bills of exchange and promissory notes, drawn and payable in India and bearing two or more good signatures, one of which shall be that of a scheduled bank or a State co-operative bank or any financial institution, which is predominantly engaged in the acceptance or discounting of bills of exchange and promissory notes and which is approved by the Bank in this behalf and drawn or issued for the purpose of financing agricultural operations or the marketing of crops, and maturing within fifteen months from the date of such purchase or rediscount, exclusive of days of grace;
1[***]
(bb) The purchase, sale and rediscount of bills of exchange and promissory notes drawn and payable in India and bearing two or more good signatures, one of which shall be that of a State co-operative bank or a State financial corporation or any financial institution, which is predominantly engaged in the acceptance or discounting of bills of exchange and promissory notes and which is approved by the Bank in this behalf, and drawn or issued for the purpose of financing the production or marketing activities of cottage and small scale industries approved by the Bank and maturing within twelve months from the date of such purchase or rediscount, exclusive of days of grace, provided that the payment of the principal and interest of such bills of exchange or promissory notes is fully guaranteed by the State Government;
(c) The purchase, sale and rediscount of bills of exchange and promissory notes drawn and payable in India and bearing the signature of a scheduled bank, and issued or drawn for the purpose of holding or trading in securities of the Central Government or a State Government, and maturing within ninety days from the date of such purchase or rediscount, exclusive of days of grace;
(3)
(a) The purchase from and sale to scheduled banks of foreign exchange;
(b) The purchase, sale and rediscount of bills of exchange (including treasury bills) drawn in or on any place in any country outside India which is a member of the International Monetary Fund and maturing: -
(i) In the case of bills of exchange arising out of any bona fide transaction relating to the export of goods from India, within one hundred and eighty days, and
(ii) In any other case, within ninety days,
From the date of such purchase or rediscount:
PROVIDED that no such purchase, sale or rediscount shall be made in India except with a scheduled bank or a State co-operative bank;
1[***]
(3A) The making to any scheduled bank or State co-operative bank, of loans and advances, against promissory notes of such bank, repayable on demand or on the expiry of fixed periods not exceeding one hundred and eighty days:
PROVIDED that the borrowing bank furnishes a declaration in writing, to the effect that-
(i) It holds bills of exchange arising out of any transaction relating to the export of goods from India, of a value not less than the amount of such loans or advances: -
(a) Drawn in India and on any place in any country outside India which is a member of the International Monetary Fund or in any other country notified in this behalf by the Bank in the Gazette of India, and
(b) Maturing not later than one hundred and eighty days from the date of the loan or advance, and it will, so long as any part of such loans and advances remains unpaid, continue to hold such bills of exchange of a value not less than the amount of such loans or advances outstanding for the time being; or
(ii) It has granted a pre-shipment loan or advance to an exporter or any other person in India in order to enable him to export goods from India, the amount of the loan or advance drawn and outstanding at any time being not less than the outstanding amount of the loan or advance obtained by the borrowing bank from the bank;
(3B) The making to any scheduled bank or State co-operative bank of loans and advances repayable on demand or on the expiry of fixed periods not exceeding one hundred and eighty days against promissory notes of such bank:
PROVIDED that the borrowing bank furnishes a declaration in writing to the effect that it has made loans and advances for bona fide commercial or trade transactions or for financing agricultural operations or the marketing of crops or for other agricultural purposes as set out in the declaration and the said declaration includes such other particulars as may be required by the bank;
(4) The making to local authorities, scheduled banks, State co-operative banks and State Financial Corporations of loans and advances, repayable on demand or on the expiry of fixed periods not exceeding ninety days, against the security of-
(a) Stocks, funds and securities (other than immovable property) in which a trustee is authorised to invest trust money by any Act of Parliament of the United Kingdom or by any law for the time being in force in India;
(b) Gold or silver or documents of title to the same;
(c) Such bills of exchange and promissory notes as are eligible for purchase or rediscount by the bank or as are fully guaranteed as to the repayment of the principal and payment of interest by a State Government;
(d) Promissory notes of any scheduled bank or State co-operative bank, supported by documents of title to goods such documents having been transferred, assigned, or pledged to any such bank as security for a loan or advance made for bona fide commercial or trade transactions, or for the purpose of financing agricultural operations or the marketing of crops:
PROVIDED that loans and advances made against the security of bills of exchange and promissory notes arising out of any transaction relating to the export of goods from India shall be repayable on demand or on the expiry of fixed periods not exceeding one hundred and eighty days;
(4A) The making to any State Financial Corporation, of loans and advances repayable on the expiry of fixed periods not exceeding eighteen months from the date of such loan or advance, against securities of the Central Government or of any State Government, of any maturity, or against bonds and debentures issued by that Corporation and guaranteed by the State Government concerned and maturing within a period not exceeding eighteen months from the date of such loan or advance:
PROVIDED that the previous approval of the State Government shall be obtained for the borrowing by the State Financial Corporation and the amount of loans and advances granted to that Corporation under this clause shall not, at any time, exceed in the aggregate twice the paid-up share capital thereof;
2[(4AA) The making of annual contributions to the National Rural Credit (Long Term Operations) Fund and the National Rural Credit (Stabilisation) Fund established under sections 42 and 43, respectively, of the National Bank for Agriculture and Rural Development Act, 1981;]
(4B) The making to the Industrial Finance Corporation of India of loans and advances-
(a) Repayable on demand or on the expiry of fixed periods not exceeding ninety days from the date of such loan or advance. against securities of the Central Government or of any State Government; or
(b) Repayable on the expiry of fixed periods not exceeding eighteen months from the date of such loan or advance, against securities of the Central Government or of any maturity, or against bonds and debentures issued by the said corporation and guaranteed by the Central Government and maturing within a period not exceeding eighteen months from the date of such loan or advance.
3[***]
(4BB) The making to any financial institution notified by the Central Government in this behalf, of loans and advances: -
(a) Repayable on demand or on the expiry of fixed periods not exceeding ninety days from the date of such loan or advance, against the securities of the Central Government or of any State Government; or
(b) Repayable on the expiry of fixed periods not exceeding eighteen months from the date of such loan or advance, against securities of the Central Government or of any State Government, of any maturity, or against bonds and debentures issued by that financial institution and guaranteed by the Central Government or any State Government, and maturing within a period not exceeding eighteen months from the date of such loan or advance:
PROVIDED that the amount of loans and advances granted to a financial institution under sub-clause (b) shall not, at any time, exceed in the aggregate sixty per cent of the paid-up share capital thereof;
(4BBB) The making to the Unit Trust of loans and advances-
(i) Repayable on demand or on the expiry of a fixed period not exceeding ninety days from the date of such loan or advance against the security of stocks, funds and securities (other than immovable property) in which a trustee is authorised to invest trust money by any law for the time being in force in India;
(ii) Repayable on demand or within a period of eighteen months from the date of such loan or advance against the security of the bonds of the Unit Trust issued with the approval of and guaranteed by the Central Government;
(iii) For the purpose of any scheme other than the first unit scheme under the Unit Trust of India Act, 1963 (52 of 1963) on such terms and conditions and against the security of such other property of the Unit Trust as may be specified in this behalf by the Bank;
(4C) The making to a Warehousing Corporation established under the Agricultural Produce (Development and Warehousing) Corporations Act, 1956 (28 of 1956), of loans and advances: -
(a) Repayable on demand or on the expiry of fixed periods not exceeding ninety days, from the date of such loan or advance, against securities of the Central Government or of any State Government; or
(b) Repayable on the expiry of fixed periods not exceeding eighteen months from the date of such loan or advance, against securities of the Central Government or of any State Government, of any maturity, or against bonds and debentures issued by the Corporation to which the loan or advance is made, and guaranteed by the Central or a State Government, and maturing within a period not exceeding eighteen months from the date of such loan or advance:
PROVIDED that the amount of loans and advances granted under clause (b) shall not at any time exceed, in the aggregate, three crores of rupees in the case of the Central Warehousing Corporation and fifty lakhs of rupees in the case of a State Warehousing Corporation;
(4D) The making to the Deposit Insurance Corporation of loans and advances; and generally assisting the Corporation in such manner and on such terms as may be determined by the Central Board;
4[(4DD) The making to the National Housing Bank of loans and advances and generally assisting the National Housing Bank in such manner and on such terms as may be determined by the Central Board;]
5[(4E) The making to the National Bank of loans and advances repayable on demand or on the expiry of fixed period not exceeding eighteen months from the date of making of the loan or advance, either-
(i) Against the security of stocks, funds and securities (other than immovable property) in which a trustee is authorised to invest trust money by any law for the time being in force in India; or
(ii) On such other terms and conditions as the Bank may specify;
(4F) Contributing to the initial capital of the Unit Trust;
(4G) The making of loans and advances to, and the purchasing of bonds and debentures of, the Development Bank 2[or the Exim Bank] 4[or the Reconstruction Bank] 5[or the Small Industries Bank] out of the National Industrial Credit (Long Term Operations) Fund established under section 46C;
6[(4GG) The making of loans and advances to, and the purchasing of bonds and debentures of, the National Housing Bank out of the National Housing Credit (Long Term Operations) Fund established under section 46D;
(4H) The making to the Development Bank 3[or the Small Industries Bank] of loans and advances-
(a) Repayable on demand or on the expiry of fixed periods not exceeding ninety days, from the date of such loan or advance against the security of stocks, funds and securities (other than immovable property) in which a trustee is authorised to invest trust money by any law for the time being in force in India; or
(b) Against the security of bills of exchange or promissory notes, arising out of bona fide commercial or trade transactions bearing two or more good signatures and maturing within five years from the date of such loan or advance;
(4-I) The making to scheduled banks, the Development Bank, the Exim Bank, 7[the Reconstruction Bank or the Small Industries Bank], the Industrial Finance Corporation and any other financial institution as may, on the recommendation of the Bank, be approved in this behalf by the Central Government of loans and advances repayable on demand or otherwise and against such security and on such other terms and conditions as may be approved in this behalf by the Central Board for the purpose of enabling such banks, or financial institution, as the case may be, to purchase foreign exchange from the Bank for the purpose of financing the import of capital goods or for such other purposes as may be approved by the Central Government;
(4J) The making to the Exim Bank of loans and advances-
(a) Repayable on demand or on the expiry of a fixed period not exceeding ninety days, from the date of such loan or advance against the security of stocks, funds and securities (other than immovable property) in which a trustee is authorised to invest trust money by any law for the time being in force in India; or
(b) Against the security of bills of exchange or promissory notes, arising out of bona fide commercial or trade transactions bearing two or more good signatures and maturing within five years from the date of such loan or advance;
(4K) The making to the Reconstruction Bank of loans and advances-
(a) Repayable on demand or on the expiry of a fixed period not exceeding ninety days, from the date of such loan or advance against the security of stocks, funds and securities (other than immovable property) in which a trustee is authorised to invest trust money by any law for the time being in force in India; or
(b) Against the security of bills of exchange or promissory notes, arising out of bona fide commercial or trade transactions bearing two or more good signatures and maturing within five years from the date of such loan or advance;
(5) The making to the Central Government and State Governments of advances repayable in each case not later than three months from the date of the making of the advance;
(6) The issue of demand drafts, telegraphic transfers and other kinds of remittances made payable at its own offices or agencies, the purchase of telegraphic transfers, and the making, issue and circulation of bank post bills;
11[(6-A) dealing in derivatives, and, with the approval of the Central Board, in any other financial instrument.
Explanation.-For the purposes of this clause, “derivative” means an instrument, to be settled at a future date, whose value is derived from change in one or a combination of more than one of the following underlying, namely:-
(a) interest rate,
(b) price of securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government,
(c) price of foreign securities,
(d) foreign exchange rate, index of rates of prices,
(e) credit rating or credit index,
(g) price of gold or silver coins, or gold or silver bullion, or
(h) any other variable of similar nature;]
(7) 8[***]
(8) The purchase and sale of securities of the Central Government or a State Government of any maturity or of such securities of a local authority as may be specified in this behalf by the Central Government on the recommendation of the Central Board:
PROVIDED that securities fully guaranteed as to principal and interest by any such Government or authority shall be deemed for the purposes of this clause to be securities of such Government or authority;
9[***]
Central Government in this behalf;
(9) The custody of monies, securities and other articles of value, and the collection of the proceeds, whether principal, interest or dividends, of any such securities;
(10) The sale and realisation of all property, whether movable or immovable, which may in any way come into the possession of the Bank in satisfaction, or part satisfaction, of any of its claims;
(11) The acting as agent for the Central Government or any State Government or any local authority or the Industrial Finance Corporation of India or any other body corporate which is established or constituted by or under any other law or the government of any such country outside India or any such person or authority as may be approved in this behalf by the Central Government in the transaction or any of the following kinds of business, namely: -
(a) The purchase and sale of gold or silver or foreign exchange;
(b) The purchase, sale, transfer and custody of bills of exchange, securities or shares in any company;
(c) The collection of the proceeds, whether principal, interest or dividends, of any securities or shares;
(d) The remittance of such proceeds, at the risk of the principal, by bills of exchange payable either in India or elsewhere;
(e) The management of public debt;
(f) The issue and management of bonds and debentures;
(11A) The acting as agent for the Central Government: -
(a) In guaranteeing the due performance by any small scale industrial concern, approved by the Central Government, of its obligations to any bank or other financial institution in respect of loans and advances made, or other credit facilities provided, to it by such bank or other financial institution and the making as such agent of payments in connection with such guarantee, and
(b) In administering any scheme for subsidising the rate of interest or other charges in relation to any loans or advances made, or other credit facilities provided, by banks or other financial institutions for the purpose of financing or facilitating any export from India and the making as such agent of payment on behalf of the Central Government;
(12) The purchase and sale of gold or silver coins and gold and silver bullion and foreign exchange and the opening of a gold account with the principal currency authority of any foreign country or the Bank for International. Settlement or any international or regional bank or financial institution formed by such principal currency authority or authorities or by the government of any foreign country;
(12A) The purchase and sale of securities issued by the government of any country outside India or by any institution or body corporate established outside India and expressed to be payable in a foreign currency or any international or composite currency unit, being in the case of purchase by the Bank securities maturing within a period of ten years from the date of purchase:
PROVIDED that in the case of securities of an institution or body corporate, the repayment of principal and payment of interest in respect of such securities shall be guaranteed by the government of the country concerned;
12[(12-AA) lending or borrowing of securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government or foreign securities;
(12-AB) dealing in repo or reverse repo:
Provided that lending or borrowing of funds by way of repo or reverse repo shall not be subject to any limitation contained in this section.
Explanation.- For the purposes of this clause,-
(a) “repo” means an instrument for borrowing funds by selling securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government or foreign securities, with an agreement to repurchase the said securities on a mutually agreed future date at an agreed price which includes interest for the funds borrowed;
(b) “reverse repo” means an instrument for lending funds by purchasing securities of the Central Government or a State Government or of such securities of a local authority as may be specified in this behalf by the Central Government or foreign securities, with an agreement to resell the said securities on a mutually agreed future date at an agreed price which includes interest for the funds lent;]
(12B) The making of loans and advances in foreign currencies to scheduled banks, the Development Bank, the Exim Bank,] 6[the Reconstruction Bank or the Small Industries Bank,] the Industrial Finance Corporation, any State Financial Corporation and any other financial institution as may, on the recommendation of the Bank, be approved by the Central Government and on such terms and conditions as may be specified by the Central Board in this behalf, against promissory notes of such bank or financial institution, as the case may be:
PROVIDED that the borrowing bank or financial institution, as the case may be, furnishes a declaration in writing to the effect that-
(a) It has made loans and advances in foreign currencies for financing international trade or for the import of capital goods or for such other purposes as may be approved by the Central Government; and
(b) That the amount of loans or advances so made and outstanding at any time will not be less than the outstanding amount of the loans or advances obtained by it from the Bank;
(13) The opening of an account with an office outside India of any bank, including a bank incorporated in India or the making of an agency agreement with, and the acting as an agent or correspondent of any bank incorporated outside India, or the principal currency authority of any country under the law for the time being in force in that country or any international or regional bank or financial institution formed by such principal currency authorities or foreign governments, and the investing of the funds of the Bank in the shares and securities of any such international or regional bank or financial institution or of any other foreign institution as may be approved by the Central Board in this behalf;
(13A) Participation in any arrangement for the clearing and settlement of any amounts due from, or to any person or authority on account of the external trade of India with any other country or group of countries or of any remittances to, or from, that country or group of countries, including the advancing, or receiving of any amount in any currency in connection therewith, and, for that purpose, becoming, with the approval of the Central Government, a member of any international or regional clearing union of central banks, monetary or other authorities, or being associated with any such clearing arrangements, or becoming a member of any body or association formed by central banks, monetary or other similar authorities, or being associated with the same in any manner;
(14) The borrowing of money for a period not exceeding one month for the purposes of the business of the Bank, and the giving of security for money so borrowed:
PROVIDED that no money shall be borrowed under this clause from any person in India other than a scheduled bank or from any person outside India other than a bank which is the principal currency authority of any country under the law for the time being in force in that country:
PROVIDED FURTHER that the total amount of such borrowings from persons in India shall not at any time exceed the amount of the capital of the Bank;
(15) The making and issue of bank notes subject to the provisions of this Act;
(15A) The exercise of powers and functions and the performance of duties entrusted to the Bank under this Act or under any other law for the time being in force;
(15B) The providing of facilities for training in banking and for the promotion of research, where, in the opinion of the Bank, such provision may facilitate the exercise by the Bank of its powers and functions, or the discharge of its duties;
(16) Generally, the doing of all such matters and things as may be incidental to or consequential upon the exercise of its powers or the discharge of its duties under this Act.
——————–
1. Omitted by Act No. 62 of 1948, w.e.f. 1/1/1949.
2. Substituted by Act No. 81 of 1985, w.e.f. 1/5/1986.
3. Earlier Proviso omitted by Act No. 66 of 1988, w.e.f. 30/12/1988.
4. Inserted by Act No. 53 of 1987, w.e.f. 9/7/1988.
6. Substituted by Act No. 61 of 1981, w.e.f. 1/5/1982.
7. Substituted for the words “or the Reconstruction Bank”, by Act No. 39 of 1989, w.e.f. 7/3/1990.
8. Omitted by Act No. 2 of 1948.
9. Second proviso omitted by Act No. 32 of 1951.
10. Inserted by Act No. 53 of 1987, w.e.f. 9/7/1988.
11. Inserted by Act No. 26 of 2006 w.e.f. 12-6-2006.
12. Inserted by Act No. 26 of 2006 w.e.f. 12-6-2006.
Section 18. Power of direct discounts
When, in the opinion of the Bank, a special occasion has arisen making it necessary or expedient that action should be taken under this section for the purpose of regulating credit in the interests of Indian trade, commerce, industry and agricultural, the Bank may, notwithstanding any limitation contained in section 17: -
(1) Purchase, sell or discount any bill of exchange or promissory note though such bill or promissory note is not eligible for purchase or discount by the Bank under that section; or
(2) 1[***]
(3) Make loans or advances to-
(a) A State Co-operative bank; or
(b) On the recommendation of a State co-operative bank, to a co-operative society registered within the area in which the State co-operative bank operates; or
(c) Any other person,
Repayable on demand or on the expiry of the fixed periods, not exceeding ninety days, on such terms and conditions as the Bank may consider to be sufficient.
——————–
1. Clause (2) omitted Act No. 24 of 1978.
Section 18 A. Validity of loan or advance not to be questioned
Notwithstanding anything to the contrary contained in any other law for the time being in force-
(a) The validity of any loan or advance granted by the Bank in pursuance of the provisions of this Act shall not be called in question merely on the ground of non-compliance with the requirements of such other law as aforesaid or of any resolution, contract, memorandum, and articles of association or other instrument:
PROVIDED that nothing in this clause shall render valid any loan or advance obtained by any company or co-operative society where such company or co-operative society is not empowered by its memorandum to obtain loans or advances;
(b) Where a loan or advance has been granted under clause (3A) or under clause (3B) of section 17 or a loan or advance granted under clause (3) of section 18 by the Bank to any person has been applied by such person, wholly or in part, in making a loan or advance to any borrower, any sum received-
(i) By the borrowing bank on account of bills of exchange in respect of which the declaration under clause (i) of the proviso to clause (3A) of section 17 has been furnished or in repayment or realisation of the outstanding loans and advances referred to in clause (ii) of the said proviso or in the proviso to clause (3B) of the said section, or
(ii) By the borrowing bank or any other person in repayment or realisation of loans and advances granted to a borrower out of funds obtained by it or by him from the Bank under section 18,
Shall be utilised only for the repayment by the borrowing bank or other person, as the case may be, of the amounts due to be repaid by it or by him to the Bank, and shall be held by it or by him in trust for the Bank, until such time as the amounts are so repaid.
Section 19. Business which the bank may not transact
Save as otherwise provided in sections 17,18, 42 and 45, the bank may not-
(1) Engage in trade or otherwise have a direct interest in any commercial, industrial, or other undertaking except such interest as it may in any way acquire in the course of the satisfaction of any of its claims:
PROVIDED that all such interests shall be disposed of at the earliest possible moment;
(2) Purchase the shares of any banking company or of any other company, or grant loans upon the security of any such shares;
(3) Advance money on mortgage of, or otherwise on the security of, immovable property or documents of title relating thereto, or become the owner of immovable property, except so far as is necessary for its own business premises and residences for its officers and servants;
(4) Make loans or advances;
(5) Draw or accept bills payable otherwise than on demand;
(6) Allow interest on deposits or current amounts.
Reserve Bank of India Act, 1934
Section 20. Obligation of the Bank to transact government business
The Bank shall undertake to accept monies for account of the Central Government and to make payments up to the amount standing to the credit of its account, and to carry out its exchange, remittance and other banking operations, including the management of the public debt of the Union.
Section 21. Bank to have the right to transact government business in India
(1) The Central Government shall entrust the Bank, on such conditions as may be agreed upon, with all its money, remittance, exchange and banking transactions in India, and, in particular, shall deposit free of interest all its cash balances with the Bank:
PROVIDED that nothing in this sub-section shall prevent the Central Government from carrying on money transactions at places where the Bank has no branches or agencies, and the Central Government may hold at such places such balances as it may require.
(2) The Central Government shall entrust the Bank, on such conditions as may be agreed upon, with the management of the public debt and with the issue of any new loans.
(3) In the event of any failure to reach agreement on the conditions referred to in this section the Central Government shall decide what the conditions shall be.
(4) Any agreement made under this section shall be laid, as soon as may be after it is made, before Parliament. 1[***]
——————–
1. Clause (5) omitted by Act No. 24 of 1978.
Section 21. Bank to have the right to transact government business in India
(1) The Central Government shall entrust the Bank, on such conditions as may be agreed upon, with all its money, remittance, exchange and banking transactions in India, and, in particular, shall deposit free of interest all its cash balances with the Bank:
PROVIDED that nothing in this sub-section shall prevent the Central Government from carrying on money transactions at places where the Bank has no branches or agencies, and the Central Government may hold at such places such balances as it may require.
(2) The Central Government shall entrust the Bank, on such conditions as may be agreed upon, with the management of the public debt and with the issue of any new loans.
(3) In the event of any failure to reach agreement on the conditions referred to in this section the Central Government shall decide what the conditions shall be.
(4) Any agreement made under this section shall be laid, as soon as may be after it is made, before Parliament. 1[***]
——————–
1. Clause (5) omitted by Act No. 24 of 1978.
Section 21 A. Bank to transact government business of States on agreement
(1) The Bank may by agreement with the government of any state undertake-
(a) All its money, remittance, exchange and banking transactions in India, including in particular, the deposit, free of interest, of all its cash balances with the Bank; and
(b) The management of the public debt of, and the issue of any new loans by, that State.
(2) Any agreement made under this section shall be laid, as soon as may be after it is made, before Parliament.
Section 21 B. Effect of agreements made between the Bank and certain States before the 1st November, 1956
(1) Any agreement made under section 21 or section 21A between the Bank and the government of a State specified in the Explanation below and in force immediately before the lst day of November, 1956, shall, as from that day have effect as if it were an agreement made on that day under section 21A between the Bank and the government of the corresponding State subject to such modifications, if and being of a character not affecting the general operation of the agreement, as may be agreed upon between the Bank and the government of the corresponding State, or in default of such agreement, as may be made therein by order of the Central Government.
Explanation: In this sub-section “corresponding State” means: -
(a) In relation to the agreement between the Bank and the State of Andhra, the State of Andhra Pradesh;
(b) In relation to the agreement between the Bank and any other Part A State as it existed before the 1st day of November, 1956, the State with the same name; and
(c) In relation to the agreement between the Bank and the Part B State of Mysore or Travancore-Cochin as it existed before the 1st day of November, 1956, the State of Mysore or Kerala respectively.
(2) Any agreement made under section 21A between the Bank and the government of the part B State of Hyderabad, Madhya Bharat or Saurashtra shall be deemed to have terminated on the 31st day of October, 1956.
Section 22. Right to issue bank notes
(1) The bank shall have the sole right to issue bank notes in India, and may, for a period which shall be fixed by the Central Government on the recommendation of the Central Board, issue currency notes of the Government of India supplied to it by the Central Government, and the provisions of this Act applicable to bank notes shall, unless a contrary intention appears, apply to all currency notes of the Government of India issued either by the Central Government or by the Bank in like manner as if such currency notes were bank notes, and references in this Act to bank notes shall be construed accordingly.
(2) On and from the date on which this chapter comes into force the Central Government shall not issue any currency notes.
Section 23. Issue department
(1) The issue of bank notes shall be conducted by the Bank in an issue department which shall be separated and kept wholly distinct from the banking department, and the assets of the issue department shall not be subject to any liability other than the liabilities of the issue department as hereinafter defined in section 34.
(2) The issue department shall not issue bank notes to the banking department or to any other person except in exchange for other bank notes or for such coin, bullion or securities as are permitted by this Act to form part of the Reserve.
1[***]
——————–
1. Sub-section (3) omitted by Act No. 24 of 1978.
Reserve Bank of India Act, 1934
Section 24. Denominations of notes
(1) Subject to the provisions of sub-section (2), bank notes shall be of the denominational values of two rupees, five rupees, ten rupees, twenty rupees, fifty rupees, one hundred rupees, five hundred rupees, one thousand rupees, five thousand rupees and ten thousand rupees or of such other denominational values, not exceeding ten thousand rupees, as the Central Government may, on the recommendation of the Central Board, specify in this behalf.
(2) The Central Government may, on the recommendation of the Central Board, direct the non-issue or the discontinuance of issue of bank notes of such denominational values as it may specify in this behalf.
Section 25. Form of bank notes
The design, form and material of bank notes shall be such as may be approved by the Central Government after consideration of the recommendations made by the Central Board.
Section 26. Legal tender character of notes
(1) Subject to the provisions of sub-section (2), every bank note shall be legal tender at any place in India in payment or on account for the amount expressed therein, and shall be guaranteed by the Central Government.
(2) On recommendation of the Central Board the Central Government may, by notification in the Gazette of India, declare that, with effect from such date as may be specified in the notification, any series of bank notes of any denomination shall cease to be legal tender save at such office or agency of the Bank and to such extent as may be specified in the notification.
Section 26 A. Certain bank notes to cease to be legal tender
Notwithstanding anything contained in section 26, no bank note of the denominational value of five hundred rupees, one thousand rupees or ten thousand rupees issued before the 13th day of January, 1946, shall be legal tender in payment or on account for the amount expressed therein.
Section 27. Re-issue of notes
The Bank shall not re-issue bank notes, which are torn, defaced or excessively spoiled.
Section 28. Recovery of notes lost, stolen, mutilated or imperfect
Notwithstanding anything contained in any enactment or rule of law to the contrary, no person shall of right be entitled to recover from the Central Government or the Bank, the value of any lost, stolen, mutilated or imperfect currency note of the Government of India or bank note:
PROVIDED that the Bank may, with the previous sanction of the Central Government, prescribe the circumstances in and the conditions and limitations subject to which the value of such currency notes or bank notes may be refunded as of grace and the rules made under this proviso shall be laid on the table of Parliament. 1[***]
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1. Omitted by Act No. 24 of 1978.
Section 28 A. Issue of special bank notes and special one rupee notes in certain cases
(1) For the purpose of controlling the circulation of bank notes without India, the Bank may, notwithstanding anything contained in any other provision of this Act, issue bank notes of such design, form and material as may be approved under sub-section (3) (hereinafter in this section referred to as special bank notes) of the denominational values of five rupees, ten rupees and one hundred rupees.
(2) For the purpose of controlling the circulation of Government of India one rupee notes without India, the Central Government may, notwithstanding anything contained in any other provision of this Act or in the Currency Ordinance, 1940 (Ordinance 4 of 1940), issue Government of India notes of the denominational value of one rupee of such design, form and material as may be adopted under sub-section (3) (hereinafter in this section referred to as special one rupee notes).
(3) The design, form and material of the special bank notes shall be such as may be approved by the Central Government after consideration of the recommendations made by the Governor and of the special one rupee notes shall be such as the Central Government may think fit to adopt.
(4) Neither the special bank notes nor the special one rupee notes shall be legal tender in India.
(5) The special one rupee note shall be deemed to be included in the expression “rupee coin” for all the purposes of this Act except section 39, but shall be deemed not to be a currency note for any of the purposes of this Act.
(6) Where a special bank note is on its face expressed to be payable at a specified office or branch of the Bank, obligation imposed by section 39 shall be only on the specified office or branch and, further, shall be subject to such regulations as may be made under this section.
(7) The Bank may, with the previous sanction of the Central Government make regulations to provide for all matters for which provision is necessary or convenient for the purpose of giving effect to the provisions of this section, and, in particular, the manner in which, and the conditions or limitations subject to which-
(i) Bank notes and one rupee notes in circulation in any country outside India may be replaced by special notes issued under this section;
(ii) Any such special notes may be exchanged for any other bank notes or one rupee notes.
Section 29. Bank exempt from stamp duty on bank notes
The Bank shall not be liable to the payment of any stamp duty under the Indian Stamp Act, 1899 (2 of 1899), in respect of bank notes issued by it.
Section 30. Powers of Central Government to supersede Central Board
(1) If in the opinion of the Central Government the Bank fails to carry out any of the obligations imposed on it by or under this Act the Central Government may, by notification in the Gazette of India, declare the Central Board to be superseded, and thereafter the general superintendence and direction of the affairs of the Bank shall be entrusted to such agency at the Central Government may determine, and such agency may exercise the powers and do all acts and things which may be exercised or done by the Central Board under this Act.
(2) When action is taken under this section the Central Government shall cause a full report of the circumstances leading to such action and of the action taken to be laid before Parliament at the earliest possible opportunity and in any case within three months from the issue of the notification superseding the Board.
Section 31. Issue of demand bills and notes
(1) No person in India other than the Bank, or, as expressly authorised by this Act the Central Government shall draw, accept, make or issue any bill of exchange, hundi, promissory note or engagement for the payment of money payable to bearer on demand, or borrow, owe or take up any sum or sums of money on the bills, hundis or notes payable to bearer on demand of any such person:
PROVIDED that cheques or drafts, including hundis, payable to bearer on demand or otherwise may be drawn on a person’s account with a banker, shroff or agent.
(2) Notwithstanding anything contained in the Negotiable Instrument Act, 1881 (26 of 1881), no person in India other than the Bank or, as expressly authorised by this Act, the Central Government shall make or issue any promissory note expressed to be payable to the bearer of the instrument.
Section 32. Section
[Section 32 repealed by the Reserve Bank of India (Amendment) Act, 1974]
Section 33. Assets of the issue department
(1) The assets of the issue department shall consist of gold coin, gold bullion, foreign securities, rupee coin and rupee securities to such aggregate amount as is not less than the total of the liabilities of the issue department as hereinafter defined.
(2) The aggregate value of the gold coin, gold bullion and foreign securities held as assets and the aggregate value of the gold coin and gold bullion so held shall not at any time be less than two hundred crores of rupees and one hundred and fifteen crores of rupees, respectively.
1[(3) The remainder of the assets shall be held in rupee coin, Government of India rupee securities of any maturity, promissory notes drawn by the National Bank for any loans or advances under clause (4E) of section 17 and such bills of exchange and promissory notes payable in India as are eligible for purchase by the Bank under sub-clause (a) or sub-clause (b) or sub-clause (bb) of clause (2) of section 17 or under clause (1) of section 18.]
(4) For the purposes of this section, gold coin and gold bullion shall be valued at 2[a price not exceeding the international market price for the time being obtaining,] rupee coin shall be valued at its face value, and securities shall be valued at rates not exceeding the market rates for the time being obtaining.
(5) Of the gold coin and gold bullion held as assets, not less than seventeen-twentieths shall be held in India, and all gold coin and gold bullion held as assets shall be held in the custody of the Bank or its agencies:
PROVIDED that gold belonging to the Bank which is in any other bank or in any mint or treasury or in transit may be reckoned as part of the assets.
(6) For the purposes of this section, the foreign securities which may be held as part of the assets shall be-
(i) Securities of the following kinds payable in the currency of any foreign country which is a member of the International Monetary Fund, namely: -
(a) Balances with the bank which is the principal currency authority of that foreign country and any other balances or securities in foreign
Currency maintained with or issued by the International Monetary Fund, the International Bank for Reconstruction and Development, the International Development Association or the International Finance Corporation or Asian Development Bank or the Bank for International Settlements or any banking or financial institution 3[approved] by the Central Government in this behalf, provided that they are repayable within a period of ten years;
(b) Bills of exchange bearing two or more good signatures and drawn on and payable at any place in that foreign country and having a maturity not exceeding ninety days; and (c) Government securities of that foreign country maturing within ten years;
(ii) Any drawing rights representing a liability of the International Monetary Fund.
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1. Substituted for the figures and words “0.118489 grammes of fine gold per rupee” by Act No. 8 of 1991, w.r.e.f. 15/10/1990.
2. Substituted by Act No. 1 of 1984, w.e.f. 15/2/1984.
3. Substituted by Act No. 61 of 1981, w.e.f. 1/5/1982.
Section 34. Liabilities of the issue department
(1) The liabilities of the issue department shall be an amount equal to the total of the amount of the currency notes of the Government of India and bank notes for the time being in circulation. 1[***]
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1. Sub-sections (2) & (3) omitted.
Section 35. Section
[Section 35 repealed by Act No. 62 of 1948, w.e.f. 1st. January, 1949]
Section 36. Section
[Section 36 repealed by Act No. 55 of 1963, w.e.f. 1st. February, 1964]
Section 37. Suspension of assets requirements as to foreign securities
Notwithstanding anything contained in the foregoing provisions, the Bank may, with the previous sanction of the Central Government, for periods not exceeding six months in the first instance, which may, with the like sanction, be extended from time to time by periods not exceeding three months at a time, hold as assets foreign securities of less amount in value than that required by sub-section (2) of section 33.
Section 38. Obligations of government and the Bank in respect of rupee coin
The Central Government shall undertake not to put into circulation any rupees, except through the Bank, and Bank shall undertake not to dispose of rupee coin otherwise than for the purposes of circulation.
Section 39. Obligation to supply different forms of currency
(1) The Bank shall issue rupee coin on demand in exchange for bank notes and currency notes of the Government of India, and shall issue currency notes or bank notes on demand in exchange for coin which is legal tender under the Indian Coinage Act, 1906 (3 of 1906).
(2) The Bank shall, in exchange for currency notes or bank notes of two rupees or upwards, supply currency notes or bank notes of lower value or other coins which are legal tender under the Indian Coinage Act, 1906 (3 of 1906), in such quantities as may, in the opinion of the Bank, be required for circulation; and the Central Government shall supply such coins to the Bank on demand. If the Central Government at any time fails to supply such coins, the Bank shall be released from its obligations to supply them to the public.
Section 40. Transactions in foreign exchange
2[Transactions in foreign exchange. The Bank shall sell to or buy from any authorised person who makes a demand in that behalf at its office in Bombay, Calcutta, Delhi or Madras or at such of its branches as the Central Government may, by order, determine, foreign exchange at such rates of exchange and on such conditions as the Central Government may from time to time by general or special order determine, having regard so far as rates of exchange are concerned to its obligations to the International Monetary Fund:
PROVIDED that no person shall be entitled to demand to buy or sell foreign exchange of a value less than two lakhs of rupees.
Explanation: In this section “authorised person” means a person who is entitled by or under the Foreign Exchange Regulation Act, 1[1973 (46 of 1973)] to buy, or as the case may be, sell, the foreign exchange to which his demand relates.]
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1. Substituted by Act No. 1 of 1984, w.e.f. 15/2/1984.
2. Substituted for sections 40 and 41 by Act No. 23 of 1947.
Section 41 A. Section
[Section 41A. Obligation to provide remittance between India and Burma: repealed by Act No. 11 of 1947, w.e.f. 1st. April, 1947]
Section 42. Cash reserves of scheduled banks to be kept with the Bank
(1) Every bank included in Scheduled II shall maintain with the Bank an average daily balance the amount of which shall not be less than 11[such per cent of the total of the demand and time liabilities in India of such bank as shown in the return referred to in sub-section (2), as the Bank may from time to time, having regard to the needs of securing the monetary stability in the country, notify in the Gazette of India]
PROVIDED that the Bank may, by notification in the Gazette of India, increase the said rate to such higher rate as may be specified in the notification so however that the rate shall not be more than 1[twenty per cent] of the total of the demand and time liabilities.
Explanation: For the purposes of this section-
(a) “Average daily balance” shall mean the average of the balances held at the close of business on each day of a 2[fortnight;]
2[(b) “Fortnight” shall mean the period from Saturday to the second following Friday, both days inclusive;]
(c) “Liabilities” shall not include-
(i) The paid-up capital or the reserves or any credit balance in the profit and loss account of the bank;
(ii) The amount of any loan taken from the bank or from the Development Bank 5[or from the Exim Bank] 7[or from the Reconstruction Bank] 6[or from the National Housing Bank] or from the 10[National Bank] 8[or from the Small Industries Bank;]
(iii) In the case of a State co-operative bank, also any loan taken by such bank from a State Government 3[or from the National Co-operative Development Corporation established under the National Co-operative Development Corporation Act, 1962 (26 of 1962)] and any deposit of money with such bank representing the reserve fund or any part thereof maintained with it by any co-operative society within its area of operation;
(iv) In the case of a State 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;
3[(v) In the case of a Regional Rural Bank, also any loan taken by such bank from its Sponsor Bank;
(d) The aggregate of the “liabilities” of a scheduled bank, which is not a State co-operative bank, to-
(i) The State Bank;
(ii) A subsidiary bank as defined in section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959);
(iii) A corresponding new bank constituted by section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970);
3[(iiia) A corresponding new bank constituted by section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980);]
(iv) A banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
(v) A co-operative Bank; or
(vi) 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 scheduled bank;
(e) The aggregate of the “liabilities” of a scheduled bank, which is a State co-operative bank, to-
(i) The State Bank;
(ii) A subsidiary bank as defined in section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959);
(iii) A corresponding new bank constituted by section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970);
3[(iiia) A corresponding new bank constituted by section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980);
(iv) A banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949); or . (v) 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 State co-operative bank.
(1A) Notwithstanding anything contained in sub-section (1), the bank may, by notification in the Gazette of India, direct that every scheduled bank shall, with effect from such date as may be specified in the notification, maintain with the bank, in addition to the balance prescribed by or under sub-section (1), an additional average daily balance the amount of which shall not be less than the rate specified in the notification, such additional balance being calculated with reference to the excess of the total of the demand and time liabilities of the bank as shows in the return referred to in sub-section (2) over the total of its demand and time liabilities at the close of business on the date specified in the notification as shown by such return so however, that the additional balance shall, in no case, be more than such excess:
3[PROVIDED that the bank may, by a separate notification in the Gazette of India, specify different dates in respect of a bank subsequently, included in the Schedule II.]
4[(1AA) ****]
4[(1B) *****]
3[(1C) The bank may, for the purposes of this section, 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 scheduled bank, and if any question arises as to whether any transaction or class of transactions shall be regarded, for the purposes of this section, as liability in India of a scheduled bank, the decision of the Bank thereon shall be final.]
(2) Every scheduled bank shall send to the bank a return signed by two responsible officers of such bank showing-
(a) The amount of its demand and time liabilities and the amount of its borrowings from banks in India, classifying them into demand and time liabilities,
(b) The total amount of legal tender notes and coins held by it in India,
(c) The balance held by it at the Bank in India,
(d) The balances held by it at other banks in current account and the money at call and short notice in India,
(e) The investments (at book value) in Central and State Government securities including treasury bills and treasury deposit receipts,
(f) The amount of advances in India,
(g) The inland bills purchased and discounted in India and foreign bills purchased and discounted,
2[At the close of business on each alternate Friday, and every such return shall be sent not later than seven days after the date to which it relates:]
PROVIDED that the bank may, by notification in the Gazette of India, delete or modify or add to any of the particulars specified in the foregoing clauses:
PROVIDED FURTHER that where 3[such alternate] Friday is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881), for one or more offices of a scheduled bank, the return shall give the preceding working day’s figures in respect of such office or offices, but shall nevertheless be deemed to relate to that Friday:
2[PROVIDED ALSO that where the bank is satisfied that the furnishing of a fortnightly return under his sub-section is impracticable in the case of any scheduled bank by reason of the geographical position of the bank and its branches, the Bank may allow such bank-
(i) To furnish a provisional return for the fortnight within the period aforesaid to be followed by a final return not later than twenty days after the date to which it relates, or
(ii) To furnish in lieu of a fortnightly return a monthly return to be sent not later than twenty days after the end of the month to which it relates giving the details specified in this sub-section in respect of such bank at the close of business for the month.]
3[(2A) Where the last Friday of a month is not an alternate Friday for the purpose of sub-section (2), every scheduled bank shall send to the bank, a special return giving the details specified in sub-section (2) as at the close of business on such last Friday or where such last Friday is a public holiday under the Negotiable Instruments Act, 1881 (26 of 1881), as at the close of business on the preceding working day and such return shall be sent not later than seven days after the date to which it relates.]
(3) If the average daily balance held at the bank by a scheduled bank during any 2[fortnight] is below the minimum prescribed by or under sub-section (1) or sub-section (1A), such scheduled bank shall be liable to pay to the bank in respect of that 2[fortnight] penal interest at a rate of three per cent above the bank rate on the amount by which such balance with the bank falls short of the prescribed minimum, and if during the next succeeding 2[fortnight] such average daily balance is still below the prescribed minimum, the rates of penal interest shall be increased to a rate of five per cent above the bank rate in respect of that 2[fortnight] and each subsequent 2[fortnight] during which the default continues on the amount by which such balance at the bank falls short of the prescribed minimum.
(3A) Where under the provisions of sub-section (3) penal interest at the increased rate of five per cent above the bank rate has become payable by a scheduled bank, if thereafter the average daily balance held at the Bank during the next succeeding 2[fortnight] is still below the prescribed minimum: -
(a) Every director, manager or secretary of the scheduled bank, 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 2[fortnight] during which the default continues, and
(b) The Bank may prohibit the scheduled bank from receiving after the said 2[fortnight] any fresh deposit,
And, if default is made by the scheduled bank in complying with the prohibition referred to in clause (b), every director and officer of the schedule bank who is knowingly and wilfully a party to such default or who through negligence or otherwise contributes to such default shall in respect of each such default 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 day after the first on which a deposit received in contravention of such prohibition is retained by the scheduled bank.
Explanation: In this sub-section “officer” includes a manager, secretary, branch manager, and branch secretary.
(4) Any scheduled bank failing to comply with the provisions of sub-section (2) shall be liable to pay to the Bank a penalty of one hundred rupees for each day during which the failure continues.
(5)
(a) The penalties imposed by sub-sections (3) and (4) shall be payable within a period of fourteen days from the date on which a notice issued by the Bank demanding the payment of the same is served by the scheduled bank, and in the event of failure of the scheduled bank to pay the same within such period, may be levied by a direction of the principal civil court having jurisdiction in the area where an office of the defaulting bank is situated, such direction to be made only upon an application made in this behalf to the court by the Bank;
(b) When the court makes a direction under clause (a), it shall issue a certificate specifying the sum payable by the scheduled bank and every such certificate shall be enforceable in the same manner as if it were a decree made by the court in a suit;
(c) Notwithstanding anything contained in this section, if the Bank is satisfied that the defaulting bank had sufficient cause for its failure to comply with the provisions of sub-sections (1), (1A) or (2), it may not demand the payment of the penal interest of the penalty, as the case may be.
(6) The Bank shall, save as hereinafter provided, by notification in the Gazette of India;
(a) Direct the inclusion in Schedule II of any bank not already so included which carries on the business of banking in 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 State co-operative bank or a company as defined in section 3 of the Companies Act, 1956 (1 of 1956), or an institution notified by the Central Government in this behalf or a corporation or a company incorporated by or under any law in force in any place outside 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 Regulation Act, 1949 (10 of 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-clause (ii) of clause (b) for such period as the Bank considers reasonable to give the scheduled bank an 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 in that Schedule whenever any scheduled bank changes its name.
Explanation: In this sub-section the expression “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.
9[(6A) In considering whether a State co-operative bank or a regional rural bank should be included in or excluded from Schedule II, it shall be competent for the Bank to act on a certificate from the National Bank on the question whether or not a State co-operative bank or a regional rural bank, as the case may be, satisfies the requirements as to paid-up capital and reserves or whether its affairs are not being conducted in a manner detrimental to the interests of its depositors.]
(7) The Bank may, for such period and subject to such conditions as may be specified, grant to any scheduled bank such exemptions from the provisions of this section as it thinks fit with reference to all or any of its offices or with reference to the whole or any part of its assets and liabilities.
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1. Substituted by Act No. 9 of 1991, for the words “fifteen per cent”.
2. Substituted by Act No. 1 of 1984, w.e.f. 29/3/1985.
3. Inserted by Act No. 1 of 1984, w.e.f. 29/3/1985.
4. Sub-section (1-AA) and (1-B) Omitted by Act No. 26 of 2006 w.e.f. 12-6-2006.
5. Inserted by Act No. 28 of 1981, w.e.f. 1/1/1982.
6. Inserted by Act No. 53 of 1987, w.e.f. 9/7/1988.
7. Inserted by Act No. 62 of 1984, w.e.f. 20/3/1985.
8. Inserted by Act No. 39 of 1989, w.e.f. 7/3/1990.
9. Inserted by Act No. 61 of 1981, w.e.f. 1/5/1982.
10. Substituted by Act No. 61 of 1981, w.e.f. 1/5/1982.
11. Subs. by Act No. 26 of 2006 w.e.f. 12-6-2006.
Section 43. Publication of consolidated statement by the bank
The Bank shall cause to be published each 1[fortnight] a consolidated statement showing the aggregate liabilities and assets of all the scheduled banks together, based on the returns and information received under this Act or any other law for the time being in force.
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1. Substituted by Act No. 1 of 1984, w.e.f. 29/3/1985.
Section 43 A. Protection of action taken in good faith
(1) No suit or other legal proceeding shall lie against the bank or any of its officers for anything which is in good faith done or intended to be done in pursuance of section 42 or section 43 or in pursuance of the provision of chapter IIIA.
(2) No suit or other legal proceeding shall lie against the bank or any of its officers for any damage caused or likely to be caused by anything which is in good faith done or intended to be done in pursuance of section 42 or section 43 or in pursuance of the provisions of chapter III-A.
Section 44. Section
[Section 44. Power to require returns from co-operative banks :repealed by the Banking Laws (Application to Co-operative Societies) Act, 1965, w.e.f. 1st. March 1966]
Section 45. Appointment of agents
1[Appointment of agents. (1) Unless otherwise directed by the Central Government with reference to any place, the bank may, having regard to public interest, convenience of banking, banking development and such other factors which in its opinion are relevant in this regard, appoint the National Bank, or the State Bank, or a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), as its agent at all places, or at any place in India for such purposes as the Bank may specify.
(2) When any bank is appointed by the bank as its agent under sub-section (1) to receive on behalf of the Bank any payment required to be made into the Bank, or any bill, hundies or other securities required to be delivered into the Bank, under any law or rule, regulations or other instructions having the force of law, the same may be paid or delivered into the bank so appointed as the agent of the bank.]
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1. Substituted by Act No. 61 of 1981, w.e.f. 1/5/1982.
Section 45 A. Definitions
In this chapter, unless the context otherwise requires: -
(a) “Banking company” means a banking company as defined in section 5 of the Banking Regulation Act, 1949 (10 of 1949), and includes the State Bank of India, any subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), any corresponding new bank constituted by section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), and any other financial institution notified by the Central Government in this behalf;
(b) “Borrower” means any person to whom any credit limit has been sanctioned by any banking company, whether availed of or not, and includes-
(i) In the case of a company or corporation, as subsidiaries;
(ii) In the case of a Hindu undivided family, any member thereof or any firm in which such member is a partner;
(iii) In the case of a firm, any partner thereof or any other firm in which such partner is a partner; and
(iv) In the case of an individual, any firm in which such individual is a partner;
(c) “Credit information” means any information relating to-
(i) The amounts and the nature of loans or advances and other credit facilities granted by a banking company to any borrower or class of borrowers;
(ii) The nature of security taken from any borrower or class of borrowers for credit facilities granted to him or to such class;
(iii) The guarantee furnished by a banking company for any of its customers or any class of its customers;
(iv) The means, antecedents, history of financial transactions and the credit worthiness of any borrower or class of borrowers;
(v) Any other information which the Bank may consider to be relevant for the more orderly regulation of credit or credit policy.
Section 45 B. Power of bank to collect credit information
The bank may-
(a) Collect, in such manner as it may think fit, credit information from banking companies; and
(b) Furnish such information to any banking company in accordance with the provisions of section 45D.
Section 45 C. Power to call for returns containing credit information
(1) For the purpose of enabling the bank to discharge its functions under this chapter, it may at any time direct any banking company to submit to it such statements relating to such credit information and in such form and within such time as may be specified by the Bank from time to time.
(2) A banking company shall, notwithstanding anything to the contrary contained in any law for time being in force or in any instrument regulating the constitution thereof or in any agreement executed by it, relating to the secrecy of its dealings with its constituents, be bound to comply with any direction issued under sub-section (1).
Section 45 D. Procedure for furnishing credit information to banking companies
(1) A banking company may, in connection with any financial arrangement entered into or proposed to be entered into by it, with any person, make an application to the Bank in such form as the Bank may specify requesting it to furnish the applicant with such credit information as may be specified in the application.
(2) On receipt of an application under sub-section (1), the bank shall, as soon as may be, furnish the applicant with such credit information relating to the matters specified in the application, as may be in its possession:
PROVIDED that the information so furnished shall not disclose the names of the banking companies which have submitted such information to the Bank.
(3) The bank may in respect of each application levy such fees, not exceeding twenty-five rupees, as it may deem fit for furnishing credit information.
Section 45 E. Disclosure of information prohibited
(1) Any credit information contained in any statement submitted by a banking company under section 45C or furnished by the bank to any banking company under section 45D, shall be treated as confidential and shall not, except for the purposes of this chapter, be published or otherwise disclosed.
(2) Nothing in this section shall apply to-
(a) The disclosure by any banking company, with the previous permission of the Bank, of any information furnished to the Bank under section 45C;
(b) The publication by the Bank, if it considers necessary in the public interest so to do, of any information collected by it under section 45C, in such consolidated form as it may think fit without disclosing the name of any banking company or its borrowers;
(c) The disclosure or publication by the banking company or by the bank of any credit information to any other banking company or in accordance with the practice and usage customary among bankers or as permitted or required under any other law:
1[(d) the disclosures of any credit information under the Credit Information Companies (Regulation) Act, 2005.]
PROVIDED that any credit information received by a banking company under this clause shall not be published except in accordance with the practice and usage customary among bankers or as permitted or required under any other law.
(3) Notwithstanding anything contained in any law for the time being in force, no court, tribunal or other authority shall compel the Bank or any banking company to produce or to give inspection of any statement submitted by that banking company under section 45C or to disclose any credit information furnished by the Bank to that banking company under section 45D.
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1. Clause (d) Inserted by Act No. 30 of 2005 w.e.f. 23-6-2005.
Section 45 F. Certain claims for compensation barred
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 of this chapter.
Section 45 G. Section
[Section 45G. Penalties: repealed by the Reserve Bank of India (Amendment) Act, 1974]
Section 45 H. Chapter III-B not to apply in certain cases
CHAPTER III-B
The provisions of this chapter shall not apply to the State Bank or banking company as defined in section 5 of the Banking Regulation Act, 1949 (10 of 1949) or 1[a corresponding new bank as defined in clause (da) of section 5 of that Act or a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959)] or a Regional Rural Bank or a co-operative bank or a primary agricultural credit society or a primary credit society:
PROVIDED that for the purposes of this chapter, the Tamil Nadu Industrial Investment Corporation Limited shall not be deemed to be a banking company.
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1. Substituted by Act No. 1 of 1984, w.e.f. 15/2/1984.
Section 45 I. Definitions
In this chapter, unless the context otherwise requires-
2[(a) “Business of a non-banking financial institution” means carrying on of the business of a financial institution referred to in clause (c) and includes business of a non-banking financial company referred to in clause (f);]
3[(aa)] “Company” means a 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;
(b) “Corporation” means a corporation incorporated by an Act of any Legislature;
1[(bb) “Deposit” includes and shall be deemed always to have included any receipt of money by way of deposit or loan or in any other form, but does not include: -
(i) Amounts raised by way of share capital;
(ii) Amounts contributed as capital by partners of a firm;
(iii) Amounts received from a scheduled bank or a co-operative bank or any other banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
(iv) Any amount received from: -
(a) The Development Bank,
(b) A State Financial Corporation,
(c) Any financial institution specified in or under section 6A of the Industrial Development Bank of India Act, 1964 (18 of 1964), or
(d) Any other institution that may be specified by the Bank in this behalf;
(v) Amounts received in the ordinary course of business, by way of-
(a) Security deposit,
(b) Dealership deposit,
(c) Earnest money, or
(d) Advance against orders for goods, properties or services;
(vi) Any amount received from an individual or a firm or an association of individuals not being a body corporate, registered under any enactment relating to money lending which is for the time being in force in any State; and
(vii) Any amount received by way of subscriptions in respect of a chit.
Explanation I: “Chit” has the meaning assigned to it in clause (b) of section 2 of the Chit Funds Act, 1982 (40 of 1982).
Explanation II: Any credit given by a seller to a buyer on the sale of any property (whether movable or immovable) shall not be deemed to be deposit for the purposes of this clause;
(c) “Financial institution” means any non-banking institution which carries on as its business or part of its business any of the following activities, namely: -
(i) The financing, whether by way of making loans or advances or otherwise, of any activity other than its own;
(ii) The acquisition of shares, stock, bonds, debentures or securities issued by a government or local authority or other marketable securities of a like nature;
(iii) Letting or delivering of any goods to a hirer under a hire-purchase agreement as defined in clause (c) of section 2 of the Hire-Purchase Act, 1972 (26 of 1972);
(iv) The carrying on of any class of insurance business;
(v) Managing, conducting or supervising, as foreman, agent or in any other capacity, of chits or kuries as defined in any law which is for the time being in force in any State, or any business, which is similar thereto;
(vi) Collecting, for any purpose or under any scheme or arrangement by whatever name called monies in lump sum or otherwise, by way of subscriptions or by sale of units, or other instruments or in any other manner and awarding prizes or gifts, whether in cash or kind, or disbursing monies in any other way, to persons from whom monies are collected or to any other person,
4[But does not include any institution, which carries on as its principal business: -
(a) Agricultural operations; or
(aa) Industrial activity; or;]
(b) The purchase or sale of any goods (other than securities) or the providing of any services; or
(c) The purchase, construction or sale of immovable property, so, however, that no portion of the income of the institution is derived from the financing of purchases, constructions or sales of immovable property by other persons;
2[Explanation : For the purposes of this clause, “industrial activity” means any activity specified in sub-clauses (i) to (xviii) of clause (c) of section 2 of the Industrial Development Bank of India Act, 1964 (18 of 1964)];
(d) “Firm” means a firm as defined in the Indian Partnership Act, 1932 (9 of 1932);
(e) “Non-banking institution” means a company, corporation or co-operative society.
2[(f) “non-banking financial company” means-
(i) A financial institution which is a company;
(ii) A non banking institution which is a company and which has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner, or lending Tiny manner;
(iii) Such other non-banking institution or class of such institutions, as the bank may, with the previous approval of the Central Government and by notification in the Official Gazette, specify.]
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1. Substituted by Act No. 1 of 1984, w.e.f. 15/2/1984.
2. Inserted by Reserve Bank of India (Amendment) Act, 1997, w.r.e.f. 9/1/1997.
3. Earlier clause (a) renumbered to (aa) by Reserve Bank of India (Amendment) Act, 1997, w.e.f. 9/1/1997.
4. Substituted by Reserve Bank of India (Amendment) Act, 1997, w.e.f. 9/1/1997.
Section 45 IA. Requirement of registration and net owned fund
1[Requirement of registration and net owned fund. (1) Notwithstanding anything contained in this Chapter or in any other law for the time being in force, no non-banking financial company shall commence or carry on the business of a non-banking financial institution without-
(a) Obtaining a certificate of registration issued under this Chapter; and
(b) Having the net owned fund of twenty five lakh rupees or such other amount, not exceeding two hundred lakhs, as the bank may, be notification in the Official Gazette, specify.
(2) Every non-banking financial company shall make an application for registration to the bank in such form as the bank may specify:
PROVIDED that a non-banking financial company in existence on the commencement of the Reserve Bank of India (Amendment) Act, 1997 shall make an application for registration to the bank before the expiry of six months from such commencement and notwithstanding anything contained in sub-section (1) may continue to carry on the business of a non-banking financial institution until a certificate of registration is issued to it or rejection of application for registration is communicated to it.
(3) Notwithstanding anything contained in sub-section (1), a non-banking financial company in existence on the commencement of the Reserve Bank of India (Amendment) Act, 1997 and having a net owned fund of less than twenty five lakh rupees may, for the purpose of enabling such company to fulfil the requirement of the net owned fund, continue to carry on the business of a non-banking financial institution-
(i) For a period of three years from such commencement; or
(ii) For such further period as the bank may, after recording the reasons in writing for so doing, extend, subject to the condition that such company shall, within three months of fulfilling the requirement of the net owned fund, inform the bank about such fulfilment:
PROVIDED that the period allowed to continue business under this sub-section shall in no case exceed six years in the aggregate.
(4) The bank may, for the purpose of considering the application for registration, require to be satisfied by an inspection of the books of the non-banking financial company or otherwise that the following conditions are fulfilled: -
(a) That the non-banking financial company is or shall be in a position to pay its present or future depositors in full as and when their claims accrue;
(b) That the affairs of the non-banking financial company are not being or are not likely to be conducted in a manner detrimental to the interest of its present or future depositors;
(c) That the general character of the management or the proposed management of the non-banking financial company shall not be prejudicial to the public interest or the interests of its depositors;
(d) That the non-banking financial company has adequate capital structure and earning prospects;
(e) That the public interest shall be served by the grant of certificate of registration to the non-banking financial company to commence or to carry on the business in India;
(f) That the grant of certificate of registration shall not be prejudicial to the operation and consolidation of the financial sector consistent with monetary stability and economic growth considering such other relevant factors which the bank may, by notification in the Official Gazette, specify; and
(g) Any other condition, fulfilment of which in the opinion of the bank, shall be necessary to ensure that the commencement of or carrying on of the business in India by a non-banking financial company shall not be prejudicial to the public interest or in the interest of the depositors.
(5) The bank may, after being satisfied that the conditions specified in sub-section (4) are fulfilled, grant a certificate of registration subject to such conditions which it may consider fit to impose.
(6) The bank may cancel a certificate of registration granted to a non-banking financial company under this section if such company-
(i) Ceases to carry on the business of a non-banking financial institution in India; or
(ii) Has failed to comply with any condition subject to which the certificate of registration had been issued to it; or
(iii) At any time fails to fulfil any of the conditions referred to in clauses (a) to (g) of sub-section (4); or
(iv) Fails-
(a) To comply with any direction issued by the bank under the provisions of this Chapter; or
(b) To maintain accounts in accordance with the requirements of any law or any direction or order issued by the bank under the provisions of this Chapter; or
(c) To submit or offer for inspection its books of accounts and other relevant documents when so demanded by an inspecting authority of the bank; or
(v) Has been prohibited from accepting deposit by an order made by the bank under the provisions of this Chapter and such order has been in force for a period of not less than three months:
PROVIDED that before cancelling a certificate of registration on the ground that the non-banking financial company has failed to comply with the provisions of clause (ii) or has failed to fulfil any of the conditions referred to in clause (iii) the bank, unless it is of the opinion that the delay in cancelling the certificate of registration shall be prejudicial to public interest or the interest of the depositors or the non-banking financial company, shall give an opportunity to such company on such terms as the bank may specify for taking necessary steps to comply with such provisions or fulfilment of such condition:
PROVIDED FURTHER that before making any order of cancellation of certificate of registration, such company shall be given a reasonable opportunity of being heard.
(7) A company aggrieved by the order of rejection of application for registration or cancellation of certificate of registration may prefer an appeal, within a period of thirty days from the date on which such order of rejection or cancellation is communicated to it, to the Central Government and the decision of the Central Government where an appeal has been preferred to it, or of the bank where no appeal has been preferred, shall be final:
PROVIDED that before making any order of rejection of appeal, such company shall be given a reasonable opportunity of being heard.
Explanation: For the purposes of this section-
(I) “Net owned fund” means-
(a) The aggregate of the paid-up equity capital and free reserves as disclosed in the latest balance sheet of the company after deducting therefrom-
(i) Accumulated balance of loss;
(ii) Deferred revenue expenditure; and
(iii) Other intangible assets; and
(b) Further reduced by the amounts representing-
(1) Investments of such company in shares of-
(i) Its subsidiaries;
(ii) Companies in the same group;
(iii) All other non-banking financial companies; and
(2) The book value of debentures, bonds, outstanding loans and advances (including hire-purchase and lease finance) made to, and deposits with-
(i) Subsidiaries of such company; and
(ii) Companies in the same group,
To the extent such amount exceeds ten per cent, of (a) above.
(II) “Subsidiaries” and “companies in the same group” shall have the same meanings assigned to them in the Companies Act, 1956 (1 of 1956).]
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1. Inserted by Reserve Bank of India (Amendment) Act, 1997, w.r.e.f. 9/1/1997.
Section 45 IB. Maintenance of percentage of assets
1Maintenance of percentage of assets. (1) Every non-banking financial company shall invest and continue to invest in India in unencumbered approved securities, valued at a price not exceeding the current market price of such securities, an amount which, at the close of business on any day, shall not be less than five per cent or such higher percentage not exceeding twenty five per cent, as the bank may, from time to time and by notification in the Official Gazette, specify, of the deposits outstanding at the close of business on the last working day of the second preceding quarter:
PROVIDED that the bank may specify different percentages of investment in respect of different classes of non-banking financial companies.
(2) For the purpose of ensuring compliance with the provisions of this section, the bank may require every non-banking financial company to furnish a return to it in such form, in such manner and for such period as may be specified by the bank.
(3) If the amount invested by a non-banking financial company at the close of business on any day falls below the rate specified under sub-section (1), such company shall be liable to pay to the bank, in respect of such shortfall, a penal interest at a rate of three per cent per annum above the bank rate on such amount by which the amount actually invested falls short of the specified percentage, and where the shortfall continues in the subsequent quarters, the rate of penal interest shall be five per cent per annum above the bank rate on such shortfall for each subsequent quarter.
(4)
(a) The penal interest payable under sub-section (3) shall be payable within a period of fourteen days from the date on which a notice issued by the bank demanding payment of the same is served on the non-banking financial company and, in the event of a failure of the non-banking financial company to pay the same within such period, penalty may be levied by a direction of the principal civil court having jurisdiction in the area where an office of the defaulting non-banking financial company is situated and such direction shall be made only upon an application made in this behalf to the court by the bank; and
(b) When the court makes a direction under clause (a), it shall issue a certificate specifying the sum payable by the non-banking financial 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.
(5) Notwithstanding anything contained in this section, if the bank is satisfied that the defaulting non-banking financial company had sufficient cause for its failure to comply with the provisions of sub-section (1), it may not demand the payment of the penal interest.
Explanation: For the purposes of this section: -
(i) “Approved securities” means securities of any State Government or of the Central Government and such bonds, both the principal whereof and the interest whereon shall have been fully and unconditionally guaranteed by any such government;
(ii) “Unencumbered approved securities” includes the approved securities lodged by the non-banking financial company with another institution for an advance or any other arrangement to the extent to which such securities have not been drawn against or availed of or encumbered in any manner;
(iii) “Quarter” means the period of three months, ending on the last day of March, June, September or December.
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1. Inserted by Reserve Bank of India (Amendment) Act, 1997, w.r.e.f. 9/1/1997.
Section 45 IC. Reserve fund
(1) Every non-banking financial company shall create a reserve fund and transfer therein a sum not less than twenty per cent of its net profit every year as disclosed in the profit and loss account and before any dividend is declared.
(2) No appropriation of any sum from the reserve fund shall be made by the non-banking financial company except for the purpose as may be specified by the bank from time to time and every such appropriation shall be reported to the bank within twenty-one days from the date of such withdrawal:
PROVIDED that the bank may, in any particular case and for sufficient cause being shown, extend the period of twenty-one days by such further period as it thinks fit or condone any delay in making such report.
(3) Notwithstanding anything contained in sub-section (1), the Central Government may, on the recommendation of the bank and having regard to the adequacy of the paid-up capital and reserves of a non-banking financial company in relation to its deposit liabilities, declare by order in writing that the provisions of sub-section (1) shall not be applicable to the non-banking financial company for such period as may be specified in the order:
PROVIDED that no such order shall be made unless 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 non-banking financial company.]
Section 45 J. Section
Bank to regulate or prohibit issue of prospectus or advertisement soliciting deposits of money.
]
The bank may, if it considers necessary in the public interest so to do, by general or special order-
(a) Regulate or prohibit the issue by any non-banking institution of any prospectus or advertisement soliciting deposits of money from the public; and
(b) Specify the conditions subject to which any such prospectus or advertisement, if not prohibited, may be issued.
Section 45 JA. Power of bank to determine policy and issue directions
1[Power of bank to determine policy and issue directions. (1) If the bank is satisfied that, in the public interest or to regulate the financial system of the country to its advantage or to prevent the affairs of any non-banking financial company being conducted in a manner detrimental to the interest of the depositors or in a manner prejudicial to the interest of the non-banking financial company, it is necessary or expedient so to do, it may determine the policy and give directions to all or any of the non-banking financial companies relating to income recognition, accounting standards, making of proper provision for bad and doubtful debts, capital adequacy based on risk weights for assets and credit conversion factors for off balance-sheet items and also relating to deployment of funds by a non-banking financial company or a class of non-banking financial companies or non-banking financial companies generally, as the case may be, and such non-banking financial companies shall be bound to follow the policy so determined and the directions so issued.
(2) Without prejudice to the generality of the powers vested under sub-section (1), the bank may give directions to non-banking financial companies generally or to a class of non-banking financial companies or to any non-banking financial company in particular as to-
(a) The purpose for which advances or other fund based or non-fund based accommodation may not be made; and . (b) The maximum amount of advances or other financial accommodation or investment in shares and other securities which, having regard to the paid-up capital, reserves and deposits of the non-banking financial company and other relevant considerations, may be made by that non-banking financial company to any person or a company or to a group of companies.]
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1. Inserted by Reserve Bank of India (Amendment) Act, 1997, w.r.e.f. 9/1/1997.
Section 45 K. Power of bank to collect information from non-banking institutions as to deposits and to give directions
(1) The bank may at any time direct that every non-banking institution shall furnish to the bank, in such form, at such intervals and within such time, such statements, information or particulars relating to or connected with deposits received by the non-banking institution, as may be specified by the bank by general or special order.
(2) Without prejudice to the generality of the power vested in the bank under sub-section (1), the statements, information or particulars to be furnished under sub-section (1), may relate to all or any of the following matters, namely, the amount of the deposits, the purposes and periods for which, and the rates of interest and other terms and conditions on which, they are received.
(3) The bank may, if it considers necessary in the public interest so to do, give directions to non-banking institutions either generally or to any non-banking institution or group of non-banking institutions in particular, in respect of any matters relating to or connected with the receipt of deposits, including the rates of interest payable on such deposits, and the periods for which deposits may be received.
(4) If any non-banking institution fails to comply with any direction given by the bank under sub-section (3), the bank may prohibit the acceptance of deposits by that non-banking institution.
(5) 1[***]
(6) Every non-banking institution receiving deposits shall, if so required by the bank and within such time as the bank may specify, cause to be sent at the cost of the non-banking institution a copy of its annual balance-sheet and profit and loss account or other annual accounts to every person from whom the non-banking institution holds, as on the last day of the year to which the accounts relate, deposits higher than such sum as may be specified by the bank.
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1. Omitted by Act No. 51 of 1974.
Section 45 L. Power of bank to call for information from financial institutions and to give directions
(1) If the bank is satisfied for the purpose of enabling it to regulate the credit system of the country to its advantage it is necessary so to do, it may-
(a) Require financial institutions either generally or any group of financial institutions or financial institution in particular, to furnish to the Bank in such form, at such intervals and within such time, such statements, information or particulars relating to the business of such financial institutions or institution, as may be specified by the bank by general or special order;
(b) Give to such institutions either generally or to any such institution in particular, directions relating to the conduct of business by them or by it as financial institutions or institution.
(2) Without prejudice to the generality of the power vested in the bank under clause (a) of sub-section (1), the statements, information or particulars to be furnished by a financial institution may relate to all or any of the following matters, namely, the paid-up capital, reserves or other liabilities, the investments whether in government securities or otherwise, the persons to whom, and the purposes and periods for which, finance is provided and the terms and conditions, including the rate of interest, on which it is provided.
(3) In issuing directions to any financial institution under clause (b) of sub-section (1), the bank shall have due regard to the conditions in which, and the objects for which, the institution has been established, its statutory responsibilities, if any, and the effect the business of such financial institution is likely to have on trends in the money and capital markets.
Section 45 M. Duty of non-banking institutions to furnish statements, etc., required by bank
It shall be the duty of every non-banking institution to furnish the statements, information or particulars called for, and to comply with any direction given to it, under the provisions of this chapter.
Section 45 MA. Powers and duties of auditors
(1) It shall be the duty of an auditor of a non-banking institution to inquire whether or not the non-banking institution has furnished to the bank such statements, information or particulars relating to or connected with deposits received by it, as are required to be furnished under this chapter, and the auditor shall, except where he is satisfied on such inquiry that the non-banking institution has furnished such statements, information or particulars, make a report to the bank giving the aggregate amount of such deposits held by the non-banking institution.
1[(1A) The bank may, on being satisfied that it is necessary so to do, in the public interest or in the interest of the depositors or for the purpose of proper assessment of the books of accounts, issue directions to any non-banking financial company or any class of non-banking financial companies or non-banking financial companies generally or to the auditors of such non-banking financial company or companies relating to balance sheet, profit and loss account, disclosure of liabilities in the books of accounts or any matter relating thereto.]
(2) Where, in the case of 2[a non-banking financial company] the auditor has made, or intends to make, a report to the bank under sub-section (1), he shall include in his report under sub-section (2) of section 227 of the Companies Act, 1956 (1 of 1956), the contents of the report which he has made, or intends to make, to the bank.
1[(3) Where the bank is of the opinion that it is necessary so to do in the public interest or in the interest of the non-banking financial company, or in the interest of depositors of such company it may at any time by order direct that a special audit of the accounts of the non-banking financial company in relation to any such transaction or class of transactions or for such period or periods, as may be specified in the order, shall be conducted and the bank may appoint an auditor or auditors to conduct such special audit and direct the auditor or the auditors to submit the report to it.
(4) The remuneration of the auditors as may be fixed by the bank, having regard to the nature and volume of work involved in the audit and the expenses of or incidental to the audit, shall be borne by the non-banking financial company so audited.]
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1. Inserted by Reserve Bank of India (Amendment) Act, 1997, w.r.e.f. 9/1/1997.
2. Substituted for words “a non-banking institution, being a company” by Reserve Bank of India (Amendment) Act, 1997, w.e.f. 9/1/1997.
Section 45 MB. Power of bank to prohibit acceptance of deposit and alienation of assets
1[Power of bank to prohibit acceptance of deposit and alienation of assets. (1) If any non-banking financial company violates the provisions of any section or fails to comply with any direction or order given by the bank under any of the provisions of this Chapter, the bank may prohibit the non-banking financial company from accepting any deposit.
(2) Notwithstanding anything to the contrary contained in any agreement or instrument or any law for the time being in force, the bank, on being satisfied that it is necessary so to do in the public interest or in the interest of the depositors, may direct, the non-banking financial company against which an order prohibiting from accepting deposit has been issued, not to sell, transfer, create charge or mortgage or deal in any manner with its property and assets without prior written permission of the bank for such period not exceeding six months from the date of the order.
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1. Inserted by Reserve Bank of India (Amendment) Act, 1997, w.r.e.f. 9/1/1997.
Section 45 MC. Power of bank to file winding up petition
(1) The bank, on being satisfied that a non-banking financial company-
(a) Is unable to pay its debt; or
(b) Has by virtue of the provisions of section 45-IA become disqualified to carry on the business of a non-banking financial institution; or
(c) Has been prohibited by the bank from receiving deposit by an order and such order has been in force for a period of not less than three months; or
(d) The continuance of the non-banking financial company is detrimental to the public interest or to the interest of depositors of the company,
May file an application for winding up of such non-banking financial company under the Companies Act, 1956 (1 of 1956).
(2) A non-banking financial company shall be deemed to be unable to pay its debt if it has refused or has failed to meet within five working days any lawful demand made at any of its offices or branches and the bank certifies in writing that such company is unable to pay its debt.
(3) A copy of every application made by the bank under sub-section (1) shall be sent to the Registrar of Companies.
(4) All the provisions of the Companies Act, 1956 (1 of 1956) relating to winding up of a company shall apply to a winding up proceeding initiated on the application, made by the bank under this provision.]
Section 45 N. Inspection
(1) The bank may, at any time, cause an inspection to be made by one or more of its officers or employees or other persons (hereinafter in this section referred to as the inspecting authority)-
(i) Of any non-banking institution, including a financial institution, for the purposes of verifying the correctness or completeness of any statement, information or particulars furnished to the bank or for the purpose of obtaining any information or particulars which the non-banking institution has failed to furnished on being called upon to do so; or
(ii) Of any non-banking institution being a financial institution, if the bank considers it necessary or expedient to inspect that institution.
(2) It shall be the duty of every director or member of any committee or other body for the time being vested with the management of the affairs of the non-banking institution or other officer or employee thereof to produce to the inspecting authority all such books, accounts and other documents in his custody or power and to furnish that authority with any statements and information relating to the business of the institution as that authority may require of him, within such time as may be specified by that authority
(3) The inspection authority may examine on oath director or member of any committee or body for the time being vested with the management of the affairs of the non-banking institution or other officer or employee thereof, in relation to its business and may administer an oath accordingly.
Section 45 NA. Deposits not to be solicited by unauthorised persons
No person shall solicit on behalf of any non-banking institution either by publishing or causing to be published any prospectus or advertisement or in any other manner deposits of money from the public unless-
(a) He has been authorised in writing by the said non-banking institution to do so and specifies the name of the institution which has so authorised him, and
(b) The prospectus or advertisement complies with any order made by the bank under section 45J and with any other provision of law for the time being in force, applicable to the publication of such prospectus or advertisement.
Section 45 NB. Disclosure of information
1[Disclosure of information. (1) Any information relating to a non-banking financial company-
(i) Contained in any statement or return submitted by such company under the provisions of this Chapter; or
(ii) Obtained through audit or inspection or otherwise by the bank,
Shall be treated as confidential and shall not, except otherwise provided in this section, be disclosed.
(2) Nothing in this section shall apply to-
(a) The disclosure by any non-banking financial company, with the previous permission of the bank, of any information furnished to the bank under sub-section (1);
(b) The publication by the bank, if it considers necessary in the public interest so to do, of any information collected by it under sub-section (1) in such consolidated form as it may think fit without disclosing the name of any non-banking financial company or its borrowers;
(c) The disclosure or publication by the non-banking financial company or by the bank of any such information to any other non-banking financial company or in accordance with the practice and usage customary amongst such companies or as permitted or required under any other law:
PROVIDED that any such information received by a non-banking financial company under this clause shall not be published except in accordance with the practice and usage customary amongst companies or as permitted or required under any other law.
(3) Notwithstanding anything contained in this Act or in any other law for the time being in force, the bank, if it is satisfied that, in the public interest or in the interest of the depositors or the non-banking financial company or to prevent the affairs of any non-banking financial company being conducted in a manner detrimental to the interest of the depositors, it is expedient so to do, may, either on its own motion or on being requested, furnish or communicate any information relating to the conduct of business by any non-banking financial company to any authority constituted under any law.
(4) Notwithstanding anything contained in any law for the time being in force, no court or Tribunal or other authority shall compel the bank to produce or to give for inspection of any statement or other material obtained by the bank under any provisions of this Chapter.
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1. Inserted by Reserve Bank of India (Amendment) Act, 1997, w.r.e.f. 9/1/1997.
Section 45 NC. Power of bank to exempt
The bank, on being satisfied that it is necessary so to do, may declare by notification in the Official Gazette that any or all of the provisions of this Chapter shall not apply to a non-banking institution or a class of non-banking institutions or a non-banking financial company or to any class or non-banking financial companies either generally or for such period as may be specified, subject to, such condition, limitations or restrictions as it may think fit to impose.]
Section 45 O. Section
[Section 45-O. Penalties: repealed by the Reserve Bank of India (Amendment) Act, 1974]
Section 45 P. Section
[Section 45P. Cognizance of offences: repealed by the Reserve Bank of India (Amendment) Act, 1974]
Section 45 Q. Chapter III B to override other laws
The provisions of this Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.
Section 45 QA. Power of Company Law Board to order repayment of deposit
1[Power of Company Law Board to order repayment of deposit. (1) Every deposit accepted by a non-banking financial company, unless renewed, shall be repaid in accordance with the terms and conditions of such deposit.
(2) Where a non-banking financial company has failed to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, the Company Law Board constituted under section 10E of the Companies Act, 1956 (1 of 1956), may, if it is satisfied, either on its own motion or on an application of the depositor, that it is necessary so to do to safeguard the interests of the company, the depositors or in the public interest, direct, by order, the non-banking financial company to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the order:
PROVIDED that the Company Law Board may, before making any order under this sub-section, give a reasonable opportunity of being heard to the non-banking financial company and the other persons interested in the matter.
——————–
1. Inserted by Reserve Bank of India (Amendment) Act, 1997, w.r.e.f. 9/1/1997.
Section 45 QB. Nomination by depositors
(1) Where a deposit is held by a non-banking financial institution to the credit of one or more persons, the depositor or, as the case may be, all the depositors together may nominate, in the manner prescribed by rules made by the Central Government under section 45ZA of the Banking Regulation Act, 1949 (10 of 1949), 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 non-banking financial institution.
(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 purports to confer on any person the right to receive the amount of deposit from the non-banking financial institution, 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 manner prescribed by rules made by the Central Government under section 45ZA of the Banking Regulation Act, 1949 (10 of 1949).
(3) Where the nominee is a minor, it shall be lawful for the depositor making the nomination to appoint, in the manner prescribed by rules made by the Central Government under section 45ZA of the Banking Regulation Act, 1949 (10 of 1949), any person to receive the amount of deposit in the event of his death during the minority of the nominee.
(4) Payment by a non-banking financial institution in accordance with the provisions of this section shall constitute a full discharge to the non-banking financial institution 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.
(5) No notice of the claim of any person, other than the person or persons in whose name a deposit is held by a non-banking financial institution, shall be receivable by the non-banking institution, nor shall the non-banking financial institution 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 deposit is produced before a non-banking institution, the non-banking institution shall take due note of such decree, order, certificate or other authority.]
Section 45 R. Interpretation
1[CHAPTER III-C
PROHIBITION OF ACCEPTANCE OF DEPOSITS BY UNINCORPORATED BODIES
——————–
1. Inserted by Act No. 1 of 1984, w.e.f. 15/2/1984.
45R. Interpretation.
The words and expressions used in this Chapter and defined in Chapter IIIB shall have the meanings respectively assigned to them therein.
Section 45 S. Deposits not to be accepted in certain cases
1[Deposits not to be accepted in certain cases. (1) No person, being an individual or a firm or an unincorporated association of individuals shall, accept any deposit-
(i) If his or its business wholly or partly includes any of the activities specified in clause (c) of section 45-I; or
(ii) If his or its principal business is that of receiving of deposits under any scheme or arrangement or in any other manner, or lending in any manner:
PROVIDED that nothing contained in this sub-section shall apply to the receipt of money by an individual by way of loan from any of his relatives or to the receipt of money by a firm by way of loan from the relative or relatives of any of the partners.
(2) Where any person referred to in sub-section (1) holds any deposit on the lst day of April, 1997 which is not in accordance with sub-section (1), such deposit shall be repaid by that person immediately after such deposit becomes due for repayment or within three years from the date of such commencement, whichever is earlier:
PROVIDED that if the bank is satisfied on an application made by any person to the bank that such person is unable to pay a part of the deposits for reasons beyond his control or such repayment shall cause extreme hardship to him, it may, by an order in writing, extend such period by a period not exceeding one year subject to such conditions as may be specified in the order.
(3) On and from the lst day of April, 1997, no person referred to in sub-section (1) shall issue or cause to be issued any advertisement in any form for soliciting deposit.
Explanation: For the purposes of this section, a person shall be deemed to be a relative of another if, and only if-
(i) They are members of a Hindu undivided family; or
(ii) They are husband and wife; or
(iii) The one is related to the other in the manner indicated in the List of relatives below:
List of relatives
1. Father, 2. Mother (including step-mother), 3. Son (including step-son), 4. Son’s wife, 5. Daughter (including step-daughter), 6. Father’s father, 7. Father’s mother,8. Mother’s mother,9. Mother’s father,10. Son’s son, 11. Son’s son’s wife, 12. Son’s daughter, 13. Son’s daughter’s husband, 14. Daughter’s husband, 15. Daughter’s son, 16. Daughter’s son’s wife, 17. Daughter’s daughter, 18. Daughter’s daughter’s husband, 19. Brother (including step-brother), 20. Brother’s wife, 21, Sister (including step-sister), 22. Sister’s husband.]
——————–
1. Substituted by Reserve Bank of India (Amendment) Act, 1997, w.e.f. 1/4/1997.
Section 45 T. Power to issue search warrants
(1) Any court having jurisdiction to issue a search warrant under the Code of Criminal Procedure, 1973 (2 of 1974) may, on an application by an officer of the bank or of the State Government authorised in this behalf stating his belief that certain documents relating to acceptance of deposits in contravention of the provisions of section 45S are secreted in any place within the local limits of the jurisdiction of such court, issue a warrant to search for such documents.
(2) A warrant issued under sub-section (1) shall be executed in the same manner and shall have the same effect as a search warrant issued under the Code of Criminal Procedure, 1973.
Section 45 U. Definitions
1[Definitions.
1[CHAPTER III-D
REGULATION OF TRANSACTIONS IN DERIVATIVES, MONEY MARKET INSTRUMENTS, SECURITIES, ETC.
For the purpose of this Chapter,-
(a) “derivative” means an instrument, to be settled at a future date, whose value is derived from change in interest rate, foreign exchange rate, credit rating or credit index, price of securities (also called “underlying”), or a combination of more than one of them and includes interest rate swaps, forward rate arrangements, foreign currency swaps, foreign currency-rupee swaps, foreign currency options, foreign currency-rupee options or such other instruments as may be specified by the Bank from time to time;
(b) “money market instruments” include call or notice money, term money, repo, reverse repo, certificate of deposit, commercial usance bill, commercial paper and such other debt instrument of original or initial maturity up to one year as the Bank may specify from time to time;
(c) “repo” means an agreement for borrowing funds by selling securities with an agreement to repurchase the securities on a mutually agreed future date at an agreed price which includes interest for the funds borrowed;
(d) “reverse repo” means an instrument for lending funds by purchasing securities with an agreement to resell the securities on a mutually agreed future date at an agreed price which includes interest for the funds lent;
(e) “securities” means securities of the Central Government or a State Government or such securities of a local au thority as may be specified in this behalf by the Central Government and, for the purposes of repo” or “reverse repo”, includes corporate bonds and debentures.]
——————–
1. Ins. by Act No. 26 of 2006 w.e.f. 12-6-2006.
Section 45 V. Transactions in derivatives
1[Transactions in derivatives. (1) Notwithstanding anything contained in the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or any other law for the time being in force, transactions in such derivatives, as may be specified by the Bank from time to time, shall be valid, if at least one of the parties to the transactions is the Bank, a scheduled bank, or such other agency falling under the regulatory purview of the Bank under the Act, the Banking Regulation Act, 1949 (10 of 1949), the Foreign Exchange Management Act, 1999 (42 of 1999), or any other Act or instrument having the force of law, as may be specified by the Bank from time to time.
(2) Transactions in such derivatives, as had been specified by the Bank from time to time, shall be deemed always to have been valid, as if the provisions of subsection (1) were in force at all material times.]
——————–
1. Ins. by Act No. 26 of 2006 w.e.f. 12-6-2006.
Section 45 W. Power to regulate transactions in derivatives, money market instruments, etc
1[Power to regulate transactions in derivatives, money market instruments, etc. (1) The Bank may, in public interest, or to regulate the financial system of the country to its advantage, determine the policy relating to interest rates or interest rate products and give directions in that behalf to all agencies or any of them, dealing in securities, money market instruments, foreign exchange, derivatives, or other instruments of like nature as the Bank may specify from time to time:
Provided that the directions issued under this sub-section shall not relate to the procedure for execution or settlement of the trades in respect of the transactions mentioned therein, on the Stock Exchanges recognised under Section 4 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956).
(2) The Bank may, for the purpose of enabling it to regulate agencies referred to in sub-section (1), call for any information, statement or other particular from them, or cause an inspection of such agencies to be made.]
——————–
1. Ins. by Act No. 26 of 2006 w.e.f. 12-6-2006.
Section 45 X. Duty to comply with directions and furnish information
1[Duty to comply with directions and furnish information. It shall be the duty of every director or member or other body for the time being vested with the management of the affairs of the agencies referred to in Section 45-W to comply with the directions given by the Bank and to submit the information or statement or particulars called for under that section.]
——————–
1. Ins. by Act No. 26 of 2006 w.e.f. 12-6-2006.
Section 46. Contribution by Central Government to the reserve fund
The Central Government shall transfer to the bank rupee securities of the value of five crores of rupees to be allocated by the bank to the reserve fund.
Section 46 A. Contribution to National Rural Credit (Long Term Operations) Fund and National Rural Credit (Stabilisation) Fund
1[Contribution to National Rural Credit (Long Term Operations) Fund and National Rural Credit (Stabilisation) Fund. The bank shall contribute every year such sums of money as it may consider necessary and feasible to do so, to the National Rural Credit (Long Term Operations) Fund and the National Rural Credit (Stabilisation) Fund established and maintained by the National Bank under sections 42 and 43, respectively, of the National Bank for Agriculture and Rural Development Act, 1981.
——————–
1. Earlier sections 46A and 46B substituted by Act No. 61 of 1981, w.e.f. 12/7/1982.
Section 46 B. Section
[Section 46B: Repealed]
Section 46 C. National Industrial Credit (Long Term Operations) Fund
(1) The bank shall establish and maintain a fund to be known as the national industrial credit (long term operations) fund to which shall be credited-
(a) An initial sum of ten crores of rupees by the bank;
(b) Such further sums of money as the bank may contribute every year:
PROVIDED that the annual contribution during each of the five years commencing with the year ending on the 30th day of June, 1965 shall not be less than five crores of rupees:
PROVIDED FURTHER that the Central Government may, if the circumstances so require, authorise the bank to reduce the said sum of five crores of rupees in any year.
(2) The amount in the said fund shall be applied by the bank only to the following objects, namely: -
(a) The making to the Development Bank of loans and advances for the purpose of the purchase of, or subscription to, stocks, shares, bonds or debentures issued by the Industrial Finance Corporation of India, a State Financial Corporation or any other financial institution which may be notified by the Central Government in this behalf, or for the purposes of any other business of the Development Bank;
(b) The purchasing of bonds and debentures issued by the Development Bank;
1[(c) The making to the Exim Bank or the Reconstruction Bank [or the Small Industries Bank], as the case may be, of loans and advances for the purposes of any business of the Exim Bank or the Reconstruction Bank 2[or the Small Industries Bank],
(d) The purchasing of bonds and debentures issued by the Exim Bank or the Reconstruction Bank [or the Small Industries Bank, as the case may be.
——————–
1. Inserted by Act No. 28 of 1981, w.e.f. 1/1/1982.
2. Inserted by Act No. 39 of 1989, w.e.f. 7/3/1990.
Section 46 D. National Housing Credit (Long Term Operations) Fund
1[National Housing Credit (Long Term Operations) Fund. (1) The Bank shall establish and maintain a Fund to be known as the National Housing Credit (Long Term Operations) Fund to which shall be credited every year such sums of money as it may consider necessary.
(2) The amount in the said fund shall be applied by the Bank only to the following objects, namely: -
(a) The making to the National Housing Bank of loans and advances for the purpose of any business of the National Housing Bank;
(b) The purchasing of bonds and debentures issued by the National Housing Bank.
——————–
1. Inserted by Act No. 53 of 1987, w.e.f. 9/7/1988.
Section 47. Allocation of surplus profits
After making provisions for bad and doubtful debts, depreciation in assets, contributions to staff and superannuation funds and for all other matters for which provision is to be made by or under this Act or which are usually provided for by bankers, the balance of the profits shall be paid to the Central Government.
Section 48. Exemption of bank from income-tax and super-tax
Notwithstanding anything contained in the Income Tax Act, 1961 (43 of 1961), or any other enactment for the time being in force relating to income-tax or super-tax, the bank shall not be liable to pay income-tax or super-tax on any of income, profits or gains.
Section 49. Publication of bank rate
The bank shall make public from time to time the standard rate at which it is prepared to buy or re-discount bills of exchange or other commercial paper eligible for purchase under this Act.
Section 50. Auditors
(1) Not less than two auditors shall be appointed, and their remuneration fixed, by the Central Government.
(2) The auditors shall hold office for such term not exceeding one year as the Central Government may fix while appointing them, and shall be eligible for reappointment.
Section 51. Appointment of special auditors by government
Without prejudice to anything contained in section 50, the Central Government may at any time appoint the Comptroller and Auditor-General to examine and report upon the accounts of the bank.
Section 52. Powers and duties of auditors
(1) Every auditor shall be supplied with a copy of the annual balance-sheet, and it shall be his duty to examine the same, together with the accounts and vouchers relating thereto; and every auditor shall have a list delivered to him of all books kept by the bank, and shall at all reasonable times have access to the books, accounts and other documents of the bank, and may, at the expense of the bank, employ accountants or other person to assist him in investigating such accounts and may, in relation to such accounts, examine any director or officer of the bank.
(2) The auditors shall make a report to the Central Government upon the annual balance-sheet and accounts, and in every such report they shall state whether, in their opinion, the balance-sheet is a full and fair balance-sheet containing all necessary particulars and properly drawn up so as to exhibit a true and correct view of the state of the bank’s affairs, and, in case they have called for any explanation or information from the Central Board, whether it has been given and whether it is satisfactory.
Section 53. Returns
(1) The bank shall prepare and transmit to the Central Government a weekly accounts of the Issue Department and of the Banking Department in such form as the Central Government may, by notification in the Gazette of India, prescribe. The Central Government shall cause these accounts to be published in the Gazette of India at such intervals and in such modified form as it may deem fit.
(2) The bank shall also, within two months from the date on which the annual accounts of the bank are closed, transmit to the Central Government a copy of the annual accounts signed by the Governor, the Deputy Governors and the Chief Accounting Officer of the bank and certified by the auditor, together with a report by the Central Board on the working of the bank throughout the year, and the Central Government shall cause such accounts and report to be published in the Gazette of India.
Section 54. Rural credit and development
1[Rural credit and development. The bank may maintain expert staff to study various aspects of rural credit and development and in particular it may: -
(a) Tender expert guidance and assistance to the National Bank;
(b) Conduct special studies in such areas as it may consider necessary to do so for promoting integrated rural development.]
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1. Substituted by Act No. 61 of 1981, w.e.f. 1/5/1982.
Section 54 A. Delegation of powers
(1) The Governor may, by general or special order, delegate to a Deputy Governor, subject to such conditions and limitations, if any, as may be specified in the order, such of the powers and functions exercisable by him under this Act or under any other law for the time being in force as he may deem necessary for the efficient administration of the functions of the bank.
(2) The fact that a Deputy Governor exercises any power or does any act or thing in pursuance of this Act shall be conclusive proof of his authority to do so.
Section 54 AA. Power of bank to depute its employees to other institutions
(1) The bank may, notwithstanding anything contained in any law, or in any agreement, for the time being in force, depute any member of its staff for such period as it may thinks fit-
(a) To any institution which is wholly or substantially owned by the bank;
(b) To the Development Bank, so, however, that no such deputation shall continue after the expiration of thirty months from the commencement of section 5 of the Public Financial Institutions Laws (Amendment) Act, 1975;
(c) To the Unit Trust, so, however, that no such deputation shall continue after the expiration of thirty months from the date notified by the Central Government under sub-section (1) of section 4A of the Unit Trust of India Act, 1963 (52 of 1963);
And thereupon the person so deputed shall, during the period of his deputation, render such service to the institution to which he is so deputed as that institution may require.
(2) Where a person has been deputed to an institution under sub-section (1), he shall not be entitled to claim any salary, emoluments and other terms and conditions of service, which he would not have been entitled to claim if he had not been so deputed.
(3) Nothing contained in this section shall empower the bank to depute any member of its staff to any institution on any salary, emoluments or other terms and conditions which is or are less favourable to him than that or those to which he is entitled immediately before such deputation.
(4) For the purposes of this section, an institution shall be deemed to substantially owned by the bank if in the capital of the institution the bank has not less than forty per cent share.
Explanation: The word “capital” means, in relation to the Unit Trust, the initial capital of that Trust.
Section 55. Section
[Section 55. Reports by the bank: repealed by Act No. 62 of l948, w.e.f. 1st. January, 1949]
Section 56. Section
[Section 56. Power to require declaration as to ownership of registered shares: repealed by Act No. 62 of l948, w.e.f. 1st. January, 1949]
Section 57. Liquidation of the Bank
(1) Nothing in the Companies Act, 1956 (1 of 1956) shall apply to the bank and the bank shall not be placed in liquidation save by order of the Central Government and in such manner as it may direct.
(2) [Omitted]
Section 58. Power of the Central Board to make regulations
(1) The Central Board may, with the previous sanction of the Central Government, 3[by notification in the Official Gazette make regulations consistent with this Act to provide for all matters for which provision is necessary or convenient for the purpose of giving effect to the provisions of this Act.
(2) In particular and without prejudice to the generality of the foregoing provision, such regulations may provide for all or any of the following matters, namely: -
[Clauses
(a) to (e) omitted]
(f) The manner in which the business of the Central Board shall be transacted, and the procedure to be followed at meetings thereof;
(g) The conduct of business of Local Boards and the delegation to such Boards of powers and functions;
(h) The delegation of powers and functions of the Central Board to Deputy Governors, Directors or officers of the Bank;
(i) The formation of Committees of the Central Board, the delegation of powers and functions of the Central Board to such Committees, and the conduct of business in such Committees;
(j) The constitution and management of staff and superannuation funds for the officers and servants of the bank;
(k) The manner and form in which contracts binding on the bank may be executed;
(l) The provision of an official seal of the bank and the manner and effect of its use;
(m) The manner and form in which the balance-sheet of the Bank shall be drawn up, and in which the accounts shall be maintained;
(n) The remuneration of Directors of the bank;
(o) The relations of the scheduled banks with the Bank and the returns to be submitted by the scheduled banks to the bank;
(p) The regulation of clearing-houses for 1[banks (including post office savings banks);]
2[(pp) The regulation of fund transfer through electronic means between the banks or between the banks and other financial institutions 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 right and obligations of the participants in such fund transfers.]
(q) The circumstances in which, and the conditions and limitations subject to which, the value of any lost, stolen, mutilated or imperfect currency note of the Government of India or bank note may be refunded; and
(r) Generally, for the efficient conduct of the business of the bank.
(3) Any regulation made under this section shall have effect from such earlier or later date as may be specified in the regulation.
(4) Every regulation shall, as soon as may be after it is made by the Central Board, be forwarded to the Central Government and that government shall cause a copy of the same to be laid 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.
(5) Copies of all regulations made under this section shall be available to the public on payment.
——————–
1. Substituted by Act No. 66 of 1988, w.e.f. 30/12/1988.
2. Inserted by the Information Technology Act, 2000, w.e.f. 9th. June, 2000.
3. Inserted by Act No. 66 of 1988, w.e.f. 30/12/1988.
Section 58 A. Protection of action taken in good faith
(1) No suit, prosecution or other legal proceeding shall lie against the Central Government or the bank or any other person in respect of anything which is in good faith done or intended to be done under this Act or in pursuance of any order, regulation or direction made or given thereunder.
(2) No suit or other legal proceeding shall lie against the Central Government or the bank for an damage caused or likely to be caused by anything which is in good faith done or intended to be done under this Act or in pursuance of any order, regulation or direction made or given thereunder.
Section 58 B. Penalties
(1) Whoever in any application, declaration, return, statement, information or particulars made, required or furnished by or under or for the purposes of any provisions of this Act, or any order, regulation or direction made or given thereunder or in any prospectus or advertisement issued for or in connection with the invitation by any person, of deposits of money from the public 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, information or particulars which, under this Act or any order, regulation or direction made or given thereunder, it is his duty to produce or furnish or to answer any question put to him in pursuance of the provisions of this Act or of any order, regulation or direction made or given thereunder, he shall be punishable with fine which may extend to two thousand rupees in respect of each offence and if he persists in such failure or refusal, with further fine which may extend to one hundred rupees for every day, after the first during which the offence continues.
(3) If any person contravenes the provisions of section 31, he shall be punishable with fine, which may extend to the amount of the bill of exchange, hundi, promissory note or engagement for payment of money in respect whereof the offence is committed.
(4) If any person discloses any credit information, the disclosure of which is prohibited under section 45E, he 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.
1[(4A) If any person contravenes the provisions of sub-section (1) of section 45-IA, he shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to five years and with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.
(4AA) If any auditor fails to comply with any direction given or order made by the bank under section 45MA, he shall be punishable with fine, which may extend to five thousand rupees.
(4AAA) Whoever fails to comply with any order made by the Company Law Board under sub-section (2) of section 45QA, shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to a fine of not less than rupees fifty for every day during which such non-compliance continues.]
(5) 2[If any person other than an auditor]-
(a) Receives any deposit in contravention of any direction given or order made under Chapter IIIB; or
3[(aa) Fails to comply with any direction given or order made by the bank under any of the provisions of Chapter III B; or]
(b) Issues any prospectus or advertisement otherwise than in accordance with section 45NA or any order made under section 45J, as the case may be,
He shall be punishable with imprisonment for a term, which may extend to three years and shall also be liable to fine which may extend-
(i) In the case of a contravention falling under clause (a), to twice the amount of the deposit received; and
(ii) In the case of a contravention falling under clause (b), to twice the amount of the deposit called for by the prospectus or advertisement.
3[(5A) If any person contravenes any provision of section 45S, he shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of deposit received by such person in contravention of that section, or two thousand rupees, whichever is more, or with both:
PROVIDED that in the absence of special and adequate reasons to the contrary to be mentioned in the judgment of the court, the imprisonment shall not be less than one year and the fine shall not be less than one thousand rupees.
(5B) Notwithstanding anything contained in section 29 of the Code of Criminal Procedure, 1973 (2 of 1974), it shall be lawful for a Metropolitan Magistrate or a Judicial Magistrate of the first class to impose a sentence of fine in excess of the limit specified in that section on any person convicted under sub-section (5A).]
(6) If any other provision of this Act is contravened or if any default is made in complying with any other requirement of this Act or of any order, regulation or direction made or given or condition imposed thereunder, any person guilty of such contravention or default shall be punishable with fine which may extend to two thousand rupees and where a contravention or default is a continuing one, with further fine which may extend to one hundred rupees for every day, after the first, during which the contravention or default continues.
——————–
1. Inserted by Reserve Bank of India (Amendment) Act, 1997, w.r.e.f. 9/1/1997.
2. Substituted for the words “If any person” by Reserve Bank of India (Amendment) Act, 1997, w.e.f. 9/1/1997.
3. Inserted by Act No. 1 of 1984, w.e.f. 15/2/1984.
Section 58 C. Offences by companies
(1) Where a person committing a contravention or default referred to in section 58B is 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 punishment if he proves that the contravention of default was committed without his knowledge or that he had exercised all due diligence to prevent the contravention or default.
(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 same was committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary, or other officer or employee of the company, such director, manager, secretary, other officer or employee shall also be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly.
Explanation I: Any offence punishable under this Act shall be deemed to have been committed at the place where the registered office or the principal place of business, as the case may be, in India, of the company is situated.
Explanation II: For the purpose of this section: -
(a) “A company” means any body corporate and includes a corporation, a non-banking institution, a firm, a co-operative society or other association of individuals;
(b) “Director”, in relation to a firm, means a partner in the firm.
Section 58 D. Application of section 58B barred
Nothing contained in section 58B shall apply to, or in respect of, any matter dealt with in section 42.
Section 58 E. Cognizance of offences
(1) No court shall take cognizance of any offence punishable under this Act except upon a complaint in writing made by an officer of the Bank, generally or specially authorised in writing in this behalf by the Bank, and no court other than that of a Metropolitan Magistrate or a Judicial Magistrate of the first class or a court superior thereto shall try any such offence:
1[PROVIDED that in respect of any offence punishable under sub-section (5A) of section 58B, a complaint in writing may also be made by an officer of the State Government, generally or specially authorised in writing in this behalf by that government.
(2) Notwithstanding any thing contained in the Code of Criminal Procedure, 1973 (2 of 1974) a Magistrate may, if he sees reason so to do, dispense with the personal attendance of the officer of the Bank filing the complaint, but the Magistrate may in his discretion, at any stage of the proceedings, direct the personal attendance of the complainant.
——————–
1. Inserted by Act No. 1 of 1984, w.e.f. 15/2/1984.
Section 58 F. Application of fine
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.
Section 58 G. Power of bank to impose fine
1[Power of bank to impose fine. (1) Notwithstanding anything contained in section 58B, if the contravention or default of the nature referred to in section 58B is committed by a non-banking financial company, the bank may impose on such non-banking financial company-
(a) A penalty not exceeding five thousand rupees; or
(b) Where the contravention or default is under sub-section (4A) or clause (a) or clause (aa) of sub-section (5) of section 58B, a penalty of five lakh rupees or twice the amount involved in such contravention or default, where the amount is quantifiable, whichever is more; and where such contravention or default is a continuing one, further penalty which may extend to twenty-five thousand rupees for every day, after the first, during which the contravention or default continues.
(2) For the purpose of imposing penalty under sub-section (1), the bank shall serve a notice on the non-banking financial company requiring it to show cause why the amount specified in the notice should not be imposed as a penalty and a reasonable opportunity of being heard shall also be given to such non-banking financial company.
(3) Any penalty imposed by the bank under this section shall be payable within a period of thirty days from the date on which notice issued by the bank demanding payment of the sum is served on the non-banking financial company and, in the event of failure of the non-banking financial 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 or the head office of the non-banking financial company is situated :
PROVIDED that no such direction shall be made, except on an application made by an officer of the bank authorised in this behalf, to by the principal civil court.
(4) The court, which makes a direction under sub-section (3), shall issue a certificate specifying the sum payable by the non-banking financial 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.
(5) Non complaint shall be filed against any non-banking financial company in any court of law pertaining to any contravention or default in respect of which the bank under this section has imposed any penalty.
(6) Where any complaint has been filed against a non-banking financial company in a court in respect of contravention or default of the nature referred to in section 58B, no proceedings for imposition of penalty against that non-banking financial company shall be taken under this section.]
——————–
1. Inserted by Act No. 1 of 1984, w.e.f. 15/2/1984.
Section 59-61. Sections
[Sections 59 to 61: repealed by Act No. 20 of 1937]
Schedule 1
SCHEDULE I
[Section 9]
1[1. The Western Area shall consist of the States of Goa, Gujarat, Madhya Pradesh and Maharashtra and the Union Territories of Dadra and Nagar Haveli, and Daman and Diu.
2. The Eastern Area shall consist of the States of Arunachal Pradesh, Assam, Bihar, Manipur, Meghalaya, Mizoram, Nagaland, Orissa, Sikkim, Tripura and West Bengal and the Union Territories of Andaman and Nicobar Islands.]
3. The Northern Area shall consist of the States of Jammu and Kashmir, Punjab, Haryana, Himachal Pradesh, Rajasthan and Uttar Pradesh and the Union territories of Chandigarh and Delhi.
4. The Southern Area shall consist of the States of Andhra Pradesh, Karnataka, Tamil Nadu and Kerala and the Union territories of Pondicherry and Lakshadweep.
——————–
1. Substituted by Reserve Bank of India (Amendment) Act, 1997, w.e.f. 9/1/1997.
Schedule 2
SCHEDULE II
SCHEDULED BANKS
[Sections 2(e) and 42]
Abhyudaya Co-operative Bank Ltd., Bombay (18/8/1988 w.e.f. 19/1/1988)
ABN Amro Bank N.V. (11/10/1991)
Adhiyaman Grama Bank, Dharmapuri (Tamil Nadu) (27/12/1985)
Ajgemene bank Nederland N.V.
Akola Gramin Bank, Akola (Maharashtra) (16/10/1983)
Alaknanda Gramin Bank, Pauri (U.P.) (31/8/1985)
Aligarh Gramin Bank, Aligarh (U.P.) (22/3/1981)
Allahabad Bank
Allahabad Kshetriya Gramin Bank, Allahabad (U.P.) (23/8/1980)
Alwar-Bharatpur Anchalik Gramin Bank, Bharatpur (Rajasthan)
(21/2/1981)
Ambala-Kurukshetra Gramin Bank, Ambala City (Haryana) (18/1/1985)
American Express International Banking Corporation
Andhra Bank, Masulipatam (A.P.)
Andhra Pradesh State Co-operative Bank Ltd., Hyderabad (A.P.) (2/7/1966)
ANZ Grindlays Bank p.l.c. (25/1/1990)
Arab Bangladesh Bank Ltd.
Aravali Kshetriya Gramin Bank, Sawaimadhopur (Rajasthan) (2/10/1981)
Arunachal Pradesh Rural Bank, Pasighat (Arunachal Pradesh) (30/11/1983)
Aurangabad-Jalna Gramin Bank, Aurangabad (Maharashtra) (6/12/1982)
Baitarani Gramya Bank, Baripada (Orissa) (23/6/1980)
Balasore Gramya Bank, Balasore (Orissa) (6/8/1980)
Ballia Kshetriya Gramin Bank, Ballia (U.P.) (25/12/1976)
Banaskantha-Mehsana Gramin Bank, Patan (Gujarat) (29/11/1981)
Bank International Indonesia
Bank of America National Trust and Savings Association (29/5/1964)
Bank of Bahrain and Kuwait B.S.C. (14/7/1986)
Bank of Baroda
Bank of Ceylon
Bank of Cochin Ltd., Ernakulam
Bank of Credit and Commerce International (Overseas) Ltd.
Bank of India
Bank of Karad Ltd., Karad (5/6/1968)
Bank of Madura Ltd., Madurai (T.N.)
Bank of Maharashtra
Bank of Nova Scotia, Toronto (Canada) (31/5/1984)
Bank of Oman Ltd.
Bank of Punjab Ltd. (19/4/1995)
Bank of Rajasthan Ltd., Udaipur (Rajasthan)
Bank of Tamilnad Ltd. (22/11/1979)
Bank of Thanjaur Ltd.
1[The Bank of Tokyo-Mitsubishi UFJ Ltd.]
Banque de I’ Indochine et de Suez (INDOSUEZ) (2/10/1981)
Banque Nationale de Paris (1/7/1966)
Barabanki Gramin Bank, Barabanki (U.P.)
Bardhaman Gramin Bank, Burdwan (W.B.) (25/11/1980)
Bareilly Corporation Bank Ltd., Bareilly (U.P.)
Bareilly Kshetriya Gramin Bank, Bareilly (U.P.) (27/9/1980)
Bassein Catholic Co-operative Bank Ltd., Papdy Vasai (Town) Thane District, Maharashtra (1/11/1990)
Bastar Kshetriya Gramin Bank, Jagdalpur (M.P.) (15/12/1979)
Basti Gramin Bank, Basti (U.P.) (1/8/1980)
Begusarai Kshetriya Gramin Bank, Begusarai (Bihar) (23/3/1985)
Benares State Bank
Bhagalpur-Banka Kshetriya Gramin Bank, Bhagalpur (Bihar) (22/3/1985)
Bhagirath Gramin Bank, Sitapur (U.P.) (19/9/1976)
Bhandara Gramin Bank, Bhandara (Maharashtra)
Bharat Overseas Bank Ltd., Madras
Bhilwara-Ajmer Kshetriya Gramin Bank, Bhilwara (Rajasthan) (24/3/1984)
Bhojpur Rohtas Gramin Bank, Arrah (Bihar) (26/12/1975)
Bidur Gramin Bank, Bijnor (U.P.) (18/1/1983)
Bihar State Co-operative Bank Ltd., Patna (Bihar) (2/7/1966)
Bijapur Grameena Bank, Bijapur (Karnataka) (31/3/1983)
Bikaner Kshetriya Gramin Bank, Bikaner (Rajasthan) (25/3/1985)
Bilaspur-Raipur Kshetriya Gramin Bank, Bilaspur (M.P.) (20/10/1976)
Bolangir Anchalik Gramya Bank, Bolangir (10/4/1976)
Bombay Mercantile Co-operative Bank Ltd., Bombay (18/8/1988 w.e.f. 1/9/1988)
British Bank of the Middle East
Buldhana Gramin Bank, Buldhana (Maharashtra) (17/10/1985)
Bundelkhand Kshetriya Gramin Bank, Tikkamgarh (M.P.)
Bundi-Chittorgarh Kshetriya Gramin Bank, Bundi (Rajasthan) (23/3/1984)
Cachar Gramin Bank, Silchar (Assam) (31/3/1981)
Canara Bank
Catholic Syrian Bank Ltd., Trichur (18/8/1969)
Cauvery Grameena Bank, Mysore (2/10/1976)
Central Bank of India
Centurion Bank Ltd. (27/1/1995)
Chaitanya Grameena Bank, Tenali (Guntur) (A.P.) (25/3/1983)
Chambal Kshetriya Gramin Bank, Morena (M.P.) (11/2/1984)
Champaran Kshetriya Gramin Bank, Motihari (Bihar) (21/3/1976)
Chandrapur Gadchiroli Gramin Bank, Chandrapur (Maharashtra)
(4/2/1983)
Chartered Bank
Chase Manhattan Bank N.A. (7/12/1994)
Chhatrasal Gramin Bank, Orai (U.P.) (30/3/1982)
Chhindwara-Seoni Kshetriya Gramin Bank, Chhindwara (M.P.)
(20/1/1983)
Chikmagalur-Kodaga Grameena Bank, Chikmagalur (Karnataka) (28/4/1984)
Chitradurga Gramin Bank, Chitradurga (Karnataka) (5/8/1981)
Citibank N.A.
City Union Bank Ltd.
Commercial Bank of Korea Ltd.
Corporation Bank Ltd.
Cosmos Co-operative Bank Ltd., Pune (Maharashtra) (1/11/1990)
Credit Agricole Indosuez
Credit Lyonnais (28/12/1989)
Cuttack Gramya Bank, Cuttack (Orissa) (11/10/1976)
Damoh-Panna-Sagar Kshetriya Gramin Bank, Damoh (M.P.) (30/3/1981)
Dena Bank
Deutsche Bank A.G. (15/11/1980) (13/12/1986) (5/4/1988)
Development Bank of Singapore Ltd.
Development Co-operative Bank Ltd., Bombay (18/8/1988 w.e.f. 1/9/1988)
Development Credit Bank Ltd.
Devipatan Kshetriya Gramin Bank, Gonda (U.P.) (17/1/1981)
Dewas Shajapur Kshetriya Gramin Bank, Dewas (M.P.) (30/3/1982)
Dhanalakshmi Bank Ltd., Trichur (Kerala)
Dhenkanal Gramya Bank, Dhenkanal (Orissa) (12/8/1981)
Dresdner Bank AG
Dungarpur-Banswara Kshetriya Gramin Bank, Dungarpur (Rajasthan) (25/3/1984)
Durg-Rajnandgaon Gramin Bank, Rajnandgaon (M.P.) (12/3/1980)
Ellaquai Dehati Bank, Srinagar (J&K) (10/7/1979)
Emirates Commercial Bank Ltd. (6/3/1981)
Etah Gramin Bank, Etah (U.P.) (29/3/1981)
Etawah Kshetriya Gramin Bank, Etawah (U.P.) (18/3/1980)
European Asian Bank
Faizabad Kshetriya Gramin Bank, Faizabad (U.P.) (5/9/1980)
Faridkot Bhatinda Kshetriya Gramin Bank, Bhatinda (Punjab) (22/3/1986)
Farrukhabad Gramin Bank, Farrukhabad (U.P.) (29/3/1976)
Fatehpur Kshetriya Gramin Bank, Fatehpur (U.P.) (6/9/1980)
Federal Bank Ltd., Alwaye (Kerala)
Ganga Yamuna Gramin Bank, Dehradun (U.P.) (29/3/1985)
Gaur Gramin Bank, Malda (W.B.)
Giridih Kshetriya Gramin Bank, Giridih (Bihar) (30/6/1984)
Global Trust Bank Ltd. (11/10/1994)
Goa State Co-operative Bank Ltd. (15/12/1994)
Godavari Grameena Bank, Rajahmundry (A.P.) (11/4/1987)
Golconda Grameen Bank, Hyderabad (A.P.) (15/2/1985)
Gomti Gramin Bank, Jaunpur (U.P.) (30/3/1981)
Gopalganj Kshetriya Gramin Bank, Gopalganj (Bihar) (27/3/1981)
Gorakhpur Kshetriya Gramin Bank, Gorakhpur (U.P.) (30/9/1975)
Grindlays Bank P.L.C.
Gujarat State Co-operative Bank Ltd., Ahmedabad (Gujarat) (2/7/1966)
Gurdaspur Amritsar Kshetriya Gramin Vikas Bank, Gurdaspur (Punjab)
(31/3/1983)
Gurgaon Gramin Bank, Gurgaon (Haryana) (28/3/1976)
Gwalior Datia Kshetriya Gramin Bank, Datia (M.P.) (19/9/1985)
HDFC Bank Ltd. (23/1/1995)
Habib Bank Ltd.
Hadoti Kshetriya Gramin Bank, Kotah (Rajasthan) (14/10/1982)
Hanil Bank
Hardoi-Unnao Gramin Bank, Hardoi (U.P.) (7/6/1977)
Haryana Kshetriya Gramin Bank, Bhiwani (Haryana)
Haryana State Co-operative Apex Bank Ltd., Ambala at Chandigarh
Hazaribagh Kshetriya Gramin Bank, Hazaribagh (Bihar) (19/11/1984)
Himachal Gramin Bank, Mandi (H.P.) (23/12/1976)
Hindon Gramin Bank, Ghaziabad (U.P.) (28/3/1987)
Hindustan Commercial Bank Ltd., Kanpur (UP)
Hissar-Sirsa Kshetriya Gramin Bank, Hissar (Haryana) (2/10/1984)
Hongkong and Shanghai Banking Corporation Ltd. (25/1/1990)
Howrah Grameen Bank, Howrah (W.B.) (12/6/1982)
IDBI Bank Ltd.
Indian Bank
Indian Overseas Bank
Indore-Ujjain Kshetriya Gramin Bank, Ujjain (M.P.) (19/11/1984)
ING Bank N.V.
Jaipur Nagaur Aanchalik Gramin Bank, Jaipur (Rajasthan)
Jammu and Kashmir Bank Ltd., Srinagar (11/8/1971)
Jammu Rural Bank, Jammu (12/3/1976)
Jamnagar Gramin Bank, Jamnagar (Gujarat) (26/12/1978)
Jamuna Gramin Bank, Agra (U.P.) (2/12/1983)
Janata Sahakari Bank Ltd., Pune (Maharashtra) (18/8/1988 w.e.f. 1/9/1988)
Jhabua-Dhar Kshetriya Gramin Bank, Jhabua (M.P.) (20/6/1980)
Junagadh Amreli Gramin Bank, Junagadh (Gujarat)
Ka Bank Nangkyndong Ri Khasi Jaintia (Meghalaya) (29/12/1981)
Kakathiya Grameena Bank, Warangal (A.P.) (28/6/1982)
Kalahandi Anchalika Gramya Bank, Bhawanipatna (Orissa) (26/5/1980)
Kalpatharu Grameena Bank, Tumkur (Karnataka) (31/3/1982)
Kalupur Commercial Co-operative Bank Ltd., Ahmedabad (Gujarat) (18/8/1988 w.e.f. 1/9/1988)
Kamraj Rural Bank, Sopore (J&K) (16/6/1981)
Kanakadurga Grameena Bank, Gudivada (A.P.) (28/3/1986)
Kanpur Kshetriya Gramin Bank, Kanpur (U.P.) (27/2/1980)
Kapurthala Firozpur Kshetriya Gramin Bank, Kapurthala (Punjab) (30/3/1983)
Karbi N.C. Rural Bank, Diphu (Assam) (27/1/1982)
Karnataka Bank Ltd., Mangalore (Karnataka)
Karnataka State Co-operative Apex Bank Ltd., Bangalore (Karnataka) (2/7/1966)
Karur Vysya Bank
Kashi Gramin Bank, Varanasi (U.P.) (28/7/1980)
Kerala State Co-operative Bank Ltd., Trivandrum (2/7/1966)
Khasi Jaintia Rural Bank, Shillong (Meghalaya)
Kisan Gramin Bank, Budaun (U.P.) (19/5/1980)
Kolar Gramin Bank, Kolar (Karnataka) (16/2/1983)
Koraput-Panchabati Gramya Bank, Jeypore (Orissa) (13/11/1976)
Kosi Kshetriya Gramin Bank, Purnea (Bihar) (23/12/1976)
Krishna Grameena Bank, Gulbarga (Karnataka) (1/12/1978)
Krung Thai Bank Public Company Ltd.
Kshetriya Gramin Bank, Hoshangabad (20/1/1976)
Kshetriya Kisan Gramin Bank, Mainpuri (U.P.) (20/5/1980)
Kumbakon City Union Bank Ltd.
Kutch Gramin Bank, Bhuj (Gujarat) (23/12/1978)
Lakhimi Gaonlia Bank, Golaghat (Assam) (29/7/1980)
Lakshmi Commercial Bank Ltd.
Lakshmi Vilas Bank Ltd. Karur
Langpi Dehangi Rural Bank, Dhipu (Assam)
Lord Krishna Bank Ltd., Kodungallur (16/4/1971)
Madhubani Kshetriya Gramin Bank, Madhubani (Bihar) (31/3/1979)
Madhya Pradesh (Rajya Sahakari Bank Maryadit), Jabalpur (M.P.)
Madhya Pradesh State Co-operative Bank Ltd., Madras (2/7/1966)
Madras State Co-operative Bank Ltd., Madras (2/7/1966)
Magadh Gramin Bank, Gaya (Bihar) (10/11/1976)
Mahakaushal Kshetriya Gramin Bank, Narsinghpur (M.P.) (1/4/1984)
Maharashtra Co-operative Bank Ltd., Mumbai
Maharashtra State Co-operative Bank Ltd., Bombay (Incorporating the Vidarbha Co-operative Bank Ltd.) (2/7/1966)
Malaprabha Grameena Bank, Dharwar (13/8/1976)
Mallabhum Gramin Bank, Bankura (9/4/1976)
Malwa Gramin Bank, Sangrur (Punjab) (27/2/1986)
Mandla-Balaghat Kshetriya Gramin Bank, Mandia (M.P.) (14/11/1982)
Manipur Rural Bank, Imphal (Manipur) (28/5/1981)
Manjira Grameena Bank, Sangareddy, Medak, (A.P.) (31/3/1982)
Mapura Urban Co-operative Bank of Goa Ltd., Goa
Marathwada Gramin Bank, Nanded (Maharashtra) (26/8/1976)
Marudhar Kshetriya Gramin Bank, Churu (Rajasthan) (29/3/1979)
Marwar Gramin Bank, Pali (6/9/1976)
Mayurakshi Gramin Bank, Suri (West Bengal) (16/10/1976)
Mercantile Bank Ltd.
Mewar Aanchalik Gramin Bank, Udaipur (Rajasthan) (25/1/1983)
Miraj State Bank Ltd.
Mithila Kshetriya Gramin Bank, Darbhanga (Bihar) (14/3/1980)
Mitsui Taiyo Kobe Bank Ltd.
Mizoram Rural Bank, Aizawl (Mizoram) (27/9/1983)
Monghyr Kshetriya Gramin Bank, Monghyr (Bihar) (12/3/1977)
Murshidabad Gramin Bank, Berhampore (W.B.) (17/11/1984)
Muzaffarnagar Kshetriya Gramin Bank, Muzaffarnagar (U.P.) (27/7/1984)
Mysore State Co-operative Apex Bank Ltd., Bangalore (2/7/1966)
Nadia Gramin Bank, Krishnagar (W.B.) (27/8/1980)
Nagaland Rural Bank, Kohima (Nagaland) (30/3/1983)
Nagarjuna Gramin Bank, Khammam (30/4/1976)
Nalanda Gramin Bank, Biharshariff (Bihar) (31/3/1979)
Nainital Almora Kshetriya Grameen Bank, Nainital (U.P.) (26/3/1983)
Nainital Bank Ltd., Nainital (U.P.)
Nedungadi Bank Ltd., Calicut (Orissa)
Netravati Grameena Bank, Mangalore (Karnataka) (11/10/1984)
New Bank of India
New India Co-operative Bank Ltd., Bombay, Maharashtra (1/9/1990)
Nimar Kshetriya Gramin Bank, Khargone (M.P.) (26/6/1982)
North Malabar Gramin Bank, Cannanore (Kerala) (12/12/1976)
Oman International Bank S.A.O.G. (25/1/1990)
Oriental Bank of Commerce
Orissa State Co-operative Bank Ltd., Cuttack (2/7/1966)
Overseas Chinese Banking Corporation Ltd.
Palamau Kshetriya Gramin Bank, Daltonganj (Bihar) (15/5/1980)
Panchmahal Gramin Bank, Godhra (Gujarat) (30/3/1982)
Pandyan Grameen Bank, Sattur (T.N.) (9/3/1977)
Parvatiya Gramin Bank, Chamba (H.P.) (2/11/1985)
Parur Central Bank Ltd.
Patliputra Gramin Bank, Patna (Bihar) (27/11/1984)
Pinakini Grameena Bank, Nellore (A.P.)
Pithoragarh Kshetriya Gramin Bank, Pithoragarh (U.P.) (27/3/1985)
Pragjyotish Gaonlia Bank, Nalbari (Assam) (6/7/1976)
Pratapgarh Kshetriya Gramin Bank, Pratapgarh (U.P.) (25/8/1980)
Prathama Bank, Moradabad (30/9/1975)
Punjab and Sind Bank, Amritsar
Punjab Co-operative Bank, Amritsar
Punjab National Bank
Punjab State Co-operative Bank Ltd., Chandigarh
Purbanchal Bank Ltd., Gauhati
Puri Gramya Bank, Pipli (Orissa) (25/2/1976)
Rae Bareli Kshetriya Gramin Bank, Rae Bareli (U.P.) (29/3/1976)
Raigarh Kshetriya Gramin Bank, Raigarh (M.P.) (31/1/1981)
Rajasthan State Co-operative Bank Ltd., Jaipur (Rajasthan) (2/7/1966)
Rajgarh Kshetriya Gramin Bank, Rajgarh (M.P.)
Rajgarh Sehore Kshetriya Gramin Bank, Biaora (Rajgarh) (M.P.)
(23/3/1983)
Rajkot Nagrik Sahakari Bank Ltd., Bombay (18/8/1988 w.e.f. 1/9/1988)
Ranchi Kshetriya Gramin Bank, Ranchi (Bihar) (21/6/1980)
Rani Lakshmi Bai Kshetriya Gramin Bank, Jhansi (U.P.) (31/3/1982)
Ratlam Mandsaur Kshetriya Gramin Bank, Mandsaur (M.P.)
Ratnagiri Sindudurg Gramin Bank, Ratnagiri (Maharashtra) (19/11/1983)
Ratnakar Bank Ltd., Kolhapur
Rayalaseema Grameena Bank, Cuddapah (6/8/1976)
Rewa-Sidhi Gramin Bank, Rewa (M.P.) (20/12/1976)
Rupee Co-operative Bank Ltd., Pune (Maharashtra) (18/8/1988 w.e.f.
1/9/1988)
Rushikulya Gramya Bank, Berhampur (Orissa) (14/2/1981)
SBI Commercial and International Bank Ltd. (30/11/1993)
Sabarkantha-Gandhinagar Gramin Bank, Himatnagar (Gujarat) (9/8/1984)
Sagar Gramin Bank, Amtala (West Bengal), (24/9/1980)
Sahyadri Gramin Bank, Shimoga (Karnataka) (6/9/1984)
Samastipur Kshetriya Gramin Bank, Samastipur (Bihar) (12/5/1980)
Samyut Kshetriya Gramin Bank, Azamgarh (U.P.) (6/1/1976)
Sangameshwara Grameena Bank, Mahboobnagar (A.P.) (31/3/1982)
Sangli Bank
Sangli Urban Co-operative Bank Ltd., Sangli (18/8/1988 w.e.f. 1/9/1988)
Santhal Pargannas Gramin Bank, Dumka (Bihar) (30/3/1977)
Saran Kshetriya Gramin Bank, Chapra (Bihar) (28/3/1981)
Saraswat Co-operative Bank Ltd., Bombay (18/8/1988 w.e.f. 1/9/1988)
Sarayu Gramin Bank, Lakhimpur-Kheri (U.P.) (9/8/1983)
Sarda Gramin Bank, Satna (M.P.)
Satar Bank of Mysore (Karnataka)
Shahadol Kshetriya Gramin Bank, Shahadol (M.P.)
Shahjahanpur Kshetriya Gramin Bank, Shahjahanpur (U.P.) (24/3/1983)
Shamrao Vithal Co-operative Bank Ltd., Bombay (18/8/1988 w.e.f. 1/9/1988)
Sharda Gramin Bank, Satna (31/3/1979)
Shekhawati Gramin Bank, Sikar (Rajasthan) (7/10/1976)
Shivalik Kshetriya Gramin Bank, Hoshiarpur, (Punjab) (30/3/1983)
Shivpuri-Guna Kshetriya Gramin Bank, Shivpuri (M.P.) (28/3/1981)
Shri Venkateswara Grameena Bank, Chittoor (A.P.) (22/3/1981)
Singhbhum Kshetriya Gramin Bank, Chaibasa (Bihar) (31/3/1979)
Siwan Kshetriya Gramin Bank, Siwan (Bihar) (31/3/1981)
Solapur Gramin Bank, Solapur (Maharashtra) (21/1/1984)
Sonali Bank
South Indian Bank Ltd., Trichur (Kerala)
South Malabar Gramin Bank, Malappuram (Kerala) (11/12/1976)
Sravasthi Gramin Bank, Bahraich (U.P.) (4/3/1980)
Sree Anantha Grameena Bank, Anantapur (A.P.) (1/11/1979)
Sri Saraswati Grameena Bank, Adilabad (A.P.) (30/3/1982)
Sri Sathavahana Grameena Bank, Karimnagar (A.P.) (28/3/1983)
Sri Visakha Grameena Bank, Srikakulam (A.P.) (30/9/1976)
Sriganganagar Kshetriya Gramin Bank, Sriganganagar (Rajasthan)
(31/3/1984)
Srirama Grameena Bank, Nizamabad (A.P.) (21/2/1985)
Standard Chartered Bank
State Bank of Bikaner and Jaipur
State Bank of Hyderabad
State Bank of India
State Bank of Indore
State Bank of Mauritius Ltd. (12/12/1994)
State Bank of Mysore
State Bank of Patiala
State Bank of Saurashtra, Bhavnagar
State Bank of Travancore
Subansiri Gaonlia Bank, North Lakhimpur (Assam) (30/3/1982)
Sultanpur Kshetriya Gramin Bank, Sultanpur (U.P.) (8/2/1977)
Sumitomo Bank Ltd.
Surat Peoples Co-operative Bank Ltd., Surat (Gujarat) (18/8/1988 w.e.f. 1/9/1988)
Surat-Bharuch Gramin Bank, Bharuch (Gujarat) (28/2/1984)
Surendranagar-Bhavnagar Gramin Bank, Surendranagar (Gujarat) (15/12/1983)
Surguja Kshetriya Gramin Bank, Ambikapur (M.P.) (24/10/1979)
Syndicate Bank
Tamil Nadu Mercantile Bank Ltd.
Tamil Nadu State Apex Co-operative Bank Ltd., Madras (25/5/1989)
Thane Gramin Bank, Thane (Maharashtra) (30/3/1986)
Thar Aanchalik Gramin Bank, Jodhpur (Rajasthan) (31/1/1983)
Toronto-Dominion Bank
Traders’ Bank Ltd.
Tripura Gramin Bank, Agartala (21/12/1976)
Tulsi Gramin Bank, Banda (U.P.) (26/3/1981)
Tungabhadra Gramin Bank, Bellary (25/1/1976)
UCO Bank
Union Bank of India
United Bank of India
United Commercial Bank
United Industrial Bank Ltd., Calcutta
United Western Bank Ltd., Bangalore City
Uttar Banga Kshetriya Gramin Bank, Cooch-Behar (W.B.) (7/3/1977)
Uttar Pradesh Co-operative Bank Ltd., Lucknow (2/7/1966)
Vaishali Kshetriya Gramin Bank, Muzaffarpur (Bihar) (10/3/1977)
Vallalar Grama Bank, Cuddalore (Tamil Nadu) (19/6/1986)
Valsad-Dangs Gramin Bank, Bulsar (Gujarat) (23/2/1984)
Varada Grameena Bank, Kumta (Karnataka) (12/10/1984)
Vidisha-Bhopal Kshetriya Gramin Bank, Vidisha (M.P.) (31/3/1986)
Vidur Gramin Bank, Bijnor (U.P.)
Vijaya Bank Ltd., Mangalore (Karnataka)
Vindhyavasini Gramin Bank, Mirzapur (U.P.) (30/3/1983)
Visveshwaraya Grameen Bank, Mandya (Karnataka) (27/3/1985)
Vysya Bank Ltd., Bangalore City
West Bengal Provincial Co-operative Bank Ltd., Calcutta (2/7/1966)
West Bengal State Co-operative Bank Ltd., Calcutta
Yavatmal Gramin Bank, Yavatmal (Maharashtra) (29/1/1985)
——————–
1. Subs. by Noti. No. DBOD No. IBD. 937/23.3.007/2005-06 , dated 26-12-2005 (w.e.f. 1-1-2006.)
Schedule 3
SCHEDULE III
[Repealed by Act No. 23 of 1955, w.e.f. 1/7/1955]
Schedule 4
SCHEDULE IV
[Repealed by Act No. 62 of 1948, w.e.f. 1/1/1949]
Schedule 5
SCHEDULE V
[Repealed by the M.O. 1937]
“CHAPTER III-E
JOINT MECHANISM
45-Y. Joint Mechanism.—
(1) Notwithstanding anything contained in this Act or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or any other law for the time being in force, if any difference of opinion arises as to whether—
(i) any instrument, being derivative referred to in clause (a) or money market instrument referred to in clause (b) or repo referred to in clause (c) or reverse repo referred to in clause (d) or securities referred to in clause (e) of Section 45-U of this Act; or
(ii) any instrument, being policy of life insurance under the Insurance Act, 1938 (4 of 1938) or the rules or regulations made thereunder, or, scrips or any other securities referred to in sub-clauses (i), (ia), (ib), (ic), (id), (ie), (ii), (iia) and (iii) of clause (h) of Section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956),
is hybrid or composite instrument, having a component of money market investment or securities market instrument or a component of insurance or any other instrument referred to in clause (i) or clause (ii) and falls within the jurisdiction of the Reserve Bank of India or the Securities and Exchange Board of India established under Section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Insurance Regulatory and Development Authority established under Section 3 of the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999) or the Pension Fund Regulatory and Development Authority constituted by the Resolution of the Government of India Number F.No. 1(6) 2007-PR, dated the 14th November, 2008, such difference of opinion shall be referred to a Joint Committee consisting of the following, namely—
| (a) the Union Finance Minister |
ex officio Chairperson |
| (b) the Governor, Reserve Bank of India |
ex officio Vice-Chairperson |
| (c) the Secretary, Department of Economic Affairs in the Ministry of Finance, Government of India |
ex officio Member; |
| (d) the Secretary, Department of Financial Services in the Ministry of Finance, Government of India |
ex officio Member; |
| (e) the Chairperson, Insurance Regulatory and Development Authority |
ex officio Member |
| (f) the Chairman, Securities and Exchange Board of India |
ex officio Member; |
| (g) the Chairperson, Pension Fund Regulatory and Development Authority |
ex officio Member; |
(2) The Secretary, Department of Financial Services in the Ministry of Finance, Government of India shall be the convener of the meetings of the Joint Committee referred to in sub-section (1).
(3) In case of any difference of opinion referred to in sub-section (1), any Member of the Joint Committee referred to in clauses (&), (e), if) or (g) of that sub-section may make a reference to the Joint Committee.
(4) The Joint Committee shall follow such procedure as it may consider expedient and give, within a period of three months from the date of reference made under sub¬section (3), its decisions thereon to the Central Government.
(5) The decision of the Joint Committee shall be binding on the Reserve Bank of India, the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority and the Pension Fund Regulatory and Development Authority.”
November 30, 2014
Section 1. SHORT TITLE EXTENT AND COMMENCEMENT.
[IX OF 1932]
(IN ITS APPLICATION TO THE STATE OF MAHARASHTRA)
(Received the assent of the Governor-General on 8th April, 1932)
AMENDED BY MAH. 29 OF 1984 (1-1-1985) 1
AN ACT TO DEFINE AND AMEND THE LAW RELATING TO PARTNERSHIP.
WHEREAS it is expedient to define and amend the law relating to partnership; It is hereby enacted as follows :
(1) This Act may be called the Indian Partnership Act, 1932.
(2) It extends to the whole of India except the State of Jammu and Kashmir.
(3) It shall come into force on the 1st day of October, 1932, except section 69 which shall come into force on the 1st day of October, 1933.
Section 2. DEFINITIONS.
In the Act, unless there is anything repugnant in the subject or context,
(a) an “act of a firm” means any act or omission by all the partners, or by any partner or agent of the firm which gives rise to a right enforceable by or against the firm;
(b) “business” includes every trade, occupation and profession;
(c) “prescribed” means prescribed by rules made under this Act;
(c-1) “Registrar” means the Registrar of Firms appointed under sub-section (1) of section 57 and includes the Deputy Registrar of Firms and Assistant Registrar of Firms appointed under sub-section (2) of that section;
(d) “third party” used in relation to a firm or to a partner therein means any person who is not a partner in the firm; and
(e) expressions used but not defined in this Act and defined in the Indian Contract Act, 1872, shall have the meanings assigned to them in that Act.
Section 3. APPLICATION OF PROVISIONS OF ACT IX OF 1872.
The unrepealed provisions of the Indian Contract Act, 1872, save in so far as they are inconsistent with the express provisions of this Act, shall continue to apply to firms.
Section 4. DEFINITION OF “PARTNERSHIP”, “PARTNER”, “FIRM” AND “FIRM-NAME”.
“Partnership” is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all.
Persons who have entered into partnership with one another are called individually, “partners” and collectively “a firm”, and the name under which their business is carried on is called the “firm-name”.
Section 5. PARTNERSHIP NOT CREATED BY STATUS.
The relation of partnership arises from contract and not from status; and, in particular, the members of a Hindu undivided family carrying on a family business as such, or a Burmese Buddhist husband and wife carrying on business as such are not partners in such business.
Section 6. MODE OF DETERMINING EXISTENCE OF PARTNERSHIP.
In determining whether a group of persons is or is not a firm, or whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together.
Explanation I : The sharing of profits or of gross returns arising from property by persons holding a joint or common interest in that property does not of itself make such persons partners.
Explanation II : The receipt by a person of a share of the profits of a business, or of a payment contingent upon the earning of profits or varying with the profits earned by a business, does not itself make him a partner with the persons carrying on the business; and, in particular, the receipt of such share or payment -
(a) by a lender of money to persons engaged or about to engage in any business
(b) by a servant or agent as remuneration,
(c) by the widow or child of a deceased partner, as annuity, or
(d) by a previous owner or part-owner of the business, as consideration for the sale of the goodwill or share thereof, does not of itself make the receiver a partner with the persons carrying on the business.
Section 7. PARTNERSHIP-AT-WILL.
Where no provision is made by contract between the partners for the duration of their partnership, or for the determination of their partnership, the partnership is “partnership-at-will”.
Section 8. PARTICULAR PARTNERSHIP.
A person may become a partner with another person in particular adventures or undertakings.
Section 9. GENERAL DUTIES OF PARTNERS.
Partners are bound to carry on the business of the firm to greatest common advantage, to be just and faithful to each other, and to render true accounts and full information of all things affecting the firm to any partner, his heir or legal representative.
Section 10. DUTY TO INDEMNIFY FOR LOSS CAUSED BY FRAUD.
Every partner shall indemnify the firm for any loss caused to it by his fraud in the conduct of the business of the firm.
Section 11. DETERMINATION OF RIGHTS AND DUTIES OF PARTNERS BY CONTRACT BETWEEN THE PARTNERS.
(1) Subject to the provisions of this Act, the mutual rights and duties of the partners of a firm may be determined by contract between the partners, and such contract may be express or may be implied by a course of dealing.
Such contract may be varied by consent of all the partners, and such consent may be express or may be implied by a course of dealing.
(2) AGREEMENTS IN RESTRAINT OF TRADE.
Notwithstanding anything contained in section 27 of the Indian Contract Act, 1872, such contracts may provide that a partner shall not carry on any business other than that of the firm while he is a partner.
Section 12. THE CONDUCT OF THE BUSINESS.
Subject to contract between the partners -
(a) every partner has a right to take part in the conduct of the business;
(b) every partner is bound to attend diligently to his duties in the conduct of the business;
(c) any difference arising as to ordinary matters connected with the business may be decided by a majority of the partners, and every partner shall have the right to express his opinion before the matter is decided, but no change may be made in the nature of the business without the consent of all the partners;
(d) every partner has a right to have access to and to inspect and copy any of the books of the firm;
(e) in the event of the death of a partner, his heirs or legal representatives or their duly authorised agents shall have a right of access to and to inspect and copy any of the books of the firm.
Section 13. MUTUAL RIGHT AND LIABILITIES.
Subject to contract between the partners -
(a) a partner is not entitled to receive remuneration for taking part in the conduct of the business;
(b) the partners are entitled to share equally in the profits earned, and shall contribute equally to the losses sustained by the firm;
(c) where a partner is entitled to interest on the capital subscribed by him, such interest shall be payable only out of profits;
(d) a partner making, for the purposes of the business, any payment or advance beyond the amount of capital he has agreed to subscribe, is entitled to interest thereon at the rate of six per cent. per annum;
(e) the firm shall indemnify a partner in respect of payments made and liabilities incurred by him
(i) in the ordinary and proper conduct of the business; and
(ii) in doing such act, in an emergency, for the purpose of protecting the firm from loss, as would be done by a person of ordinary prudence, in his own case, under similar circumstances; and
(f) a partner shall indemnify the firm for any loss caused to it by his willful neglect in the conduct of the business of the firm.
Section 14. THE PROPERTY OF THE FIRM.
Subject to contract between the partners, the property of the firm includes all property and rights and interest in property originally brought into the stock of the firm, or acquired, by purchase or otherwise, by or for the firm for the purposes and in the course of the business of the firm, and includes also the goodwill of the business.
Unless the contrary intention appears, property and rights and interest in property acquired with money belonging to the firm are deemed to have been acquired for the firm.
Section 15. APPLICATION OF THE PROPERTY OF THE FIRM.
Subject to the contract between the partners, the property of the firm shall be held and used by the partners exclusively for the purposes of the business.
Section 16. PERSONAL PROFITS EARNED BY PARTNERS.
Subject to the contract between the partners, -
(a) if a partner derives any profits for himself from any transaction of the firm, or from the use of the property or business connection of the firm or the firm-name, he shall account for that profit and pay it to the firm;
(b) if a partner carries on any business of the same nature as and competing with that of the firm, he shall account for and pay to the firm all profits made by him in that business.
Section 17. RIGHTS AND DUTIES OF PARTNERS AFTER A CHANGE IN THE FIRM.
Subject to contract between the partners, -
(a) where a change occurs in the constitution of a firm, the mutual rights and duties of the partners in the reconstituted firm remain the same as they were immediately before the change, as far as may be;
(b) AFTER THE EXPIRY OF THE TERM OF THE FIRM.
where a firm constituted for a fixed term continues to carry on business after the expiry of that term, the mutual rights and duties of the partners remain the same as they were before the expiry, and so far as they may be consistent with the incidents of partnership-at-will; and
(c) WHERE ADDITIONAL UNDERTAKINGS ARE CARRIED OUT.
where a firm constituted to carry out one or more adventures or undertakings carries out other adventures or undertakings, the mutual rights and duties of the partners in respect of the other adventures or undertakings are the same as those in respect of the original adventures or undertakings.
Section 18. PARTNER TO BE AGENT OF THE FIRM.
Subject to the provisions of this Act, a partner is the agent of the firm for the purposes of the business of the firm.
Section 19. IMPLIED AUTHORITY OF PARTNER AS AGENT OF THE FIRM.
(1) Subject to the provisions of section 22, the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm.
The authority of a partner to bind the firm conferred by this section is called his “implied authority”.
(2) In the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to -
(a) submit a dispute relating to the business of the firm to arbitration,
(b) open a banking account on behalf of the firm in his own name,
(c) compromise or relinquish any claim or portion of a claim by the firm,
(d) withdraw a suit or proceeding filed on behalf of the firm,
(e) admit any liability in a suit or proceeding against the firm,
(f) acquire immovable property on behalf of the firm,
(g) transfer immovable property belonging to the firm, or
(h) enter into partnership on behalf of the firm.
Section 20. EXTENSION AND RESTRICTION OF PARTNER’S IMPLIED AUTHORITY.
The partners in a firm may, by contract between the partners, extend or restrict the implied authority of any partner.
Notwithstanding any such restriction, any act done by a partner on behalf of the firm which falls within his implied authority binds the firm, unless the person with whom he is dealing knows of the restriction or does not know or believe that partner to be a partner.
Section 21. PARTNER’S AUTHORITY IN AN EMERGENCY.
A partner has authority, in an emergency, to do all such acts for the purpose of protecting the firm from loss as would be done by a person of ordinary prudence, in his own case, acting under similar circumstances, and such acts bind the firm.
Section 22. MODE OF DOING ACT TO BIND FIRM.
In order to bind a firm, an act or instrument done or executed by a partner or other person on behalf of the firm shall be done or executed in the firm-name, or in any other manner expressing or implying an intention to bind the firm.
Section 23. EFFECT OF ADMISSION BY A PARTNER.
An admission or representation made by a partner concerning the affairs of the firm is evidence against the firm, it is made in the ordinary course of business.
Section 24. EFFECT OF NOTICE TO ACTING PARTNER.
Notice to a partner who habitually acts in the business of the firm of any matter relating to the affairs of the firm operates as notice to the firm, except in the case of a fraud on the firm committed by or with the consent of that partner.
Section 25. LIABILITY OF A PARTNER FOR ACTS OF THE FIRM.
Every partner is liable jointly with all the other partners and also severally, for all acts of the firm done while he is a partner.
Section 26. LIABILITY OF THE FIRM FOR WRONGFUL ACTS OF A PARTNER.
Where, by the wrongful act or omission of a partner acting in the ordinary course of the business of a firm or with the authority of his partners, loss or injury is caused to any third party, or any penalty is incurred, the firm is liable therefore to the same extent as the partner.
Section 27. LIABILITY OF FIRM FOR MISAPPLICATION BY PARTNERS.
Where -
(a) a partner acting within his apparent authority receives money or property from a third party and misapplies it, or
(b) a firm in the course of its business receives money or property from a third party, and the money or property is misapplied by any of the partners while it is in the custody of the firm, the firm is liable to make good the loss.
Section 28. HOLDING OUT.
(1) Anyone who by words spoken or written or by conduct represent himself, or knowingly permits himself to be represented, to be a partner in a firm, is liable as a partner in that firm to anyone who has on the faith of any such representation given credit to the firm, whether the person representing himself or represented to be a partner does or does not know that the representation has reached the person so giving credit.
(2) Where after partner’s death the business continued in the old firm-name, the continued use of that name or of the deceased partner’s name as a part thereof shall not of itself make his legal representative or his estate liable for any act of the firm done after his death.
Section 27. LIABILITY OF FIRM FOR MISAPPLICATION BY PARTNERS.
Where -
(a) a partner acting within his apparent authority receives money or property from a third party and misapplies it, or
(b) a firm in the course of its business receives money or property from a third party, and the money or property is misapplied by any of the partners while it is in the custody of the firm, the firm is liable to make good the loss.
Section 29. RIGHTS OF TRANSFEREE OF A PARTNER’S INTEREST.
(1) A transfer by a partner of his interest in the firm, either absolute or by mortgage, or, by the creation by him of a charge on such interest, does not entitle the transferee, during the continuance of the firm, to interfere in the conduct of the business or to require accounts or to inspect the books of the firm, but entitles the transferee only to receive the share of profits of the transferring partner, and the transferee shall accept the account of profits agreed to by the partners.
(2) If the firm is dissolved or if the transferring partner ceases to be a partner, the transferee is entitled as against the remaining partners, to receive the share of the assets of the firm to which the transferring partner is entitled and, for the purpose of ascertaining that share, to an account as from the date of the dissolution.
Section 29A. DELETION OF ENTRIES RELATING TO CERTAIN FIRMS BY REASON OF FORMATION OF GUJARAT STATE.
(1) Notwithstanding anything contained in this Chapter, a Registrar of Firms appointed for any area by the Government of Maharashtra may, by order in writing, amend the Register of Firms maintained by him by deleting therefrom the entries relating to any firm, whose place of business has, by reason
of the formation of the State of Gujarat by the Bombay Reorganisation Act, 1960, ceased to be situated in the State of Maharashtra : Provided that the Registrar shall, before passing any order under this sub-section, make such inquiry as he deems necessary and give notice to the firm and the Registrar of the State of Gujarat.
(2) After such amendment, the Registrar shall cease to perform the functions of a Registrar in respect of any firm the entries relating to which have been deleted as aforesaid.
(3) Any person aggrieved by an order under sub-section (1) may appeal to such authority and within such time, as may be specified in this behalf by the Government of Maharashtra, by notification in the Official Gazette and such authority shall pass such order on the appeal as it thinks fit.
(4) An order of a Registrar under sub-section (1), or where an appeal has been preferred against it under sub-section (3), the order of the appellate authority shall be final.
Section 30. MINORS ADMITTED TO THE BENEFITS OF PARTNERSHIP.
(1) A person who is a minor according to the law to which he is subject may not be a partner in a firm, but, with the consent of all the partners for the time being, he may be admitted to the benefits of partnership.
(2) Such minor has a right to such share of the property and of the profits of the firm as may be agreed upon, and he may have access to and inspect and copy any of the accounts of the firm.
(3) Such minor’s share is liable for the acts of the firm but the minor is not personally liable for any such act.
(4) Such minor may not sue the partners for an account or payment of his share of the property or profits of the firm, save when severing his connection with the firm, and in such case the amount of his share shall be determined by a valuation made as far as possible in accordance with the rules contained in section 48 :
Provided that all the partners acting together or any partner entitled to dissolve the firm upon notice to other partners may elect in such suit to dissolve the firm, and thereupon the Court shall proceed with the suit as one for dissolution and for settling accounts between the partners and the amount of the share of the minor shall be determined along with the shares of the partners.
(5) At any time within six months of his attaining majority, or of his obtaining knowledge that he had been admitted to the benefits of partnership, whichever date is later, such person may give public notice that he has elected to become or that he has elected not to become a partner in the firm, and such notice shall determine his position as regards the firm :
Provided that, if he fails to give such notice, he shall become a partner in the firm on the expiry of the said six months.
(6) Where any person has been admitted as a minor to the benefits of partnership in a firm, the burden of proving the fact that such person had no knowledge of such admission until a particular date after the expiry of six months of his attaining majority shall lie on the person asserting that fact.
(7) Where such person becomes a partner -
(a) his rights and liabilities as a minor continue upto the date on which he becomes a partner, but he also becomes personally liable to third parties for all acts of the firm done since he was admitted to the benefits of partnership, and
(b) his share in the property and profits of the firm shall be the share to which he was entitled as a minor.
(8) Where such person elects not be to become a partner, -
(a) his rights and liabilities shall continue to be those of a minor under the section upto the date on which he gives public notice;
(b) his share shall not be liable for any acts for the firm done after the date of the notice; and
(c) he shall be entitled to sue the partners for his share of the property and profits in accordance with sub-section (4).
(9) Nothing in sub-sections (7) and (8) shall affect the provisions of section 28.
CHAPTER V INCOMING AND OUTGOING PARTNERS.
Section 31. INTRODUCTION OF A PARTNER.
(1) Subject to contract between the partners and to the provisions of section 30, no person shall be introduced as a partner into a firm without the consent of all the existing partners.
(2) Subject to the provisions of section 80, a person who is introduced as a partner into a firm does not thereby become liable for any act of the firm done before he became a partner.
Section 32. RETIREMENT OF A PARTNER.
(1) A partner may retire -
(a) with the consent of all the otter partners,
(b) in accordance with an express agreement by the partners, or
(c) where the partnership is at will, by giving notice in writing to all the other partners of his intention to retire.
(2) A retiring partner may be discharged from any liability to any third party for acts of the firm done before his retirement by an agreement made by him with such third party and the partners of the reconstituted firm, and such agreement may be implied by a course of dealing between such third party and the reconstituted firm after he had knowledge of the retirement.
(3) Notwithstanding the retirement of a partner from a firm, he and the partners continue to be liable as partners to third parties for any act done by any of them which would have been an act of the firm if done before the retirement, until public notice is given of the retirement
Provided that a retired partner is not liable to any third party who deals with the firm without knowing that he was a party.
(4) Notices under sub-section (3) may be given by the retired partner or by any partner of the reconstituted firm.
Section 33. EXPULSION OF A PARTNER.
(1) A partner may not be expelled from a firm by any majority of the partners, save in the exercise in good faith or powers conferred by contract between the partners.
(2) The provisions of sub-sections (2), (3) and (4) of section 32 shall apply to an expelled partner as if he were a retired partner.
Section 34. INSOLVENCY OF A PARTNER.
(1) Where a partner in a firm is adjudicated an insolvent, he ceases to be a partner on the date on which the order of adjudication is made, whether or not the firm is thereby dissolved.
(2) Where under a contract between the partners the firm is not dissolved by the adjudication of a partner as an insolvent, the estate of a partner so adjudicated is not liable for any act of the firm and the firm is not liable for any act of the insolvent, done after the date on which the order of adjudication is made.
Section 35. LIABILITY OF ESTATE OF DECEASED PARTNER.
Where under a contract between the partners the firm is not dissolved by the death of a partner, the estate of a deceased partner is not liable for any act of the firm done after his death
Section 36. RIGHTS OF OUTGOING PARTNER TO CARRY ON COMPETING BUSINESS.
(1) An outgoing partner may carry on a business competing with that of the firm and he may advertise such business, but subject, to contract to the contrary, he may not
(a) use the firm-name,
(b) represent himself as carrying on the business of the firm, or
(c) solicit the custom of persons who were dealing with the firm before he ceased to be a partner.
(2) AGREEMENT IN RESTRAINT OF TRADE.
A partner may make an agreement with his partners that on ceasing to be a partner he will not carry on any business similar to that of the firm within a specified period or within specified local limits; and, notwithstanding anything contained in section 27 of the Indian Contract Act, 1872, such agreement shall be valid if the restrictions imposed are reasonable.
Section 37. RIGHT OF OUTGOING PARTNER IN CERTAIN CASES TO SHARE SUBSEQUENT PROFITS.
Where any member of a firm has died or otherwise ceased to be a partner, and the surviving or continuing partners carry on the business of the firm with the property of the firm without any final settlement of accounts as between them and the outgoing partner or his estate, then, in the absence of a contract to the contrary, the outgoing partner or his estate is entitled at the option of himself or his representatives to such share of the profits made since he ceased to be a partner as may be attributable to the use of his share of the property of the firm or to interest at the rate of six per cent. per annum on the amount of his share in the property of the firm :
Provided that where by contract between the partners an option is given to surviving or continuing partners to purchase the interest of a deceased or outgoing partner, and that option is duly exercised, the estate of the deceased partner, or the outgoing partner of his estate, as the case may be, is not entitled to any further or other share of profits, but if any partner assuming to act in exercise of the option does not in all material respects comply with the terms thereof, he is liable to account under the foregoing provisions of this section.
Section 38. REVOCATION OF CONTINUING GUARANTEE BY CHANGE IN FIRM.
A continuing guarantee given to a firm, or to a third party in respect of the transactions of a firm, is in the absence of agreement to the contrary, revoked as to future transactions from the date of any change in the constitution of the firm.
Section 39. DISSOLUTION OF A FIRM.
The dissolution of a partnership between all the partners of a firm is called the “dissolution of the firm”.
Section 40. DISSOLUTION BY AGREEMENT.
A firm may be dissolved with the consent of all the partners or in accordance with a contract between the partners.
Section 41. COMPULSORY DISSOLUTION.
A firm is dissolved
(a) by the adjudication of all the partners or of all the partners but one as insolvent, or
(b) by the happening of any event which makes it unlawful for the business of the firm to be carried on or for the partners to carry it on in partnership :
Provided that, where more than one separate adventure or undertaking is carried on by the firm, the illegality of one or more shall not of itself cause the dissolution of the firm in respect of its lawful adventures and undertakings.
Section 42. DISSOLUTION ON THE HAPPENING OF CERTAIN CONTINGENCIES.
Subject to contract between the partners a firm is dissolved
(a) if constituted for a fixed term, by the expiry of that term;
(b) if constituted to carry out one or more adventures or undertakings, by the completion thereof;
(c) by the death of a partner; and
(d) by the adjudication of a partner as an insolvent.
Section 43. DISSOLUTION BY NOTICE OF PARTNERSHIP AT WILL.
(1) Where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm.
(2) The firm is dissolved as from the date mentioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice.
Section 44. DISSOLUTION BY THE COURT.
At the suit of a partner, the Court may dissolve a firm on any of the following grounds, namely :-
(a) that a partner has become of unsound mind, in which case the suit may be brought as well by the next friend of the partner who has become of unsound mind as by any other partner;
(b) that a partner, other than the partner suing, has become in any way permanently incapable of performing his duties as partner;
(c) that a partner, other than the partner suing, is guilty of conduct which is likely to affect prejudicially the carrying on of the business regard being had to the nature of the business;
(d) that a partner, other than the partner suing, willfully or persistently commits breach of agreements relating to the management of the affairs of the firm of the conduct of its business; or otherwise so conducts himself in matters relating to the business that it is not reasonably practicable for the other partners to carry on the business in partnership with him;
(e) that a partner, other than the partner suing, has in any way transferred the whole of his interest in the firm to a third party, or has allowed his share to be charged under the provisions of rule 49 of Order XXI of the First Schedule to the Code of Civil Procedure, 1908, or has allowed it to be sold in the recovery of arrears of land revenue or of any dues recoverable as arrears of land revenue due by the partner;
(f) that the business of the firm cannot be carried on save at a loss; or
(g) on any other ground which renders it just and equitable that the firm should be dissolved.
Section 45. LIABILITY FOR ACTS OF PARTNERS DONE AFTER DISSOLUTION.
(1) Notwithstanding the dissolution of a firm, the partners continue to be liable as such to third parties for any act done by any of them which would have been an act of the firm, if done before the dissolution, until public notice is given of the dissolution :
Provided that the estate of a partner who dies, or who is adjudicated an insolvent, or of a partner who, not having been known to the person dealing with the firm to be a partner, retires from the firm, is not liable under this section for acts done after the date on which he ceases to be a partner.
(2) Notices under sub-section (1) may be given by any partner.
Section 46. RIGHT OF PARTNERS TO HAVE BUSINESS WOUND UP AFTER DISSOLUTION.
On the dissolution of a firm every partner or his representative is entitled, as against all the other partners or their representatives, to have the property of the firm applied in payment of the debts and liabilities of the firm, and to have the surplus distributed among the partners or which representatives according to their rights.
Section 47. CONTINUING AUTHORITY OF PARTNERS FOR PURPOSES OF WINDING UP.
After the dissolution of a firm the authority of each partner to bind the firm, and the other mutual rights and obligations of the partners, continue notwithstanding the dissolution, so far as may be necessary to wind up the affairs of the firm and to complete transactions begun but unfinished at the time of the dissolution, but not otherwise :
Provided that the firm is in no case bound by the acts of a partner who had been adjudicated insolvent, but this proviso does not affect the liability of any person who has after the adjudication represented himself or knowingly permitted himself to be represented as a partner of the insolvent.
Section 48. MODE OF SETTLEMENT OF ACCOUNTS BETWEEN PARTNERS.
In settling the accounts of a firm after dissolution, the following rules shall, subject to agreement by the partners, be observed :
(a) Losses, including deficiencies of capital, shall be paid first out of profits, next out of capital, and, lastly, if necessary, by the partners individually in the proportions in which they were entitled to share profits;
(b) the assets of the firm, including any sums contributed by the partners to make up deficiencies of capital, shall be applied in the following manner and order :
(i) in paying the debts of the firm to third parties;
(ii) in paying to each partner ratably what is due to him from the firm for advances as distinguished from capital;
(iii) in paying to each partner ratably what is due to him on account of capital; and
(iv) the residue, if any, shall be divided among the partners in the proportions in which they were entitled to share profits.
Section 49. PAYMENT OF FIRM’S DEBTS AND OF SEPARATE DEBTS.
Where there are joint debts due from the firm, and also separate debts due from any partner, the property of the firm shall be applied in the first instance in payment of the debts of the firm, and, if there is any surplus, then the share of each partner shall be applied in payment of his separate debts or paid to him. The separate property of any partner shall he applied first in the payment of his separate debts, and the surplus (if any) in payment of the debts of the firm.
Section 50. PERSONAL PROFITS EARNED AFTER DISSOLUTION.
Subject to contract between the partners, the provisions of clause (a) of section 16 shall apply to transactions by any surviving partner or by the representatives of deceased partner, undertaken after the firm is dissolved on account of the death of a partner and before its affairs have been completely wound up :
Provided that where any partner or his representative has bought the good will of the firm, nothing in the section shall affect his right to use the firm-name.
Section 51. RETURN OF PREMIUM ON PREMATURE DISSOLUTION.
Where a partner has paid a premium on entering into partnership for a fixed term, and the firm is dissolved before the expiration of that term otherwise than by the death of a partner, he shall be entitled to repayment of the premium or of such part thereof as may be reasonable, regard being had to the terms upon which he became a partner, and to the length of time during which he was a partner, unless -
(a) the dissolution is mainly due to his own misconduct, or
(b) the dissolution is in pursuance of an agreement containing no provision for the return of the premium or any part of it.
Section 52. RIGHTS WHERE PARTNERSHIP CONTRACT IS RESCINDED FOR FRAUD OR MISREPRESENTATION.
Where a contract creating partnership is rescinded on the ground of fraud or misrepresentation of any of the parties thereto, the party entitled to rescind is, without prejudice to any other right, entitle -
(a) to a lien on, or right of retention of, the surplus of the assets of the firm remaining after the debts of the firm have been paid, for any sum paid by him for the purchase of a share in the firm and for any capital contributed by him;
(b) to rank as a creditor of the firm in respect of any payment made by him towards the debts of the firm; and
(c) to he indemnified by the partner or partners guilty of fraud or misrepresentation against all the debts of the firm.
Section 53. RIGHT TO RESTRAIN FROM USE OF FIRM-NAME OR FIRM-PROPERTY.
After a firm is dissolved, every partner or his representative may, in the absence of a contract between the partners to the contrary, restrain any other partner or his representative from carrying on a similar business in the firm-name or from using any of the property of the firm for his own benefit, until the affairs of the firm have been completely wound up :
Provided that where any partner or his representative has brought the goodwill of the firm, nothing in this section shall affect his right to use the firm-name.
Section 54. AGREEMENTS IN RESTRAINT OF TRADE.
Partners may, upon or in anticipation of the dissolution of the firm, make an agreement that some or all of them will not carry on a business similar to that of the firm within a specified period or within specified local limits and notwithstanding anything contained in section 27, of the Indian Contract Act, 1872, such agreement shall be valid if the restrictions imposed are reasonable.
Section 55. SALE OF GOODWILL AFTER DISSOLUTION.
(1) In settling the accounts of a firm after dissolution, the goodwill shall, subject to contract between the partners, be included in the assets, and it may be sold either separately or along with other property of the firm.
(2) RIGHTS OF BUYER AND SELLER OF GOODWILL.
Where the goodwill of a firm is sold after dissolution, a partner may carry on a business competing with that of the buyer and he may advertise such business, but, subject to agreement between him and the buyer, he may not
(a) use the firm-name,
(b) represent himself as carrying on the business of the firm, or
(c) solicit the custom of persons who were dealing with the firm before its dissolution.
(3) AGREEMENTS IN RESTRAINT OF TRADE.
Any partner may upon the sale of the goodwill of a firm, make an agreement with the buyer that such partner will not carry on any business similar to that of the firm within a specified period or within specified local limits, and, notwithstanding anything contained in section 27 of the Indian Contract Act, 1872 such agreement shall be valid if the restrictions are reasonable.
Section 56. POWER TO EXEMPT FROM APPLICATION OF THIS CHAPTER.
The State Government of any State may, by notification in the Official Gazette, direct that the provisions of this Chapter shall not apply to that State or to any part thereof specified in the notification.
Section 57. APPOINTMENT OF REGISTRAR OF FIRMS AND DEPUTY AND ASSISTANT REGISTRARS OF FIRMS.
(1) The State Government may, by notification in the Official Gazette, appoint a Registrar of Firms who shall exercise, perform and discharge the powers, functions and duties of the Register under this Act throughout the State of Maharashtra.
(2) The State Government may likewise appoint one or more Deputy Registrars of Firms and Assistant Registrars of Firms who shall exercise, perform and discharge all or such of the powers, functions and duties of the Registrar and in such areas as the State Government may, by notification in the Official Gazette, specify.
(3) The officers appointed under sub-section (1) and sub-section (2) shall be deemed to be public servants within the meaning of section 21 of the Indian Penal Code.
Section 58. APPLICATION FOR REGISTRATION.
(1) Subject to the provisions of sub-section of sub-section (1A), the registration of a firm effected by sending by post or delivering to the Registrar of the area in which any place of business of the firm is situated or proposed to be situated, a statement in the prescribed form and accompanied by the prescribed fee and a true copy of the deed of partnership stating :
(a) the firm-name,
(aa) the nature of business of the firm;
(b) the place or principal place of business of the firm,
(c) the names of any other places where the firm carries on business,
(d) the date when each partner joined the firm,
(e) the names in full and permanent addresses of the partners, and
(f) the duration of the firm.
The statement shall be signed by all the partners, or by their agents specially authorised in this behalf.
(1A) The statement under sub-section (1) shall be sent or delivered to the Registrar within a period of one year from the date of constitution of the firm :
Provided that in the case of any firm carrying on business on or before the date of commencement of the Indian Partnership (Maharashtra Amendment) Act, 1984, such statement shall be sent or delivered to the Registrar within a period of one year firm such date.
(2) Each person signing the statement shall also verify it in the manner prescribed.
(3) A firm shall not have any of the names or emblems specified in the Schedule to the Emblems and Names (Prevention of Improper Use) Act, 1950, or any colourable imitation thereof, unless permitted so to do under that Act, or any name which is likely to be associated by the public with the name of any other firm on account of similarity, or any name which, in the opinion of the Registrar, for reasons to be recorded in writing, is undesirable:
Provided that nothing in this sub-section shall apply to any firm registered under any such name before the date of the commencement of the Indian Partnership (Maharashtra Amendment) Act, 1984.
(4) Any person aggrieved by an order of the Registrar under sub-section (3), may, within 30 days from the date of communication of such order, appeal to the officer not below the rank of Deputy Secretary to Government authorised by the State Government in this behalf, in such manner, and on payment of such fee, as may be prescribed. On receipt of any such appeal, the authorised officer shall, after giving an opportunity of being heard to the appellant, decide the appeal, and his decision shall be final.
Section 59. REGISTRATION.
(1) When the Registrar is satisfied that the provisions of section 58 have been duly complied with, he shall record an entry of the statement in a register called the Register of Firms, and shall file the statement. [19 On the date such entry is recorded and such statement is filed, the firm shall be deemed to be registered.
(2) The firm, which is registered, shall use the brackets and word (Registered) immediately after its name.
Section 59A. DELETION AND ADDITION OF CERTAIN ENTRIES RELATING TO CERTAIN FIRMS, BY REASON OF REORGANISATION OF STATES.
(1) Notwithstanding anything contained in this Chapter, a Registrar of Firms appointed for any area by the Government of Bombay may, by order in writing, amend the Register of Firms maintained by him by deleting there from the entries relating to any firm, whose place of business has, by reason of the reorganisation of States under the States Reorganisation Act, 1956, ceased to be situated in the State of Bombay. The Registrar may likewise and without any charge or fee therefor amend the Register by adding thereto the entries relating to any firm included in the Register of another State but whose place of business has, by reason of such reorganisation, become part of the area within his jurisdiction in the State of Bombay :
Provided that the Registrar shall, before passing any order under this sub-section, make such inquiry as he deems necessary and give notice to the firm and the Registrar of the State concerned.
(2) After such amendment, the Registrar shall cease to perform the functions of a Registrar in respect of any firm the entries relating to which have been deleted as aforesaid and shall perform all the functions of a Registrar in respect of any firm the entries relating to which are added as aforesaid.
(3) Any person aggrieved by an order under sub-section (1) may appeal to such authority, and within such time, as may be specified in this behalf by the Government of Bombay notification in the Official Gazette; and such authority shall pass such order on the appeal as it thinks fit.
(4) An order of a Registrar under sub-section (1), or when an appeal has been preferred against it under sub-section (3), the order of the appellate authority, shall be final.
(5) The provisions of this section shall cease to be in force from such date as the Government of Bombay may, by notification in the Official Gazette, appoint.
Section 59A-1. LATE REGISTRATION ON PAYMENT OF PENALTY.
If the statement in respect of any firm is not sent or delivered to the Registrar within the time specified in sub-section (1A) of section 58, then the firm may be registered on payment, to the Registrar, of a penalty of one hundred rupees per year of delay or a part thereof.
Section 59B. DELETION OF ENTRIES RELATING TO CERTAIN FIRMS BY REASON OF FORMATION OF GUJARAT STATE.
(1) Notwithstanding anything contained in this Chapter, a Registrar of Firms appointed for any area by the Government of Maharashtra may, by order in writing, amend the Register of Firms maintained by him by deleting there from the entries relating to any firm, whose place of business has, by reason of the formation of the State of Gujarat by the Bombay Reorganisation Act, 1960, ceased to be situated in the State of Maharashtra :
Provided that the Registrar shall, before passing any order under this sub-section, make such inquiry as he deems necessary and give notice to the firm and the Registrar of the State of Gujarat.
(2) After such amendment, the Registrar shall cease to perform the functions of a Registrar in respect of any firm the entries relating to which have been deleted as aforesaid.
(3) Any person aggrieved by an order under sub-section (1) may appeal to such authority and within such time, as may be specified in this behalf by the Government of Maharashtra, by notification in the Official Gazette and such authority shall pass such order on the appeal as it thinks fit.
(4) An order of a Registrar under sub-section (1), or where an appeal has been preferred against it under sub-section (3), the order of the appellate authority shall be final.
Section 60. RECORDING OF ALTERATIONS IN FIRM-NAME, NATURE OF BUSINESS AND PRINCIPAL PLACE OF BUSINESS.
(1) When an alteration is made in the firm name or in the nature of business of a firm or in the location of the principal place of business of a registered firm, a statement shall be sent to the Registrar, within a period of 90 days from the date of making such alteration, accompanied by the prescribed fee, specifying the alteration and signed and verified in the manner required under section 58.
(2) When the Registrar is satisfied that the provisions of sub-section (1) have been duly complied with, he shall amend the entry relating to the firm in the Register of Firms in accordance with the statement, and shall file it along with the statement relating to the firm filed under section 59.
Section 61. NOTING OF CLOSING AND OPENING OF BRANCHES.
When a registered firm discontinues business at any place or begins to carry on business at any place, such place not being its principal place of business, any partner or agent of the firm shall send intimation thereof to the Registrar, within a period of 90 days from the date of such discontinuance or, as the case may be, from the date on which the firm begins to carry on business at such place. The Registrar shall then make a note of such intimation in the entry relating to the firm in the Register of Firms, and shall file the intimation along with the statement relating to the firm filed under section 59.
Section 62. NOTING OF CHANGES IN NAMES AND ADDRESSES OF PARTNERS.
When any partner in a registered firm alters his name or permanent address, an intimation of the alteration’ shall be sent, within a period of 90 days from the date of making such alteration, by any partner or agent of the firm to the Registrar, who shall deal with it in the manner provided in section 61.
Section 63. RECORDING OF CHANGES IN AND DISSOLUTION OF A FIRM.
When a change occurs in the constitution of a registered firm, every incoming, continuing or outgoing partner, and when a registered firm is dissolved, every person who was a partner immediately before the dissolution, or the agent of every such partner or person specially authorised in this behalf shall, within a period of 90 days from the date of such change or dissolution, given notice to the Registrar of such change or dissolution, specifying the date thereof; and the Registrar shall a record of the notice in the entry relating to the firm in the Registrar of Firms and shall file the notice along with statement relating to the firm filed under section 59.
(1A) Where a change occurs in the constitution of a registered firm, all persons, who after such change are partners of the firm, shall jointly send an intimation of such change duly signed by them, to the Registrar, within a period of 90 days from the date of occurrence of such change and the Registrar shall deal with it in the manner provided by section 61.
(2) RECORDING OF WITHDRAWAL OF A MINOR.
When a minor who has been admitted to the benefits of partnership in a firm attains majority and elects to become or not to become a partner, and the firm is then a registered firm, he, or his agent specially authorised in this behalf, shall within a period of 90 days from the date of his election, give notice to the Registrar that he has or has not become a partner, and the Registrar shall deal with the notice in the manner provided in sub-section (1).
Section 64. RECTIFICATION OF MISTAKES.
(1) The Registrar shall have power at all time to rectify any mistake in order to bring the entry in the Register of Firms relating to any firm into conformity with into documents relating to that firm filed under this Chapter.
(2) On application made by the all parties who have signed any document relating to a firm filed under this Chapter, the Registrar may rectify any mistake in such document or in the record of note thereof made in the Register of Firms.
Section 65. AMENDMENT OF REGISTER BY ORDER OF COURT.
A Court deciding any matter relating to a registered firm may direct that the Registrar shall make any amendment in the entry in the Register of Firms relating to such firm which is consequential upon its decision; and the Registrar shall amend the entry accordingly.
Section 66. INSPECTION OF REGISTER AND FILED DOCUMENTS.
(1) The Registrar of Firms shall be open to inspection by any person on payment of such fee as may be prescribed.
(2) All statements, notices and intimations filed under this Chapter shall be open to inspection, subject to such conditions and on payment of such fee as may be prescribed.
Section 67. GRANT OF COPIES.
The Registrar shall on application, furnish to any person, on payment of such fee as may be prescribed, a copy, certified under his hand, of any entry or portion thereof in the Register of Firms.
Section 68. RULES OF EVIDENCE.
(1) Any statement, intimation or notice recorded or noted in Register of Firms shall, as against any person by whom or on whose behalf such statement, intimation or notice was signed, be conclusive proof of any fact therein stated.
(2) A certified copy of an entry relating to a firm in the Register of Firms may be produced in proof of the fact of the registration of such firm, and of the contents of any statement, intimation or notice recorded or noted therein.
Section 69. EFFECT OF NON-REGISTRATION.
(1) No suit to enforce a right arising from a contract or conferred by this Act shall be instituted in any Court by or on a behalf of any persons suing as a partner in a firm against the firm or any person alleged to be or to have been a partner in the firm unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm :
Provided that the requirement of registration of firm under this sub-section shall not apply to the suits or proceedings instituted by the heirs or legal representatives of the deceased partner of a firm for accounts of the firm or to realise the property of the firm.
(2) No suit to enforce a right arising from a contract shall be instituted in any court by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm.
(2A) No suit to enforce any right for the dissolution of a firm or for accounts of a dissolved firm or any right or power to realise the property of a dissolved firm shall be instituted in any Court by or on behalf of any person suing as a partner in a firm against the firm or any person alleged to be or have been a partner in the firm, unless the firm is registered and the person suing is or has been shown in the Register of Firms as a partner in the firm :
Provided that the requirement of registration of firm under this sub-section shall not apply to the suits or proceedings instituted by the heirs or legal representatives of the deceased partner of a firm for accounts of a dissolved firm or to realise the property of a dissolved firm.
(3) The provisions of sub-sections (1), (2) and (2A) shall apply also to a claim of set-off or other proceedings to enforce a right arising from a contract but shall not affect
(a) the firms constituted for a duration upto six months or with a capital upto two thousand rupees; or;
(b) the powers of an official assigned, receiver or Court under the Presidency Towns Insolvency Act, 1909, or the Provincial Insolvency Act, 1920, to realise the property of an insolvent partner.
(4) This section shall not apply
(a) to firms or partners in firm which have no place of business in the territories to which this Act extends, or whose places of business in the said territories are situated in areas to which, by notification under section 56 this Chapter does not apply, or
(b) to any suit or claim of set-off not exceeding one hundred rupees in value which, in the presidency towns, is not of a kind specified in section 19 of the Presidency Small Cause Courts Act, 1882, or outside the Presidency towns, is not of a kind specified in the Second Schedule to the Provincial Small Cause Courts Act, 1887, or to any proceeding in execution or other proceeding incidental to or arising from any such suit or claim.
Section 69A. PENALTY FOR CONTRAVENTION OF SECTION 60, 61, 62, OR 63.
If any statement, intimation or notice under sections 60, 61, 62 or 63 in respect of any registered firm is not sent or given to the Registrar, within the period specified in that section, the Registrar may, after giving notice to the partners of the firm and after giving them a reasonable opportunity of being heard, refuse to make the suitable amendments in the records relating to the firm, until the partners of the firm pay such penalty, not exceeding ten rupees per day, as the Registrar may determine in respect of the period between the date of expiry of the period specified in sections 60, 61, 62 or as the case may be, 63 and the date of making the amendments in the entries relating to the firm.
Section 70. PENALTY FOR FURNISHING FALSE PARTICULARS.
Any person who signs any statement, amending statement, notice or intimation under this Chapter containing any particulars which he knows to be false or does not believe to be true, or containing particulars which he knows to be incomplete or does not believe to be complete, shall, on conviction, be punished with imprisonment for a term which may extend to one year, or with fine, or with both :
Provided that in the absence of special and adequate reasons to the contrary to be mentioned in the judgement of the Court, the fine shall not be less than one thousand rupees.
Section 70A. MAXIMUM FEES AND POWER TO AMEND SCHEDULE I.
(1) The fees payable under this Act and the rules made there under shall not exceed the maximum fees as specified in Schedule I.
(2) Subject to the provisions of this section, the State Government may, having regard to the expenditure incurred or to be incurred for carrying out the purposes of this Act, from time to time, by notification in the Official Gazette, vary any of the amounts of maximum fees and other particulars specified in Schedule I, and, thereupon, the said Schedule shall be deemed to be amended accordingly.
(3) Every notification issued under sub-section (2) shall take effect from the date of its publication in the Official Gazette, unless some other date is specified therein for this purpose.
(4) Every notification issued by the State Government under sub-section (2) shall be laid, as soon as may be after it is issued, before each House of the State Legislature, while it is in session, for a total period of thirty days, which may be comprised in one session or in two successive sessions, and if, before the expiry of the session in which it is so laid or the session immediately following, both Houses agree in making any modification in the notification or both Houses agree that the notification should not be issued, and notify such decision in the Official Gazette, the notification shall, from the date of publication of such decision, 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 or omitted to be done in pursuance of that notification.
Section 71. POWER TO MAKE RULES.
(1) Subject to the provisions of section 70A, the State Government may, by notification in the Official Gazette, make rules prescribing the fees which shall accompany documents sent to the Registrar or which shall be paid in respect of any intimation, notice or application given to the Registrar or which shall be payable for the inspection of documents in the custody of the Registrar or for copies from the Register of Firms or which shall be paid for supply of any prescribed forms.
(2) The State Government may also make rules
(a) prescribing the form of statement submitted under sub-section (1) of section 58 and of the verification thereof;
(aa) prescribing the manner of filing an appeal under sub-section (4) of section 58;
(b) requiring statements, intimations and notices under sections 60, 61, 62 and 63 to be in prescribed form, and prescribed the form thereof;
(c) prescribing the form of the Register of Firms, and the mode in which entries relating to firms are to be made therein, and the mode in which such entries are to be amended or notes made therein;
(d) regulating the procedure of the Registrar when dispute arises;
(e) regulating the filing of documents received by the Registrar;
(f) prescribing conditions for the inspection of original documents;
(g) regulating the grant of copies;
(h) regulating the elimination of registers and documents;
(i) providing for the maintenance and form of an Index to the Register of Firms
(j) generally, to carry out the purposes of this Chapter.
(3) All rules made under this section shall be subject to the condition of previous publication.
(4) Every rule made under this section shall be laid, as soon as may be after it is made, before each House of the State Legislature, while it is in session, for a total period of thirty days, which may be comprised in one session or in two successive sessions, and if, before the expiry of the session in which it is so laid or the session immediately following, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, and notify such decision in the Official Gazette, the rule shall, from the date of publication of such decision, 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 or omitted to be done in pursuance of that rule.
Section 72. MODE OF GIVING PUBLIC NOTICE.
A public notice under this Act is given
(a) Where it relates to the retirement or expulsion of a partner from a registered firm, or to the dissolution of a registered firm, or to the election to become or not to become a partner in a registered firm by a person attaining majority who was admitted as a minor to the benefits of partnership, by notice to the Registrar of Firms under section 63, and by publication in the Official Gazette and in at least one vernacular newspaper circulating in the district where the firm to which it relates, has its place or principal place of business, and
(b) in any other case, publication in the Official Gazette, and in at least one vernacular newspaper circulating in the district where the firm to which it relates has its place or principal place of business.
Section 73. REPEALS.
Repealed by the Repealing Act, 1938, (1 of 1938), s. 2 and Sch.
Section 74. SAVINGS.
Nothing in this Act or any repeal affected thereby shall affect or be deemed to affect -
(a) any right, title, interest, obligation or liability already acquired, accrued or incurred before the commencement of this Act, or
(b) any legal proceeding or remedy in respect of any such right, title, interest, obligation or liability, or anything done or suffered before the commencement of this Act, or
(c) anything done or suffered before the commencement of this Act, or
(d) any enactment relating to partnership not expressly repealed by this Act, or
(e) any rule of insolvency relating to partnership, or
(f) any rule of law not inconsistent with this Act.
Schedule- I
I MAXIMUM FEES.
| Document or act in respect of which the fee is payable, |
Maximum fee |
| (1) Statement under section 58(1) |
Fifty rupees. |
| (2) Memorandum of appeal under section (4) |
Twenty-five rupees. |
| (3) Statement under section 60 |
Fifteen rupees. |
| (4) Intimation under section 61 |
Fifteen rupees. |
| (5) Intimation under section 62 |
Fifteen rupees. |
| (6) Notice under section 63(1) |
Fifteen rupees. |
| (7) Intimation under section 63(1A) |
Fifteen rupees. |
| (8) Notice under section 63(2) |
Fifteen rupees. |
| (9) Application under section 64 |
Fifteen rupees. |
| (10) Inspection of the Register of Firms under sub-section (1) of section 66, for inspection of one volume of the Register of Firms |
Seven rupees and fifty paise. |
| (11) Inspection of documents relating to a firm under sub-section I(2)D of section 66, for the inspection of all documents relating to one firm |
Seven rupees and fifty paise. |
| (12) Copies from the Register of Firms under section 67, for each hundred words or part thereof. |
Two rupees. |
| (13) Price of Forms prescribed under the rules |
One rupee per Form. |
Schedule II -ENACTMENTS REPEALED –
BY REPEALING ACT, 1938 (1 OF 1938) SECTION 2 AND SCHEDULE.
November 30, 2014
Section 1. Short title, extent and commencement
(1) This Act may be called the Drugs 1[and Cosmetics] Act, 1940.
(2) It extends to the whole of India 2[***].
(3) It shall come into force at once; but Chapter III shall take effect only from such date3 as the Central Government may, by notification in the Official Gazette, appoint in this behalf, and Chapter IV shall take effect in a particular State only from such date3 as the State Government may, by like notification, appoint in this behalf:
4[Provided that in relation to the State of Jammu and Kashmir, Chapter III shall take effect only from such date5 after the commencement of the Drugs and Cosmetics (Amendment) Act, 1972 (19 of 1972), as the Central Government may, by notification in the Official Gazette, appoint in this behalf.]
————————————–
1. Ins. by Act 21 of 1962, sec. 3 (w.e.f. 27-7-1964).
2. The words “except the State of Jammu and Kashmir” omitted by Act 19 of 1972, sec. 2 (w.e.f. 31-5-1972).
3. 1st April, 1947; see Notification No.F. 28(10) (3) 45H(I), dated 2nd September, 1946, Gazette of India, 1946, Pt. I, p. 1349.
Chapter IV came into force in the States of Delhi, Ajmer and Coorg on 1st April, 1947, see Notification No. F. 28 (10)(3) 45H(I), Chapters III and IV came into force in the States of Himachal Pradesh, Bilaspur, Kutch, Bhopal, Tripura, Vindhya Pradesh and Manipur on 1st April, 1953, vide Notification No. S.R.O. 663, dated 30th March, 1953, Gazette of India, Pt. II, Sec. 3, p. 451.
Chapter IV came into force in the Union Territory of Dadra and Nagar Haveli w.e.f. 1st August, 1968, see Notification No. ADM/Law/117(74), dated 20th July, 1968, Gazette of India, Pt. III, Sec. 3, p. 128. The Act is extended to Dadra and Nagar Haveli by Reg. 6 of 1963, sec. 2 and Sch. I; to Pondicherry by Reg. 7 of 1963, sec. 3 and Sch. I; to Goa, Daman and Diu by Reg. 11 of 1963, sec. 3 and Sch. and to Laccadive, Minicoy and Amindivi Islands by Reg. 8 of 1965, sec. 3 and Sch.
4. Added by Act 19 of 1972, sec. 2 (w.e.f. 31-5-1972).
5. 24th August, 1974, vide Notification No. S.O. 2185, dated 9th August, 1974, published in the Gazette of India, 1974, Pt. II, Sec. 3(ii), p. 2331.
Section 2. Application of other laws not barred.
The provisions of this Act shall be in addition to, and not in derogation of, the Dangerous Drugs Act, 1930, and any other law for the time being in force.
Section 3. Definitions.
1[(a)“2[Ayurvedic, Siddha or Unani] drug” includes all medicines intended for internal or external use for or in the diagnosis, treatment, mitigation or prevention of 3[disease or disorder in human beings or animals, and manufactured] exclusively in accordance with the formulae described in, the authoritative books of 4[Ayurvedic, Siddha and Unani Tibb systems of medicine], specified in the First Schedule;]
5[(aa)] “the Board” means—
(i) in relation to 2[Ayurvedic, Siddha or Unani] drug, the 6[Ayurvedic, Siddha and Unani Drugs Technical Advisory Board] constituted under section 33C; and
(ii) in relation to any other drug or cosmetic, the Drugs Technical Advisory Board constituted under section 5;]
5[7[(aaa)] “cosmetic” means any article intended to be rubbed, poured, sprinkled or sprayed on, or introduced into, or otherwise applied to, the human body or any part thereof for cleansing, beautifying, promoting attractiveness, or altering the appearance, and includes any article intended for use as a component of cosmetic 8[***];]
9[(b) “drug” includes—
10[(i) all medicines for internal or external use of human beings or animals and all substances intended to be used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings or animals, including preparations applied on human body for the purpose of repelling insects like mosquitoes;]
(ii) such substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of 11[vermin] or insects which cause disease in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette;]
12[(iii) all substances intended for use as components of a drug including empty gelatin capsules; and
(iv) such devices* intended for internal or external use in the diagnosis, treatment, mitigation or prevention of disease or disorder in human beings or animals, as may be specified from time to time by the Central Government by notification in the Official Gazette, after consultation with the Board;]
13[(c) “Government Analyst” means—
(i) in relation to 14[Ayurvedic, Siddha or Unani] drug, a Government Analyst appointed by the Central Government or a State Government under section 33F; and
(ii) in relation to any other drug or cosmetic, a Government Analyst appointed by the Central Government or a State Government under section 20;]
15[***]
16[(e) “Inspector” means—
(i) in relation to 14[Ayurvedic, Siddha or Unani] drug, an Inspector appointed by the Central Government or a State Government under section 33G; and
(ii) in relation to any other drug or cosmetic, an Inspector appointed by the Central Government or a State Government under section 21;]
17[(f) “manufacture” in relation to any drug 18[or cosmetic] includes any process or part of a process for making, altering, ornamenting, finishing, packing, labelling, breaking up or otherwise treating or adopting any drug 13[or cosmetic] with a view to its 19[sale or distribution] but does not include the compounding or dispensing 20[of any drug, or the packing of any drug or cosmetic,] in the ordinary course of retail business; and “to manufacture” shall be construed accordingly;]
21[(g)] “to import”, with its grammatical variations and cognate expressions means to bring into 22[India];
23[(h) “patent or proprietary medicine” means,—
(i) in relation to Ayurvedic, Siddha or Unani Tibb systems of medicine all formulations containing only such ingredients mentioned in the formulae described in the authoritative books of Ayurveda, Siddha or Unani Tibb systems of medicine specified in the First Schedule, but does not include a medicine which is administered by parenteral route and also a formulation included in the authoritative books as specified in clause (a);
(ii) in relation to any other systems of medicine, a drug which is a remedy or prescription presented in a form ready for internal or external administration of human beings or animals and which is not included in the edition of the Indian Pharmacopoeia for the time being or any other Pharmacopoeia authorised in this behalf by the Central Government after consultation with the Drugs Technical Advisory Board constituted under section 5;]
24[(i) “prescribed” means prescribed by rules made under this Act.]
25[***]
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1.Ins. by Act 13 of 1964, sec. 2 (w.e.f. 15-9-1964)
2.Subs. by Act 68 of 1982, sec. 2, for “Ayurvedic (including Siddha) or Unani” (w.e.f. 1-2-1983).
3.Subs. by Act 68 of 1982, sec. 3, for “disease in human beings, mentioned in, and processed and manufactured” (w.e.f. 1-2-1983).
4.Subs. by Act 68 of 1982, sec. 3, for “Ayurvedic (including Siddha) and Unani (Tibb) system of medicine” (w.e.f. 1-2-1983).
5.Original clause (a) relettered as clause (aa) and subs. by Act 13 of 1964, sec. 2 (w.e.f. 15-9-1964).
6.Subs. by Act 68 of 1982, sec. 3, for “Ayurvedic and Unani Drugs Technical Advisory Board” (w.e.f. 1-2-1983)
7.Clause (aa) ins. by Act 21 of 1962, sec. 4 (w.e.f. 27-7-1964) and relettered as clause (aaa) by Act 13 of 1964, sec. 2 (w.e.f. 15-9-1964).
8.The words “, but does not include soap” omitted by Act 68 of 1982, sec. 3 (w.e.f. 1-2-1983).
9.Subs. by Act 11 of 1955, sec. 2, for clause (b) (w.e.f. 15-4-1955).
10.Subs. by Act 68 of 1982, sec. 3, for sub-clause (i) (w.e.f. 1-2-1983).
11.Subs. by Act 13 of 1964, sec. 2, for “vermins” (w.e.f. 15-9-1964).
12.Ins. by Act 68 of 1982, sec. 3 (w.e.f. 1-2-1983).
13.Subs. by Act 13 of 1964, sec. 2, for clause (c) (w.e.f. 15-9-1964).
14.Subs. by Act 68 of 1982, sec. 2, for “Ayurvedic (including Siddha) or Unani” (w.e.f. 1-2-1983).
15.Clause (d) omitted by Act 19 of 1972, sec. 3 (w.e.f. 31-5-1972).
16.Subs. by Act 13 of 1964, sec. 2, for clause (e) (w.e.f. 15-9-1964).
17.Clause (bbb) ins. by Act 11 of 1955, sec. 2 (w.e.f. 15-4-1955) and relettered as clause (f) by Act 35 of 1960, sec. 2 (w.e.f. 16-3-1961)
18.Ins. by Act 21 of 1962, sec. 4 (w.e.f. 27-7-1964).
19.Subs. by Act 68 of 1982, sec. 3, for “sale and distribution” (w.e.f. 1-2-1983)
20.Subs. by Act 21 of 1962, sec. 4, for “or packing of any drug”.
21.Clauses (c), (d) and (e) relettered as clauses (g), (h) and (i) respectively by Act 35 of 1960, sec. 2 (w.e.f. 16-3-1961).
22.Subs. by Act 3 of 1951, sec. 3 and Sch., for “the States”.
23.Clause (d) relettered as clause (h) by Act 35 of 1960, sec. 2 (w.e.f. 16-3-1961) and subs. by Act 68 of 1982, sec. 3 (w.e.f. 1-2-1983).
24.Clause (e) subs. by Act 11 of 1955, sec. 2 (w.e.f. 15-4-1955) and relettered as clause (i) by Act 35 of 1960, sec. 2 (w.e.f. 16-3-1961).
25.Clause (f) ins. by the A.O. 1950 and omitted by Act 3 of 1951, sec. 3 and Sch.
* The Central Government has specified (vide S.O. 1468(E), dated 6th October, 2005) the following devices intended for external or internal use in human beings or drugs with immediate effect, namely:—
(i) Cardiac Stents (vi) Bone Cements
(ii) Drug Eluding Stents (vii) Heart Valves
(iii) Catheters (viii) Sclap Vein Set
(iv) Intra Ocular Lenses (ix) Orthopaedic Implants
(v) I.V. Cannulac (x) Internal Prosthetic Replacements.
Section 3A. Constitution of references to any law not in force or any functionary not in existence in the State of Jammu and Kashmir.
1[3A. Construction of references to any law not in force or any functionary not in existence in the State of Jammu and Kashmir.
Any reference in this Act to any law which is not in force, or any functionary not in existence, in the State of Jammu and Kashmir, shall, in relation to that State, be construed as a reference to the corresponding law in force, or to the corresponding functionary in existence, in that State.
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1. Ins. by Act 19 of 1972, sec. 4 (w.e.f. 31-5-1972).
Section 4. Presumption as to poisonous substances.
Any substance specified as poisonous by rule made under Chapter III or Chapter IV 1[or Chapter IVA] shall be deemed to be a poisonous substance for the purpose of Chapter III or Chapter IV 1[or Chapter IVA], as the case may be.
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Section 5.The Drugs Technical Advisory Board.
1[(2) The Board shall consist of the following members, namely:—
(i) the Director General of Health Services, ex officio, who shall be Chairman;
(ii) the Drugs Controller, India, ex officio;
(iii) the Director of the Central Drugs Laboratory, Calcutta, ex officio;
(iv) the Director of the Central Research Institute, Kasauli, ex officio;
(v) the Director of the Indian Veterinary Research Institute, Izatnagar, ex officio;
(vi) the President of the Medical Council of India, ex officio;
(vii) the President of the Pharmacy Council of India, ex officio;
(viii) the Director of the Central Drug Research Institute, Lucknow, ex officio;
(ix) two persons to be nominated by the Central Government from among persons who are in charge of drugs control in the States;
(x) one person, to be elected by the Executive Committee of the Pharmacy Council of India, from among teachers in pharmacy or pharmaceutical chemistry or pharmacognosy on the staff of an Indian University or a college affiliated thereto;
(xi) one person, to be elected by the Executive Committee of the Medical Council of India, from among teachers in medicine or therapeutics on the staff of an Indian University or a college affiliated thereto;
(xii) one person to be nominated by the Central Government from the pharmaceutical industry;
(xiii) one pharmacologist to be elected by the Governing Body of the Indian Council of Medical Research;
(xiv) one person to be elected by the Central Council of the Indian Medical Association;
(xv) one person to be elected by the Council of the Indian Pharmaceutical Association;
(xvi) two persons holding the appointment of Government Analyst under this Act, to be nominated by the Central Government.]
(3) The nominated and elected members of the Board shall hold office for three years, but shall be eligible for re-nomination and re-election:
2[Provided that the person nominated or elected, as the case may be, under clause (ix) or clause (x) or clause (xi) or clause (xvi) of sub-section (2) shall hold office for so long as he holds the appointment of the office by virtue of which he was nominated or elected to the Board.]
(4) The Board may, subject to the previous approval of the Central Government, make bye-laws fixing a quorum and regulating its own procedure and the conduct of all business to be transacted by it.
(5) The Board may constitute sub-committees and may appoint to such sub-committees for such periods, not exceeding three years, as it may decide, or temporarily for the consideration of particular matters, persons who are not members of the Board.
(6) The functions of the Board may be exercised notwithstanding any vacancy therein.
(7) The Central Government shall appoint a person to be Secretary of the Board and shall provide the Board with such clerical and other staff as the Central Government considers necessary.
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1. Subs. by Act 13 of 1964, sec. 4, for sub-section (2) (w.e.f. 15-9-1964).
2. Subs. by Act 13 of 1964, sec. 4, for the Proviso (w.e.f. 15-9-1964).
Section 6. The Central Drugs Laboratory.
(1) The Central Government shall, as soon as may be, establish a Central Drugs Laboratory under the control of a Director to be appointed by the Central Government, to carry out the functions entrusted to it by this Act or any rules made under this Chapter :
Provided that, if the Central Government so prescribes, the functions of the Central Drugs Laboratory in respect of any drug or class of drugs 1[or cosmetic or class of cosmetics] shall be carried out at the Central Research Institute, Kasauli, or at any other prescribed Laboratory and the functions of the Director of the Central Drugs Laboratory in respect of such drug or class of drugs 1[or such cosmetic or class of cosmetics] shall be exercised by the Director of that Institute or of that other Laboratory, as the case may be.
(2) The Central Government may, after consultation with the Board, make rules prescribing—
(a) the functions of the Central Drugs Laboratory;
2[***]
(d) the procedure for the submission of the said Laboratory 3[under Chapter IV or Chapter IVA] of samples of drugs 2[or cosmetics] for analysis or test, the forms of the Laboratory’s reports thereon and the fees payable in respect of such reports;
(e) such other matters as may be necessary or expedient to enable the said Laboratory to carry out its functions;
(f) the matters necessary to be prescribed for the purposes of the proviso to sub-section (1).
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1. Ins. by Act 21 of 1962, sec. 5 (w.e.f. 27-7-1964).
2. Clauses (b) and (c) omitted by Act 11 of 1955, sec. 4 (w.e.f. 15-4-1955).
3. Subs. by Act 13 of 1964, sec. 5, for “under Chapter IV” (w.e.f. 15-9-964).
Section 7. The Drugs Consultative Committee.
(1) The Central Government may constitute an advisory committee to be called “the Drugs Consultative Committee” to advise the Central Government, the State Governments and the Drugs Technical Advisory Board on any matter tending to secure uniformity throughout 1[ India] in the administration of this Act.
(2) The Drugs Consultative Committee shall consist of two representatives of the Central Government to be nominated by that Government and one representative of each State Government to be nominated by the State Government concerned.
(3) The Drugs Consultative Committee shall meet when required to do so by the Central Government and shall have power to regulate its own procedure.
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1. Ins. by Act 3 of 1951, sec. 3 and Sch., for “the States”.
Section 7 A. Section 5 and 7 not to apply to Ayurvedic, Siddha or Unani drugs.
1[7A. Sections 5 and 7 not to apply to Ayurvedic, Siddha or Unani drugs.—
Nothing contained in sections 5 and 7 shall apply to 2[Ayurvedic, Siddha or Unani] drugs.]
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1. Ins. by Act 13 of 1964, sec. 6 (w.e.f. 15-9-1964).
2. Subs. by Act 68 of 1982, sec. 2, for “Ayurvedic (including Siddha) or Unani” (w.e.f. 1-2-1983).
Section 8. Standards of quality.
1[(1) For the purposes of this Chapter, the expression “standard quality” means—
(a) in relation to a drug, that the drug complies with the standard set out in 2[the Second Schedule], and
(b) in relation to a cosmetic, that the cosmetic complies with such standard as may be prescribed.]
(2) The Central Government, after consultation with the Board and after giving by notification in the Official Gazette not less than three months’ notice of its intention so to do, may by a like notification add to or otherwise amend 2[the Second Schedule], for the purposes of this Chapter, and thereupon 2[the Second Schedule] shall be deemed to be amended accordingly.
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1. Subs. by Act 21 of 1962, sec. 6, for sub-section (1) (w.e.f. 27-7-1964).
2. Subs. by Act 13 of 1964, sec. 7, for “the Schedule” (w.e.f. 15-9-1964).
Section 9. Misbranded drugs.
1[9. Misbranded drugs. For the purposes of this Chapter, a drug shall be deemed to be misbranded, –
(a) If it is so coloured, coated, powdered or polished that damage is concealed or if it is made to appear of better or greater therapeutic value than it really is ; or
(b) If it is not labeled in the prescribed manner ; or
(c) If its label or contained or anything accompanying the drug bears any statement, design or device which is false or misleading in any particular.]
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1. Subs. by Act 68 of 1982, sec. 5, for section 9 (w.e.f. 1-2-1983).
Section 9 A. Adulterated drugs.
1[9A. Adulterated drugs. For the purposes of this Chapter, a drug shall be deemed to be adulterated, –
(a) If it consists, in whole or in part, of any filthy, putrid or decomposed substance ; or
(b) If it has been prepared, packed or stored under insanitary conditions whereby it may have been contaminated with filth or whereby it may have been rendered injurious to health ; or
(c) If its contained is composed in whole or in part, of any poisonous or deleterious substance which may render the contents injurious to health; or
(d) If it bears or contains, for purposes of colouring only, a colour other than one which is prescribed ; or
(e) If it contains any harmful or toxic substance which may render it injurious to health ; or
(f) If any substance has been mixed therewith so as to reduce its quality or strength.
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1. Section 9A ins. by Act 21 of 1962, sec. 7 and subs. by Act 68 of 1982, sec. 6 (w.e.f. 1-2-1983).
Section 9 B. Spurious drugs.
19B. Spurious drugs. –For the purposes of this Chapter, a drug shall be deemed to be spurious, –
(a) If it is imported under a name which belongs to another drug ; or
(b) If it is an imitation of, or is a substitute for, another drug or resembles another drug in a manner likely to deceive or bears upon it or upon its label or contained the name of another drug unless it is plainly and conspicuously marked so as to reveal its true character and its lack of identity with such other drug ; or
(c) If the label or container bears the name of an individual or company purporting to be the manufacturer of the drug, which individual or company is fictitious or does not exist ; or
(d) If it has been substituted wholly or in part by another drug or substance ; or
(e) If it purports to be the product of a manufacturer of whom it is only truly a product.
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1. Section 9B ins. by Act 13 of 1964, sec. 8 (w.e.f. 15-9-1964) and subs. by Act 68 of 1982, sec. 6 (w.e.f. 1-2-1983).
Section 9 C. Misbranded Cosmetics.
19C. Misbranded Cosmetics.
For the purposes of this Chapter, a cosmetic shall be deemed to be misbranded –
(a) If it contains a colour which is not prescribed ; or
(b) If it is not labeled in the prescribed manner ; or
(c) If the label or container or anything accompanying the cosmetic bears any statement, which is false or misleading in any particular.
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1. Ins. by Act 68 of 1982, sec. 6 (w.e.f. 1-2-1983).
Section 9 D. Spurious cosmetics.
1[9D. Spurious cosmetics.
For the purposes of this Chapter, a cosmetic shall be deemed to be spurious, –
(a) If it is imported under a name which belongs to another cosmetic ; or
(b) If it is an imitation of, or is a substitute for, another cosmetic or resembles another cosmetic in a manner likely to deceive or bears upon it or upon its label or container the name of another cosmetic, unless it is plainly and conspicuously marked so as to reveal its true character and its lack of identity with such other cosmetic ; or
(c) If the label or container bears the name of an individual or a company purporting to be the manufacturer of the cosmetic which individual or company is fictitious or does not exist ; or
(d) If it purports to be the product of a manufacturer of whom it is.]
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1. Ins. by Act 68 of 1982, sec. 6 (w.e.f. 1-2-1983).
Section 10. Prohibition of import of certain drugs or cosmetics.
From such date1 as may be fixed by the Central Government by notification in the Official Gazette in this behalf, no person shall import—
(a) any drug 2[or cosmetic] which is not of standard quality;
3[(b) any misbranded drug 4[or misbranded or spurious cosmetic];]
5[(bb) any 6[adulterated or spurious] drug;]
(c) any drug 2[or cosmetic] for the import of which a licence is prescribed, otherwise than under, and in accordance with, such licence;
7[(d) any patent or proprietary medicine, unless there is displayed in the prescribed manner on the label or container thereof 8[the true formula or list of active ingredients contained in it together with the quantities thereof];]
(e) any drug which by means of any statement, design or device accompanying it or by any other means, purports or claims to cure or mitigate any such disease or ailment, or to have any such other effect, as may be prescribed;
9[(ee) any cosmetic containing any ingredient which may render it unsafe or harmful or use under the directions indicated or recommended;]
(f) any drug 1[or cosmetic] the import of which is prohibited by rule made under this Chapter:
Provided that nothing in this section shall apply to the import, subject to prescribed conditions, of small quantities of any drug for the purpose of examination, test or analysis or for personal use:
Provided further that the Central Government may, after consultation with the Board, by notification in the Official Gazette, permit, subject to any conditions specified in the notification, the import of any drug or class of drugs not being of standard quality.
10[***]
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1.1st April, 1947, for clauses (a), (b), (c), (e) and (f) and 1st April, 1949, for clause (d), see Notification No. 18-12-46-D.I., dated 11th February, 1947, Gazette of India, 1947, Pt. I, p. 189 as amended by Notification No. F-1-2/48-D(I), dated 29th September, 1948. 1st April, 1953, for the States of Himachal Pradesh, Bilaspur, Kutch, Bhopal, Tripura, Vindhya Pradesh and Manipur vide Notification No. S.R.O. 666, dated 30th March, 1953, Gazette of India, 1953, Pt. II. Sec. 3, p. 451
2.Ins. by Act 21 of 1962, sec. 8 (w.e.f. 27-7-1964).
3.Subs. by Act 21 of 1962, sec. 8, for clause (b) (w.e.f. 27-7-1964).
4.Subs. by Act 68 of 1982, sec. 7, for “or misbranded cosmetic” (w.e.f. 1-2-1983).
5.Ins. by Act 13 of 1964, sec. 9 (w.e.f. 15-9-1964).
6.Subs. by Act 68 of 1982, sec. 7, for “adulterated” (w.e.f. 1-2-1983).
7.Subs. by Act 11 of 1955, sec. 5, for clause (d) (w.e.f. 15-4-1955).
8.Subs. by Act 68 of 1982, sec. 7, for certain words (w.e.f. 1-2-1983).
9.Ins. by Act 21 of 1962, sec. 8 (w.e.f. 27-7-1964).
10.Explanation omitted by Act 68 of 1982, sec. 7 (w.e.f. 1-2-1983).
Section 10 A. Power of Central Government to prohibit import of drugs and cosmetics in public interest.
1[10A. Power of Central Government to prohibit import of drugs and cosmetics in public interest.
Without prejudice to any other provision contained in this Chapter, if the Central Government is satisfied that the use of any drug or cosmetic is likely to involve any risk to human beings or animals or that any drug does not have the therapeutic value claimed for it or contains ingredients and in such quantity for which there is no therapeutic justification and that in the public interest it is necessary or expedient so to do then, that Government may, by notification in the Official Gazette, prohibit the import of such drug or cosmetic.
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1. Ins. by Act 68 of 1982, sec. 8 (w.e.f. 1-2-1983).
Section 11. Application of law relating to sea customs and powers of Customs Officers.
(1) The law for the time being in force relating to sea customs and to goods, the import of which is prohibited by section 18 of the Sea Customs Act, 1878 (8 of 1878)1 shall, subject to the provisions of section 13 of this Act, apply in respect of drugs 2[and cosmetics] the import of which is prohibited under this Chapter, and officers of Customs and officers empowered under that Act to perform the duties imposed thereby on a 3[Commissioner of Customs] and other officers of Customs, shall have the same powers in respect of such drugs 4[and cosmetics] as they have for the time being in respect of such goods as aforesaid.
5[(2) Without prejudice to the provisions of sub-section (1), the 6[Commissioner of Customs] or any officer of the Government authorised by the Central Government in this behalf, may detain any imported package which he suspects to contain any drug 7[or cosmetic] the import of which is prohibited under this Chapter and shall forthwith report such detention to the Drugs Controller, India, and if necessary, forward the package or sample of any suspected drug 7[or cosmetic] found therein to the Central Drugs Laboratory.]
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1. Now see the Customs Act, 1962 (52 of 1962).
2. Ins. by Act 21 of 1962, sec. 9 (w.e.f. 27-7-1964).
3. Subs. by Act 22 of 1995, sec. 83, for “Customs Collector” (w.e.f. 26-5-1995).
4. Ins. by Act 21 of 1962, sec. 9 (w.e.f. 27-7-1964).
5. Subs. by Act 11 of 1955, sec. 6, for sub-section (2) (w.e.f. 15-4-1955).
6. Subs. by Act 22 of 1995, sec. 83, for “Customs Collector” (w.e.f. 26-5-1995).
7. Ins. by Act 21 of 1962, sec. 9 (w.e.f. 27-7-1964).
Section 12. Power of Central Government to make rules.
(1) The Central Government may, 1[after consultation with or on the recommendation of the Board] and after previous publication by notification in the Official Gazette, make rules for the purpose of giving effect to the provisions of this Chapter:
2[Provided that consultation with the Board may be dispensed with if the Central Government is of opinion that circumstances have arisen which render it necessary to make rules without such consultation, but in such a case the Board shall be consulted within six months of the making of the rules and the Central Government shall take into consideration any suggestions which the Board may make in relation to the amendment of the said rules.]
(2) Without prejudice to the generality of the foregoing power, such rules may—
(a) specify the drugs or classes of drugs 3[or cosmetics or classes of cosmetics] for the import of which a licence is required, 4[and prescribe the form and conditions of such licences, the authority empowered to issue the same, the fees payable therefor and provide for the cancellation, or suspension of such licence in any case where any provision of this Chapter or the rules made thereunder is contravened or any of the conditions subject to which the licence is issued is not complied with];
(b) prescribe the methods of test or analysis to be employed in determining whether a drug 3[or cosmetic] is of standard quality;
(c) prescribe, in respect of biological and organometallic compounds, the units or methods of standardisation;
5[(cc) prescribe under clause (d) of 6[section 9A] the colour or colours which a drug may bear or contain for purposes of colouring;]
(d) specify the diseases or ailments which an imported drug may not purport or claim 7[to prevent, cure or mitigate] and such other effects which such drug may not purport or claim to have;
(e) prescribe the conditions subject to which small quantities of drugs, the import of which is otherwise prohibited under this Chapter, may be imported for the purpose of examination, test or analysis or for personal use;
(f) prescribe the places at which drugs 8[or cosmetics] may be imported, and prohibit their import at any other place;
(g) require the date of manufacture and the date of expiry of potency to be clearly and truly stated on the label or container of any specified imported drug or class of such drug, and prohibit the import of the said drug or class of drug after the expiry of a specified period from the date of manufacture;
(h) regulate the submission by importers, and the securing, of samples of drugs 8[or cosmetics] for examination, test or analysis by the Central Drugs Laboratory, and prescribe the fees, if any, payable for such examination, test or analysis;
(i) prescribe the evidence to be supplied, whether by accompanying documents or otherwise, of the quality of drugs 8[or cosmetics] sought to be imported, the procedure of officers of Customs in dealing with such evidence, and the manner of storage at places of import of drugs 8[or cosmetics] detained pending admission;
(j) provide for the exemption, conditionally or otherwise, from all or any of the provisions of this Chapter and the rules made thereunder of drugs 8[or cosmetics] imported for the purpose only of transport through, and export from, 9[India];
(k) prescribe the conditions to be observed in the packing in bottles, packages or other containers, of imported drugs 8[or cosmetics] 10[including the use of packing material which comes into direct contact with the drugs];
(l) regulate the mode of labelling drugs 8[or cosmetics] imported for sale in packages, and prescribe the matters which shall or shall not be included in such labels;
(m) prescribe the maximum proportion of any poisonous substance which may be added to or contained in any imported drug, prohibit the import of any drug in which that proportion is exceeded, and specify substances which shall be deemed to be poisonous for the purposes of this Chapter and the rules made thereunder;
(n) require that the accepted scientific name of any specified drug shall be displayed in the prescribed manner on the label or wrapper of any imported, patent or proprietary medicine containing such drug;
(o) provide for the exemption, conditionally or otherwise, from all or any of the provisions of this Chapter or the rules made thereunder of any specified drug or class of drugs 11[or cosmetics or class of cosmetics].
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1. Subs. by Act 68 of 1982, sec. 9, for “after consultation with the Board” (w.e.f. 1-2-1983).
2. Ins. by Act 11 of 1955, sec. 7 (w.e.f. 15-4-1955).
3. Ins. by Act 21 of 1962, sec. 10 (w.e.f. 27-7-1964).
4. Subs. by Act 68 of 1982, sec. 9, for certain words (w.e.f. 1-2-1983).
5. Ins. by Act 13 of 1964, sec. 10 (w.e.f. 15-9-1964).
6. Subs. by Act 68 of 1982, sec. 9 for “section 9B” (w.e.f. 1-2-1983).
7. Subs. by Act 11 of 1955, sec. 7, for “to cure or mitigate” (w.e.f. 15-4-1955).
8. Ins. by Act 21 of 1962, sec. 10 (w.e.f. 27-7-1964).
9. Subs. by Act 3 of 1951, sec. 3 and Sch., for “the States”.
10. Ins. by Act 68 of 1982, sec. 9 (w.e.f. 1-2-1983).
11. Ins. by Act 21 of 1962, sec. 10 (w.e.f. 27-7-1964).
Section 13. Offences.
13. Offences. – (1) Whoever himself or by any other person on his behalf imports,
(a) Any drug deemed to be adulterated under section 9A or deemed to be a spurious drug under section 9B or any spurious cosmetic referred to in section 9D or any cosmetic of the nature referred to in clause (ee) of section 10 shall be punishable with imprisonment for a term which may extend to three years and a fine which may extend to five thousand rupees .
(b) Any drug or cosmetic other than a drug or cosmetic referred to in clause (a), the import of which is prohibited under section 10, or any rule made under this Chapter, shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five hundred rupees, or with both ;
(c) Any drug or cosmetic in contravention of the provisions of any notification issued under section 10A, shall be punishable with imprisonment for a term which may extend to three years, or with fine which may extend to five thousand rupees, or with both.
(2) Whoever having been convicted of an offence –
(a) Under clause (a) or clause (c) of sub-section (1), is again convicted of an offence under that clause, shall be punishable with imprisonment for a term which may extend to five years, or with fine which may extend to ten thousand rupees, or with both ;
(b) Under clause (b) of sub-section (1), is again convicted of an offence under that clause, shall be punishable with imprisonment for a term which may extend to one year, or with fine which may extend to one thousand rupees, or with both.
(3) The punishment provided by this section shall be in addition to any penalty to which the offender may be liable under the provisions of section 11.
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1. Subs. by Act 68 of 1982, sec. 10, for section 13 (w.e.f. 1-2-1983).
Section 14. Confiscation.
Where any offence punishable under section 13 has been committed, the consignment of the drugs 1or cosmetics] in respect of which the offence has been committed shall be liable to confiscation.
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1. Ins. by Act 21 of 1962, sec. 11 (w.e.f. 27-7-1964).
Section 15. Jurisdiction.
No Court inferior to that 1[of a Metropolitan Magistrate or of a Judicial Magistrate of the first class] shall try an offence punishable under section 13.
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1. Subs. by Act 68 of 1982, sec. 11, for certain words (w.e.f. 1-2-1983).
Section 16. Standards of quality.
1[(1) For the purposes of this Chapter, the expression “standard quality” means—
(a) in relation to a drug, that the drug complies with the standard set out in 2[the Second Schedule], and
(b) in relation to a cosmetic, that the cosmetic complies with such standard as may be prescribed.]
(2) The 3[Central Government], after consultation with the Board and after giving by notification in the Official Gazette not less than three months’ notice of its intention so to do, may by a like notification add to or otherwise amend 2[the Second Schedule] for the purposes of this Chapter, and thereupon 2[the Second Schedule] shall be deemed to be amended accordingly.
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1. Subs. by Act 21 of 1962, sec. 12, for sub-section (1) (w.e.f. 27-7-1964).
2. Subs. by Act 13 of 1964, sec. 11, for “the Schedule” (w.e.f. 15-9-1964).
3. Subs. by Act 11 of 1955, sec. 8, for “State Government” (w.e.f. 15-4-1955).
Section 17. Misbranded drugs.
117. Misbranded drugs. For the purposes of this Chapter, a drug shall be deemed to be misbranded, –
(a) If it is so coloured, coated, powdered or polished that damage is concealed or if it is made to appear of better or greater therapeutic value than it really is ; or
(b) If it is not labeled in the prescribed manner ; or
(c) If its label or container or anything accompanying the drug bears any statement, design or device which makes any false claim for the drug or which is false or misleading in any particular.
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1. Subs. by Act 68 of 1982, sec. 13, for section 17 (w.e.f. 1-2-1983).
Section 17 A. Adulterated drugs.
For the purposes of this Chapter, a drug shall be deemed to be adulterated, –
(a) If it consists in whole or in part, of any filthy, putrid or decomposed substance ; or
(b) If it has been prepared, packed or stored under unsanitary conditions whereby it may have been contaminated with filth or whereby it may have been rendered injurious to health ; or
(c) If its container is composed, in whole or in part, of any poisonous or deleterious substance which may render the contents injurious to health ; or
(d) If it bears or contains, for purposes of colouring only, a colour other than one which is prescribed ; or
(e) If it contains any harmful or toxic substance which may render it injurious to health ; or
(f) If any substance has been mixed therewith so as to reduce its quality or strength.
Section 17 B. Spurious drugs.
For the purposes of this Chapter, a drug shall be deemed to be spurious, –
(a) If it is manufactured under a name which belongs to another drug; or
(b) If it is an imitation of, or is a substitute for, another drug or resembles another drug in a manner likely to deceive or bears upon it or upon its label or container the name of another drug unless it is plainly and conspicuously marked so as to reveal its true character and its lack of identity with such other drug ; or
(c) If the label or container bears the name of an individual or company purporting to be the manufacturer of the drug, which individual or company is fictitious or does not exist ; or
(d) If it has been substituted wholly or in part by another drug or substance ; or
(e) If it purports to be the product of a manufacturer of whom it is not truly a product.
Section 17 C. Misbranded cosmetics.
For the purposes of this Chapter, a cosmetic shall be deemed to be misbranded, –
(a) If it contains a colour which is not prescribed ; or
(b) If it is not labeled in the prescribed manner ; or
(c) If the label or container or anything accompanying the cosmetic bears any statement which is false or misleading in any particular.
Section 17 D. Spurious cosmetics.
For the purposes of this Chapter, a cosmetic shall be deemed to be spurious, —
(a) If it is manufactured under a name which belongs to another cosmetic ; or
(b) If it is an imitation of, or a substitute for, another cosmetic or resembles another cosmetic in a manner likely to deceive or bears upon it or upon its conspicuously marked so as to reveal its true character and its lack of identity with such other cosmetic ; or
(c) If the label or container bears the name of an individual or a company purporting to be the manufacturer of the cosmetic which individual or company is fictitious or does not exist ; or
(d) If it purports to be the product of a manufacturer of whom it is not truly a product.
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1. Ins. by Act 68 of 1982, sec. 13 (w.e.f. 1-2-1983).
The Drugs and Cosmetics Act, 1940
Section 18 A. Disclosure of the name of the manufacturer, etc.
1[18A. Disclosure of the name of the manufacturer, etc. Every person, not being the manufacturer of a drug or cosmetic or his agent for the distribution thereof, shall, if so required, disclose to the Inspector the name, address and other particulars of the person from whom he acquired the drug or cosmetic.
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1. Ins. by Act 13 of 1964, sec. 14 (w.e.f. 15-9-1964).
Section 18 B. Maintenance of records and furnishing of information.
118B. Maintenance of records and furnishing of information. Every person holding a licence under clause (c) of section 18 shall keep and maintain such records, registers and other documents as may be prescribed and shall furnish to any officer or authority exercising any power or discharging any function under this Act such information as is required by such officer or authority for carrying out the purposes of this Act.
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1. Ins. by Act 68 of 1982, sec. 15 (w.e.f 1-2-1983).
Section 19. Pleas.
(1) Save as hereinafter provided in this section, it shall be no defence in a prosecution under this Chapter to prove merely that the accused was ignorant of the nature, substance or quality of the drug 1[or cosmetic] in respect of which the offence has been committed or of the circumstances of its manufacture or import, or that a purchaser, having bought only for the purpose of test or analysis, has not been prejudiced by the sale.
(2) 2[For the purposes of section 18 a drug shall not be deemed to be misbranded or 3[adulterated or spurious] or to be below standard quality nor shall a cosmetic be deemed to be misbranded or to be below standard quality] only by reason of the fact that—
(a) there has been added thereto some innocuous substance or ingredient because the same is required for the manufacture or preparation of the drug 4[or cosmetic] as an article of commerce in a state fit for carriage or consumption, and not to increase the bulk, weight or measure of the drug 4[or cosmetic] or to conceal its inferior quality or other defects; or
5[***]
(b) in the process of manufacture, preparation or conveyance some extraneous substance has unavoidably become intermixed with it: provided that this clause shall not apply in relation to any sale or distribution of the drug 4[or cosmetic] occurring after the vendor or distributor became aware of such intermixture.
6[(3) A person, not being the manufacturer of a drug or cosmetic or his agent for the distribution thereof, shall not be liable for a contravention of section 18 if he proves—
(a) that he acquired the drug or cosmetic from a duly licensed manufacturer, distributor or dealer thereof;
(b) that he did not know and could not, with reasonable diligence, have ascertained that the drug or cosmetic in any way contravened the provisions of that section; and
(c) that the drug or cosmetic, while in his possession was properly stored and remained in the same state as when he acquired it.]
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1. Ins. by Act 21 of 1962, sec. 15 (w.e.f. 27-7-1964).
2. Subs. by Act 13 of 1964, sec. 15, for certain words (w.e.f. 15-9-1964).
3. Subs. by Act 68 of 1982, sec. 16, for “adulterated” (w.e.f. 1-2-1983).
4. Ins. by Act 21 of 1962, sec. 15 (w.e.f. 27-7-1964).
5. Clause (aa) ins. by Act 11 of 1955, sec. 10 (w.e.f. 15-4-1955) and omitted by Act 13 of 1964, sec. 15 (w.e.f. 15-9-1964).
6. Subs. by Act 13 of 1964, sec. 15, for sub-section (3) (w.e.f. 15-9-1964).
Section 20. Government Analysts.
1[20. Government Analysts.—(1) The State Government may, by notification in the Official Gazette, appoint such persons as it thinks fit, having the prescribed qualifications, to be Government Analysts for such areas in the State and in respect of such drugs or 2[classes of drugs or such cosmetics or classes of cosmetics] as may be specified in the notifications.
(2) The Central Government may also, by notification in the Official Gazette, appoint such persons as it thinks fit, having the prescribed qualifications, to be Government Analysts in respect of such drugs or 2[classes of drugs or such cosmetics or classes of cosmetics] as may be specified in the notification.
(3) Notwithstanding anything contained in sub-section (1) or sub-section (2), neither the Central Government nor a State Government shall appoint as a Government Analyst any official not serving under it without the previous consent of the Government under which he is serving.]
3[(4) No person who has any financial interest in the import, manufacture or sale of drugs or cosmetics shall be appointed to be a Government Analyst under sub-section (1) or sub-section (2) of this section.]
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1. Subs. by Act 35 of 1960, sec. 4, for section 20 (w.e.f. 16-3-1961).
2. Subs. by Act 21 of 1962, sec. 16, for “class of drugs” (w.e.f. 27-7-1964).
3. Ins. by Act 68 of 1982, sec. 17 (w.e.f. 1-2-1983).
Section 21. Inspectors.
1[21. Inspectors.—(1) The Central Government or a State Government may by notification in the Official Gazette, appoint such persons as it thinks fit, having the prescribed qualifications, to be Inspectors for such areas as may be assigned to them by the Central Government or the State Government, as the case may be.
(2) The powers which may be exercised by an Inspector and the duties which may be performed by him, the drugs or 2[classes of drugs or cosmetics or classes of cosmetics] in relation to which and the conditions, limitations or restrictions subject to which, such powers and duties may be exercised or performed shall be such as may be prescribed.
(3) No person who has any financial interest 3[in the import, manufacture or sale of drugs or cosmetics] shall be appointed to be an Inspector under this section.
(4) Every Inspector shall be deemed to be a public servant within the meaning of section 21 of the Indian Penal Code (45 of 1860), and shall be officially subordinate to such authority 4[, having the prescribed qualifications,] as the Government appointing him may specify in this behalf.]
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1. Subs. by Act 35 of 1960, sec. 4, for section 21 (w.e.f. 16-3-1961).
2. Subs. by Act 21 of 1962, sec. 17 for “class of drugs” (w.e.f. 27-7-1964).
3. Subs. by Act 21 of 1962, sec. 17, for “in the manufacture, import or sale of drugs” (w.e.f. 27-7-1964).
4. Ins. by Act 68 of 1982, sec. 18 (w.e.f. 1-2-1983).
Section 22. Powers of Inspectors.
1[22. Powers of Inspectors.—(1) Subject to the provisions of section 23 and of any rules made by the Central Government in this behalf, an Inspector may, within the local limits of the area for which he is appointed,—
2[(a) inspect,—
(i) any premises wherein any drug or cosmetic is being manufactured and the means employed for standardising and testing the drug or cosmetic;
(ii) any premises wherein any drug or cosmetic is being sold, or stocked or exhibited or offered for sale, or distributed;
(b) take samples of any drug or cosmetic,—
(i) which is being manufactured or being sold or is stocked or exhibited or offered for sale, or is being distributed;
(ii) from any person who is in the course of conveying, delivering or preparing to deliver such drug or cosmetic to a purchaser or a consignee;
(c) at all reasonable times, with such assistance, if any, as he considers necessary,—
(i) search any person, who, he has reason to believe, has secreted about his person, any drug or cosmetic in respect of which an offence under this Chapter has been, or is being, committed; or
(ii) enter and search any place in which he has reason to believe that an offence under this Chapter has been, or is being, committed; or
(iii) stop and search any vehicle, vessel or other conveyance which, he has reason to believe, is being used for carrying any drug or cosmetic in respect of which an offence under this Chapter has been, or is being, committed,
and order in writing the person in possession of the drug or cosmetic in respect of which the offence has been, or is being, committed, not to dispose of any stock of such drug or cosmetic for a specified period not exceeding twenty days, or, unless the alleged offence is such that the defect may be removed by the possessor of the drug or cosmetic, seize the stock of such drug or cosmetic and any substance or article by means of which the offence has been, or is being, committed or which may be employed for the commission of such offence;]
3[(cc) examine any record, register, document or any other material object found 4[with any person, or in any place, vehicle, vessel or other conveyance referred to in clause (c)], and seize the same if he has reason to believe that it may furnish evidence of the commission of an offence punishable under this Act or the Rules made thereunder;]
5[(cca) require any person to produce any record, register, or other document relating to the manufacture for sale or for distribution, stocking, exhibition for sale, offer for sale or distribution of any drug or cosmetic in respect of which he has reason to believe that an offence under this Chapter has been, or is being, committed;]
(d) exercise such other powers as may be necessary for carrying out the purposes of this Chapter or any rules made thereunder.
(2) The provisions of 6[the Code of Criminal Procedure, 1973 (2 of 1974)] shall, so far as may be, apply to any search or seizure under this Chapter as they apply to any search or seizure made under the authority of a warrant issued under 7[section 94] of the said Code.
8[(2A) Every record, register or other document seized under clause (cc) or produced under clause (cca) shall be returned to the person, from whom they were seized or who produce the same, within a period of twenty days of the date of such seizure or production, as the case may be, after copies thereof or extracts therefrom certified by that person, in such manner as may be prescribed, have been taken.]
(3) If any person wilfully obstructs an Inspector in the exercise of the powers conferred upon him by or under this Chapter 8[or refuses to produce any record, register or other document when so required under clause (cca) of sub-section (1),] he shall be punishable with imprisonment which may extend to three years, or with fine, or with both.]
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1. Subs. by Act 11 of 1955, sec. 11, for section 22 (w.e.f. 15-4-1955).
2. Subs. by Act 68 of 1982, sec. 19, for clauses (a), (b) and (c) (w.e.f. 1-2-1983).
3. Ins. by Act 35 of 1960, sec. 5 (w.e.f. 16-3-1961).
4. Subs. by Act 68 of 1982, sec. 19, for “in any place mentioned in clause (c)” (w.e.f. 1-2-1983).
5. Ins. by Act 68 of 1982, sec. 19 (w.e.f. 1-2-1983).
6. Subs. by Act 68 of 1982, sec. 19, for “the Code of Criminal Procedure, 1898 (5 of 1898)” (w.e.f. 1-2-1983).
7. Subs. by Act 68 of 1982, sec. 19, for “section 98” (w.e.f. 1-2-1983).
8. Ins. by Act 68 of 1982, sec. 19 (w.e.f. 1-2-1983).
Section 23. Procedure of Inspectors.
(1) Where an Inspector takes any sample of a drug 1[or cosmetic] under this Chapter, he shall tender the fair price thereof and may require a written acknowledgement therefor.
(2) Where the price tendered under sub-section (1) is refused or where the Inspector seizes the stock of any drug 1[or cosmetic] under clause (c) of section 22, he shall tender a receipt therefor in the prescribed form.
(3) Where an Inspector takes a sample of a drug 1[or cosmetic] for the purpose of test or analysis, he shall intimate such purpose in writing in the prescribed form to the person from whom he takes it and, in the presence of such person unless he wilfully absents himself, shall divide the sample into four portions and effectively seal and suitably mark the same and permit such person to add his own seal and mark to all or any of the portions so sealed and marked:
Provided that where the sample is taken from premises whereon the drug 1[or cosmetic] is being manufactured, it shall be necessary to divide the sample into three portions only:
Provided further that where the drug 1[or cosmetic] is made up in containers of small volume, instead of dividing a sample as aforesaid, the Inspector may, and if the drug 1[or cosmetic] be such that it is likely to deteriorate or be otherwise damaged by exposure shall, take three or four, as the case may be, of the said containers after suitably marking the same and, where necessary, sealing them.
(4) The Inspector shall restore one portion of a sample so divided or one container, as the case may be, to the person from whom he takes it, and shall retain the remainder and dispose of the same as follows:—
(i) one portion or container he shall forthwith send to the Government Analyst for test or analysis;
(ii) the second he shall produce to the Court before which proceedings, if any, are instituted in respect of the drug 1[or cosmetic]; and
2[(iii) the third, where taken, he shall send to the person, if any, whose name, address and other particulars have been disclosed under section 18A.]
(5) Where an Inspector takes any action under clause (c) of section 22,—
(a) he shall use all despatch in ascertaining whether or not the drug 1[or cosmetic] contravenes any of the provisions of section 18 and, if it is ascertained that the drug 1[or cosmetic] does not so contravene forthwith revoke the order passed under the said clause or, as the case may be, take such action as may be necessary for the return of the stock seized;
(b) if he seizes the stock of the drug 1[or cosmetic], he shall as soon as may be, inform 3[a Judicial Magistrate] and take his orders as to the custody thereof;
(c) without prejudice to the institution of any prosecution, if the alleged contravention be such that the defect may be remedied by the possessor of the drug 1[or cosmetic], he shall, on being satisfied that the defect has been so remedied, forthwith revoke his order under the said clause.
4[(6) Where an Inspector seizes any record, register, document or any other material object under clause (cc) of sub-section (1) of section 22, he shall, as soon as may be, inform 3[a Judicial Magistrate] and take his orders as to the custody thereof.]
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1. Ins. by Act 21 of 1962, sec. 15 (w.e.f. 27-7-1964).
2. Subs. by Act 13 of 1964, sec. 16, for clause (iii) (w.e.f. 15-9-1964).
3. Subs. by Act 68 of 1982, sec. 20, for “a Magistrate” (w.e.f. 1-2-1983).
4. Ins. by Act 35 of 1960, sec. 6 (w.e.f. 16-3-1961).
Section 24. Persons bound to disclose place where drugs or cosmetics are manufactured or kept.
Every person for the time being in charge of any premises whereon any drug 1[or cosmetic] is being manufactured or is kept for sale or distribution shall, on being required by any Inspector so to do, be legally bound to disclose to the Inspector the place where the drug 1[or cosmetic] is being manufactured or is kept, as the case may be.
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1. Ins. by Act 21 of 1962, sec. 15 (w.e.f. 27-7-1964).
Section 25. Reports of Government Analysts.
(1) The Government Analyst to whom a sample of any drug 1[or cosmetic] has been submitted for test or analysis under sub-section (4) of section 23, shall deliver to the Inspector submitting it a signed report in triplicate in the prescribed form.
(2) The Inspector on receipt thereof shall deliver one copy of the report to the person from whom the sample was taken 2[and another copy to the person, if any, whose name, address and other particulars have been disclosed under section 18A], and shall retain the third copy for use in any prosecution in respect of the sample.
(3) Any document purporting to be a report signed by a Government Analyst under this Chapter shall be evidence of the facts stated therein, and such evidence shall be conclusive unless the person from whom the sample was taken 3[or the person whose name, address and other particulars have been disclosed under section 18A] has, within twenty-eight days of the receipt of a copy of the report, notified in writing the Inspector or the Court before which any proceedings in respect of the sample are pending that he intends to adduce evidence in controversion of the report.
(4) Unless the sample has already been tested or analysed in the Central Drugs Laboratory, where a person has under sub-section (3) notified his intention of adducing evidence in controversion of a Government Analyst’s report, the Court may, of its own motion or in its discretion at the request either of the complainant or the accused: cause the sample of the drug1[or cosmetic] produced before the Magistrate under sub-section (4) of section 23 to be sent for test or analysis to the said Laboratory, which shall make the test or analysis and report in writing signed by or under the authority of, the Director of the Central Drugs Laboratory the result thereof, and such report shall be conclusive evidence of the facts stated therein.
(5) The cost of a test or analysis made by the Central Drugs Laboratory under sub-section (4) shall be paid by the complainant or accused as the Court shall direct.
(5) The cost of a test or analysis made by the Central Drugs Laboratory under sub-section (4) shall be paid by the complainant or accused as the Court shall direct.
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1. Ins. by Act 21 of 1962, sec. 15 (w.e.f. 27-7-1964).
2. Subs. by Act 13 of 1964, sec. 17, for certain words (w.e.f. 15-9-1964).
3. Subs. by Act 13 of 1964, sec. 17, for “or the said warrantor” (w.e.f. 15-9-1964).
Section 26. Purchaser of drug or cosmetic enabled to obtain test or analysis.
Any person 1[or any recognised consumer association, whether such person is a member of that association or not] shall, on application in the prescribed manner and on payment of the prescribed fee, be entitled to submit for test or analysis to a Government Analyst any drug 2[or cosmetic] 3[purchased by him or it] and to receive a report of such test or analysis signed by the Government Analyst.
4[Explanation.—For the purposes of this section and section 32, “recognised consumer association” means a voluntary consumer association registered under the Companies Act, 1956 or any other law for the time being in force.]
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1. Ins. by Act 71 of 1986, sec. 2 (w.e.f. 15-9-1987).
2. Ins. by Act 21 of 1962, sec. 15 (w.e.f. 27-7-1964).
3. Subs. by Act 71 of 1986, sec. 2, for “purchased by him” (w.e.f. 15-9-1987).
4. Added by Act 71 of 1986, sec. 2 (w.e.f. 15-9-1987).
Section 26 A. Powers of Central Government to prohibit manufacture, etc., of drug and cosmetic in public interest.
1[26A. Powers of Central Government to prohibit manufacture, etc., of drug and cosmetic in public interest.—Without prejudice to any other provision contained in this Chapter, if the Central Government is satisfied, that the use of any drug or cosmetic is likely to involve any risk to human beings or animals or that any drug does not have the therapeutic value claimed or purported to be claimed for it or contains ingredients and in such quantity for which there is no therapeutic justification and that in the public interest it is necessary or expedient so to do, then, that Government may, by notification in the Official Gazette, prohibit the manufacture, sale or distribution of such drug or cosmetic.]
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1. Ins. by Act 68 of 1982, sec. 21 (w.e.f. 1-2-1983).
Section 27. Penalty for manufacture, sale, etc., of drugs in contravention of this Chapter.
Whoever, himself or by any other person on his behalf, manufacturers for sale or for distribution, or sells, or stocks or exhibits or offers for sale or distributes,-
(a) any drug deemed to be adulterated under section 17A or spurious under section 17B or which when used by any person for or in the diagnosis, treatment, mitigation, or prevention of any disease or disorder is likely to cause his death or is likely to cause such harm on his body as would amount to grievous hurt within the meaning of section 320 of the Indian Penal Code solely on account of such drug being adulterated or spurious or not of standard quality, as the case may be, shall be punishable with imprisonment for a term which shall not be less than five years but which may extend to a term of life and with fine which shall not be less than ten thousand rupees ;
(b) any drug —
(i) deemed to be adulterated under section 17A, but not being a drug referred to in clause (a), or
(ii) without a valid licence as required under clause © of section 18, shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to three years and with fine which shall not be less than five thousand rupees :
Provided that the Court may, for any adequate and special reasons to be recorded in the judgment, impose a sentence of imprisonment for a term of less than one year and of fine of less than five thousand rupees :
(c) any drug deemed to be spurious under section 17B, but not being a drug referred to in clause (a) shall be punishable with imprisonment for a term which shall not be less than three years but which may extend to five years and with fine which shall not be less than five thousand rupees :
Provided that the Court may, for any adequate and special reasons, to be recorded in the judgement, impose a sentence of imprisonment for a term of less than three years but not less than one year,
(d) any drug, other than a drug referred to in clause (a) or clause (b) or clause (c), in contravention of any other provision of this Chapter or any rule made there under, shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to two years and with fine :
Provided that the Court may for any adequate and special reasons to be recorded in the judgement impose a sentence of imprisonment for a term of less than one year.
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1. Section 27 subs. by Act 13 of 1964, sec. 18 (w.e.f. 15-9-1964) and again subs. by Act 68 of 1982, sec. 22 (w.e.f. 1-2-1983).
Section 27 A. Penalty for manufacture, sale, etc., of cosmetics in contravention of this Chapter.
Whoever himself or by any other person on his behalf manufacturers for sale or for distribution, or sells, or stocks or exhibits or offers for sale –
(i) Any cosmetic deemed to be spurious under section 17C shall be punishable with imprisonment for a term, which may extend to three years and with fine ;
(ii) Any cosmetic other than a cosmetic referred to in clause (I) above in contravention of any provisions of this Chapter or any rule made there under shall be punishable with imprisonment for a term which may extend to one year or with fine which may extend to one thousand rupees or with both.
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1. Section 27A ins. by Act 21 of 1962, sec. 19 (w.e.f. 27-7-1964) and subs. by Act 68 of 1982, sec. 22 (w.e.f. 1-2-1983).
Section 28. Penalty for non-disclosure of the name of the manufacturer, etc.
1[28. Penalty for non-disclosure of the name of the manufacturer, etc.—Whoever contravenes the provisions of section 18A 2[or section 24] shall be punishable with imprisonment for a term which may extend to one year, or with fine which may extend to 3[one thousand rupees], or with both.]
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1. Subs. by Act 13 of 1964, sec. 19, for section 28 (w.e.f. 15-9-1964).
2. Ins. by Act 68 of 1982, sec. 23 (w.e.f. 1-2-1983).
3. Subs. by Act 68 of 1982, sec. 23, for “five hundred rupees” (w.e.f. 1-2-1983).
Section 28 A – Penalty for not keeping documents, etc., and for non-disclosure of information.
1[28A. Penalty for not keeping documents, etc., and for non-disclosure of information.—Whoever without reasonable cause or excuse, contravenes the provisions of section 18B shall be punishable with imprisonment for a term which may extend to one year or with fine which may extend to one thousand rupees or with both.]
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1. Ins. by Act 68 of 1982, sec. 24 (w.e.f. 1-2-1983).
Section 28 B. Penalty for manufacture, etc., of drugs or cosmetics in contravention of section 26A.
1[28B. Penalty for manufacture, etc., of drugs or cosmetics in contravention of section 26A. Whoever himself or by any other person on his behalf manufacturers or sells or distributes any drug or cosmetic in contravention of the provisions of any notification issued under section 26A, shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to fine which may extend to five thousand rupees.
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1. Ins. by Act 68 of 1982, sec. 24 (w.e.f. 1-2-1983).
Section 29. Penalty for use of Government Analyst’s report for advertising.
Whoever uses any report of a test or analysis made by the Central Drugs Laboratory or by a Government Analyst, or any extract from such report, for the purpose of advertising any drug 1 shall be punishable with fine which may extend to five hundred rupees.
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1. Ins. by Act 21 of 1962, sec. 15 (w.e.f. 27-7-1964).
Section 30. Penalty for subsequent offences. – [(1) (Note: Subs. by Act 68 of 1982, sec.25, for sub-section (1) (w.e.f. 1-2-1983)) Whoever having been convicted of an offence,
1[30. Penalty for subsequent offences.—2[(1) Whoever having been convicted of an offence,—
(a) under clause (b) of section 27 is again convicted of an offence under that clause, shall be punishable with imprisonment for a term which shall not be less than two years but which may extend to six years and with fine which shall not be less than ten thousand rupees:
Provided that the Court may, for any adequate and special reasons to be mentioned in the judgment, impose a sentence of imprisonment for a term of less than two years and of fine of less than ten thousand rupees;
(b) under clause (c) of section 27, is again convicted of an offence under that clause shall be punishable with imprisonment for a term which shall not be less than six years but which may extend to ten years and with fine which shall not be less than ten thousand rupees;
(c) under clause (d) of section 27, is again convicted of an offence under that clause shall be punishable with imprisonment for a term which shall not be less than two years but which may extend to four years or with fine which shall not be less than five thousand rupees, or with both.]
3[(1A) Whoever, having been convicted of an offence under section 27A is again convicted under that section, shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to 4[two thousand rupees], or with both.]
(2) Whoever, having been convicted of an offence under 5[***] section 29 is again convicted of an offence under the same section, shall be punishable with imprisonment which may extend to 6[ten years], or with fine, or with both.]
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1. Subs. by Act 11 of 1955, sec. 14, for section 30 (w.e.f. 15-4-1955).
2. Subs. by Act 68 of 1982, sec. 25, for sub-section (1) (w.e.f. 1-2-1983).
3. Ins. by Act 21 of 1962, sec. 20 (w.e.f. 27-7-1964).
4. Subs. by Act 68 of 1982, sec. 25, for “one thousand rupees” (w.e.f. 1-2-1983).
5. The words “section 28 or” omitted by Act 13 of 1964, sec. 20 (w.e.f. 15-9-1964).
6. Subs. by Act 13 of 1964, sec. 20, for “two years” (w.e.f. 15-9-1964).
Section 31. Confiscation.
1[(1)] Where any person has been convicted under this Chapter for contravening any such provision of this Chapter or any rule made thereunder as may be specified by rule made in this behalf, the stock of the drug 2[or cosmetic] in respect of which the contravention has been made shall be liable to confiscation 3[and if such contravention is in respect of—
4[(i) manufacture of any drug deemed to be misbranded under section 17, adulterated under section 17A or spurious under section 17B; or]
(ii) 5[manufacture for sale, or for distribution, sale, or stocking or exhibiting or offering for sale,] or distribution of any drug without a valid licence as required under clause (c) of section 18, any implements or machinery used in such manufacture, sale or distribution and any receptacles, packages or coverings in which such drug is contained and the animals, vehicles, vessels or other conveyances used in carrying such drug shall also be liable to confiscation].
6[(2) Without prejudice to the provisions contained in sub-section (1) where the Court is satisfied, on the application of an Inspector or otherwise and after such inquiry as may be necessary that the drug or cosmetic is not of standard quality 7[or is a 8[misbranded, adulterated or spurious drug or misbranded or spurious cosmetic,]] such drug or, as the case may be, such cosmetic shall be liable to confiscation.]
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1. Section 31 re-numbered as sub-section (1) of that section by Act 35 of 1960, sec. 9 (w.e.f. 16-3-1961).
2. Ins. by Act 21 of 1962, sec. 21 (w.e.f. 27-7-1964).
3. Added by Act 13 of 1964, sec. 21 (w.e.f. 15-9-1964).
4. Subs. by Act 68 of 1982, sec. 26, for clause (i) (w.e.f. 1-2-1983).
5. Subs. by Act 68 of 1982, sec. 26, for certain words (w.e.f. 1-2-1983).
6. Sub-section (2) ins. by Act 35 of 1960, sec. 9 (w.e.f. 16-3-1961) and subs. by Act 21 of 1962, sec. 21 (w.e.f. 27-7-1964).
7. Subs. by Act 13 of 1964, sec. 21, for “or is a misbranded drug” (w.e.f. 15-9-1964).
8. Subs. by Act 68 of 1982, sec. 26, for “misbranded or adulterated drug, or misbranded cosmetic” (w.e.f. 1-2-1983).
Section 31 A. Application of provisions to Government departments.
1[31A. Application of provisions to Government departments
The provisions of this Chapter except those contained in section 31 shall apply in relation to the manufacture, sale or distribution of drugs by any department of Government as they apply in relation to the manufacture, sale or distribution of drugs by any other person.
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1. Ins. by Act 13 of 1964, sec. 22 (w.e.f. 15-9-1964).
Section 32. Cognizance of offences.
(1) No prosecution under this Chapter shall be instituted except by an Inspector 1or by the person aggrieved or by a recognised consumer association whether such person is a member of that association or not.]
(2) No court inferior to that of 2 a Metropolitan Magistrate or of a Judicial Magistrate of the first class] shall try an offence punishable under this Chapter.
(3) Nothing contained in this Chapter shall be deemed to prevent any person from being prosecuted under any other law for any act or omission, which constitutes an offence against this Chapter.
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1. Ins. by Act 71 of 1986, sec. 3 (w.e.f. 15-9-1987).
2. Subs. by Act 68 of 1982, sec. 27, for “a Presidency Magistrate or of a Magistrate of the first class” (w.e.f. 1-2-1983).
Section 32 A. Power of Court to implead the manufacturer, etc.
1[32A. Power of Court to implead the manufacturer, etc.—Where, at any time during the trial of any offence under this Chapter alleged to have been committed by any person, not being the manufacturer of a drug or cosmetic or his agent for the distribution thereof the Court is satisfied, on the evidence adduced before it, that such manufacturer or agent is also concerned in that offence, then, the Court may, notwithstanding anything contained 2[in sub-sections (1), (2) and (3) of section 319 of the Code of Criminal Procedure, 1973 (2 of 1974)], proceed against him as though a prosecution had been instituted against him under section 32.
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1. Ins. by Act 13 of 1964, sec. 23 (w.e.f. 15-9-1964).
2. Subs. by Act 68 of 1982, sec. 28, for “in sub-section (1) of section 351 of the Code of Criminal Procedure, 1898 (5 of 1898)” (w.e.f. 1-2-1983).
Section 33. Power of Central Government to make rules.
1[(1) The Central Government may 2[after consultation with, or on the recommendation of, the Board] and after previous publication by notification in the Official Gazette, make rules for the purposes of giving effect to the provisions of this Chapter:
Provided that consultation with the Board may be dispensed with if the Central Government is of opinion that circumstances have arisen which render it necessary to make rules without such consultation, but in such a case the Board shall be consulted within six months of the making of the rules and the Central Government shall take into consideration any suggestions which the Board may make in relation to the amendment of the said rules.]
(2) Without prejudice to the generality of the foregoing power, such rules may—
(a) provide for the establishment of laboratories for testing and analysing drugs 3[or cosmetics];
(b) prescribe the qualifications and duties of Government Analysts and the qualifications of Inspectors;
(c) prescribe the methods of test or analysis to be employed in determining whether a drug 3[or cosmetic] is of standard quality;
(d) prescribe, in respect of biological and organometallic compounds, the units or methods of standardisation;
4[(dd) prescribe under clause (d) of 5[section 17A] the colour or colours which a drug may bear or contain for purposes of colouring;]
(e) prescribe the forms of licences 6[for the manufacture for sale or for distribution], for the sale and for the distribution of drugs or any specified drug or class of drugs 7[or of cosmetics or any specified cosmetic or class of cosmetics], the form of application for such licences, the conditions subject to which such licences may be issued, the authority empowered to issue the same 8[the qualifications of such authority] and the fees payable therefor; 8[and provide for the cancellation or suspension of such licences in any case where any provision of this Chapter or the rules made thereunder is contravened or any of the conditions subject to which they are issued is not complied with];
8[(ee) prescribe the records, registers or other documents to be kept and maintained under section 18B;
(eea) prescribe the fees for the inspection (for the purposes of grant or renewal of licences) of premises, wherein any drug or cosmetic is being or is proposed to be manufactured;
(eeb) prescribe the manner in which copies are to be certified under sub-section (2A) of section 22;]
(f) specify the diseases or ailments which a drug may not purport or claim 9[to prevent, cure or mitigate] and such other effects which a drug may not purport or claim to have;
(g) prescribe the conditions subject to which small quantities of drugs may be manufactured for the purpose of examination, test or analysis;
(h) require the date of manufacture and the date of expiry of potency to be clearly and truly stated on the label or container of any specified drug or class of drugs, and prohibit the sale, stocking or exhibition for sale, or distribution of the said drug or class of drugs after the expiry of a specified period from the date of manufacture or after the expiry of the date of potency;
(i) prescribe the conditions to be observed in the packing in bottles, packages, and other containers of drugs 10[or cosmetics], 11[including the use of packing material which comes into direct contact with the drugs] and prohibit the sale, stocking or exhibition for sale, or distribution of drugs 10[or cosmetics] packed in contravention of such conditions;
(j) regulate the mode of labelling packed drugs 10[or cosmetics], and prescribe the matters which shall or shall not be included in such labels;
(k) prescribe the maximum proportion of any poisonous substance which may be added to or contained in any drug, prohibit the manufacture, sale or stocking or exhibition for sale, or distribution of any drug in which that proportion is exceeded, and specify substances which shall be deemed to be poisonous for the purposes of this Chapter and the rules made thereunder;
(l) require that the accepted scientific name of any specified drug shall be displayed in the prescribed manner on the label or wrapper of any patent or proprietary medicine containing such drug;
12[***]
13[(n) prescribe the powers and duties of Inspectors 14[and the qualifications of the authority to which such Inspectors shall be subordinate] and 15[specify the drugs or classes of drugs or cosmetics or classes of cosmetics] in relation to which and the conditions, limitations or restrictions subject to which, such powers and duties may be exercised or performed;]
(o) prescribe the forms of report to be given by Government Analysts, and the manner of application for test or analysis under section 26 and the fees payable therefor;
16[(p) specify the offences against this Chapter or any rule made thereunder in relation to which an order of confiscation may be made under section 31; and]
(q) provide for the exemption, conditionally or otherwise, from all or any of the provisions of this Chapter or the rules made thereunder, of any specified drug or class of drugs 17[or cosmetic or class of cosmetics].
18[***]
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1. Subs. by Act 11 of 1955, sec. 15, for sub-section (1) (w.e.f. 15-4-1955).
2. Subs. by Act 68 of 1982, sec. 29, for “after consultation with the Board” (w.e.f. 1-2-1983).
3. Ins. by Act 21 of 1962, sec. 22 (w.e.f. 27-7-1964).
4. Ins. by Act 13 of 1964, sec. 24 (w.e.f. 15-9-1964).
5. Subs. by Act 68 of 1982, sec. 29, for “section 17B” (w.e.f. 1-2-1983).
6. Subs. by Act 68 of 1982, sec. 29, for “for the manufacture for sale” (w.e.f. 1-2-1983).
7. Ins. by Act 21 of 1962, sec. 22 (w.e.f. 27-7-1964).
8. Ins. by Act 68 of 1982, sec. 29 (w.e.f. 1-2-1983).
9. Subs. by Act 11 of 1955, sec. 15, for “to cure or mitigate” (w.e.f. 15-4-1955).
10. Ins. by Act 21 of 1962, sec. 22 (w.e.f. 27-7-1964).
11. Ins. by Act 68 of 1982, sec. 29 (w.e.f. 1-2-1983).
12. Clause (m) omitted by Act 13 of 1964, sec. 24 (w.e.f. 15-9-1964).
13. Subs. by Act 35 of 1960, sec. 10, for clause (n) (w.e.f. 16-3-1961).
14. Ins. by Act 68 of 1982, sec. 29 (w.e.f. 1-2-1983).
15. Subs. by Act 21 of 1962, sec. 22, for “the drugs or class of drugs” (w.e.f. 27-7-1964).
16. Subs. by Act 13 of 1964, sec. 24, for clause (p) (w.e.f. 15-9-1964).
17. Ins. by Act 21 of 1962, sec. 22 (w.e.f. 27-7-1964).
18. Sub-section (3) ins. by Act 35 of 1960, sec. 10 (w.e.f. 16-3-1961) and omitted by Act 13 of 1964, sec. 24 (w.e.f. 15-9-1964).
Section 33 A. Chapter not to apply to [Ayurvedic, Siddha or Unani] drugs.
133A. Chapter not to apply to [Ayurvedic, Siddha or Unani] drugs. –Save as otherwise provided in this Act, nothing contained in this Chapter shall apply to 2[Ayurvedic, Siddha or Unani drugs.]
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1. Ins. by Act 13 of 1964, sec. 25 (w.e.f. 1-2-1969).
2. Subs. by Act 68 of 1982, sec. 2, for “Ayurvedic (including Siddha) or Unani” (w.e.f. 1-2-1983).
Section 33 B. Application of Chapter IVA.
This Chapter shall apply only to 1Ayurvedic, Siddha and Unani] drugs.
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1. Subs. by Act 68 of 1982, sec. 2, for “Ayurvedic (including Siddha)and Unani” (w.e.f. 1-2-1983).
Section 33 C. Ayurvedic and Unani Drugs Technical Advisory Board.
(1) The Central Government shall, by notification in the Official Gazette and with effect from such date as may be specified therein, constitute a Board (to be called the 1Ayurvedic, Siddha and Unani Drugs Technical Advisory Board] to advise the Central Government and the State Governments on technical matters arising out of this Chapter and to carry out the other functions assigned to it by this Chapter.
(2) The Board shall consist of the following members, namely, –
(i) The Director General of Health Services, ex officio ;
(ii) The Drugs Controller, India, ex officio,
2(iii) The principal officer dealing with Indian systems of medicine in the Ministry of Health, ex-officio;]
(iv) The Director of the Central Drugs Laboratory, Calcutta, ex-officio ;
(v) One person holding the appointment of Government Analyst under section 33F, to be nominated by the Central Government ;
(vi) One Pharmacognocist to be nominated by the Central Government ;
(vii) One Photo-chemist to be nominated by the Central Government ;
3(VIII)Four persons to be nominated by the Central Government, two from amongst the members of the Ayurvedic Pharmacopoeia Committee, one from amongst the members of Unani Pharmacopoeia Committee and one from amongst the members of the Siddha Pharmacopoeia Committee ;]
(ix) One teacher in Darvyaguna, and Bhaishajya Kalpana, to be nominated by the Central Government ;
4(x) One teacher in ILM-UL-ADVIA and TAKLIS-WA-DAWASAZI, to be nominated by the Central Government ;
[(xi) (Note: Subs. by Act 68 of 1982, sec.30, for clauses (xi) and (xii) (w.e.f. 1-2-1983)) One teacher in Gunapadam to be nominated by the Central Government ;
(xii) Three persons, one each to represent the Ayurvedic, Siddha and Unani drug industry, to be nominated by the Central Government ;
(xiii) Three persons, one each from amongst the practitioners of Ayurvedic, Siddha and Unani Tibb systems of medicine to be nominated by the Central Government.]
(3) The Central Government shall appoint a member of the Board as its Chairman.
(4) The nominated members of the Board shall hold office for three years
but shall be eligible for recombination.
(5) The Board may, subject to the previous approval of the Central Government, make bye-laws fixing quorum and regulating its own procedure and conduct of all business to be transacted by it.
(6) The functions of the Board may be exercised notwithstanding any vacancy therein.
(7) The Central Government shall appoint a person to be Secretary of the Board and shall provide the Board with such clerical and other staff as the Central Government considers necessary.
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1. Subs. by Act 68 of 1982, sec. 30, for “Ayurvedic and Unani Drugs Technical Adviory Board” (w.e.f. 1-2-1983).
2. Subs. by Act 68 of 1982, sec. 30, for clause (iii) (w.e.f. 1-2-1983).
3. Subs. by Act 68 of 1982, sec. 30, for clause (viii) (w.e.f. 1-2-1983).
4. Subs. by Act 68 of 1982, sec. 30, for clauses (xi) and (xii) (w.e.f. 1-2-1983).
Section 33 D. The Ayurvedic, Siddha and Unani Drugs Consultative Committee.
133D. The Ayurvedic, Siddha and Unani Drugs Consultative Committee. (1) The Central Government may constitute an Advisory Committee to be called the Ayurvedic, Siddha and Unani Drugs Consultative Committee to advise the Central Government, the State Governments and the Ayurvedic, Siddha and Unani Drugs Technical Advisory Board on any matter for the purpose of securing uniformity throughout India in the administration of this Act in so far as it relates to Ayurvedic, Siddha or Unani drugs.
(2) The Ayurvedic, Siddha and Unani Drugs Consultative Committee shall consist of two persons to be nominated by the Central Government as representatives of that Government and not more than one representative of each State to be nominated by the State Government concerned.
(3) The Ayurvedic, Siddha and Unani Drugs Consultative Committee shall meet when required to do so by the Central Government and shall regulate its own procedure.
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1. Subs. by Act 68 of 1982, sec. 31, for sections 33D and 33E (w.e.f. 1-2-1983).
Section 33 E. Misbranded drugs.
For the purposes of this Chapter, an Ayurvedic, Siddha or Unani drug shall be deemed to be misbranded –
(a) If it is so coloured, coated, powdered or polished that damage is concealed or if it is made to appear of better or greater therapeutic value than it really is ; or
(b) If it is not labeled in the prescribed manner ; or
(c) If its label or container or anything accompanying the drug bears any statement, design or device which makes any false claim for the drug or which is false or misleading in any particular.
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1. Subs. by Act 68 of 1982, sec. 31, for sections 33D and 33E (w.e.f. 1-2-1983).
Section 33 EE. Adulterated drugs.
For the purposes of this Chapter, an Ayurvedic, Siddha or Unani drug shall be deemed to be adulterated, –
(a) If it consists, in whole or in part, of any filthy, putrid or decomposed substance ; or
(b) It has been prepared, packed or stored under in sanitary conditions whereby it may have been contaminated with filth or whereby it may have been rendered injurious to health ; or
(c) If its container is composed, in whole or in part, of any poisonous or deleterious substance which may render the contents injurious to health ; or
(d) If it bears or contains, for purposes of colouring only, a colour other than one which is prescribed ; or
(e) If it contains any harmful or toxic substance which may render it injurious to health ; or
(f) If any substance has been mixed therewith so as to reduce its quality or strength.
Explanation. – For the purpose of clause (a), a drug shall not be deemed to consist, in whole or in part, of any decomposed substance only by reason of the fact that such decomposed substance is the result of any natural decomposition of the drug :
Provided that such decomposition is not due to any negligence on the part of the manufacturer of the drug or the dealer thereof and that it does not render the drug injurious to health.
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1. Subs. by Act 68 of 1982, sec. 31, for sections 33D and 33E (w.e.f.1-2-1983).
Section 33 EEA. Spurious drugs.
For the purposes of this Chapter, an Ayurvedic, Siddha or Unani drug shall be deemed to be spurious –
(a) If it is sold, or offered or exhibited for sale, under a name which belongs to another drug ; or
(b) If it is an imitation of, or is a substitute for, another drug or resembles another drug in a manner likely to deceive, or bears upon it or upon its label or container the name of another drug, unless it is plainly and conspicuously marked so as to reveal its true character and its lack of identity with such other drug ; or
(c) If the label or container bears the name of an individual or company purporting to be the manufacturer of the drug, which individual or company is fictitious or does not exist ; or
(d) If it has been substituted wholly or in part by any other drug or substance ; or
(e) If it purports to be the product of a manufacturer of whom it is not truly a product.
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1. Subs. by Act 68 of 1982, sec. 31, for sections 33D and 33E (w.e.f. 1-2-1983).
Section 33 EEB. Regulation of manufacturer for sale of Ayurvedic, Siddha and Unani drugs.
133EEB. Regulation of manufacturer for sale of Ayurvedic, Siddha and Unani drugs.- No person shall manufacture for sale or for distribution any Ayurvedic, Siddha or Unani drug except in accordance with such standards, if any, as may be prescribed in relation to that drug.
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1. Subs. by Act 68 of 1982, sec. 31, for sections 33D and 33E (w.e.f. 1-2-1983).
Section 33 EEC. Prohibition of manufacture and sale of certain Ahyurvedic, Siddha and Unani drugs.
1 Prohibition of manufacture and sale of certain Ahyurvedic, Siddha and Unani drugs. –From such date as the State Government may, by notification in the Official Gazette, specify in this behalf, no person, either by himself or by any other person on his behalf, shall –
(a) Manufacture for sale or for distribution –
(i) Any misbranded, adulterated or Ayurvedic, siddha or Unani drug ;
(ii) Any patent or proprietary medicine, unless there is displayed in the prescribed manner on the label or container thereof the true list of all the ingredients contained in it ; and
(iii) Any Ayurvedic, Siddha or Unani drug in contravention of any of the provisions of this Chapter or any rule made thereunder ;
(b) Sell, stock or exhibit or offer for sale or offer for sale or distribute any Ayurvedic, Siddha or Unani drug which has been manufactured in contravention of any of the provisions of this Act, or any rule made thereunder :
(c) Manufacture for sale or for distribution, any Ahyurvedic, Siddha or Unani drug, except under, and in accordance with the conditions of, a licence issued for such purpose under this Chapter by the prescribed authority.
Provided that nothing in this section shall apply to Vaidyas and Hakims who manufacture Ayurvedic, Siddha or Unani drug for the use of their own patients :
Provided further that nothing in this section shall apply to the manufacture, subject to the prescribed conditions, of small quantities of any Ayurvedic, Siddha or Unani drug for the purpose of examination, test or analysis.
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1. Subs. by Act 68 of 1982, sec. 31, for sections 33D and 33E (w.e.f. 1-2-1983).
Section 33 EED. Power of Central Government to prohibit manufacture, etc., of Ayurvedic, Siddha or Unani drugs in public interest.
1[33EED. Power of Central Government to prohibit manufacture, etc., of Ayurvedic, Siddha or Unani drugs in public interest.—Without prejudice to any other provision contained in this Chapter, if the Central Government is satisfied on the basis of any evidence or other material available before it that the use of any Ahyurvedic, Siddha or Unani drug is likely to involve any risk to human beings or animals or that any such drug does not have the therapeutic value claimed or purported to be claimed for it and that in the public interest it is necessary or expedient so to do then, that Government may, by notification in the Official Gazette, prohibit the manufacture, sale or distribution of such drug.]
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1. Subs. by Act 68 of 1982, sec. 31, for sections 33D and 33E (w.e.f. 1-2-1983).
Section 33 F. Government Analysts.
(1) The Central Government or a State Government may, by notification in the Official Gazette, appoint such persons as it thinks fit, having the prescribed qualifications to be Government Analysts for such areas as may be assigned to them by the Central Government or the State Government, as the case may be.
(2) Notwithstanding anything contained in sub-section (1), neither the Central Government nor a State Government shall appoint as a Government Analyst any official not serving under it without the previous consent of the Government under which he is serving.
1(3) No person who has any financial interest in the manufacture or sale of any drug shall be appointed to be a Government Analyst under this section.]
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1. Ins. by Act 68 of 1982, sec. 32 (w.e.f. 1-2-1983).
Section 33 G. Inspectors.
(1) The Central Government or a State Government may, by notification in the Official Gazette, appoint such persons as it thinks fit, having the prescribed qualifications, to be Inspectors for such areas as may be assigned to them by the Central Government or the State Government as the case may be.
(2) The powers which may be exercised by an Inspector and the duties which may be performed by him and the conditions, limitations or restrictions subject to which such powers and duties may be exercised or performed shall be such as may be prescribed.
(3) No person who has any financial interest in the manufacture or sale of any drug shall be appointed to be an Inspector under this section.
(4) Every Inspector shall be deemed to be a public servant within the meaning of section 21 of the Indian Penal Code and shall be officially sub-ordinate to such authority as the Central Government appointing him may specify in this behalf.
Section 33 H. Application of provisions of sections 22, 23, 24 and 25.
The provisions of sections 22, 23, 24 and 25 and the rules, if any, made there under shall, so far as may be, apply in relation to an Inspector and a Government Analyst appointed under this Chapter as they apply in relation to an Inspector and a Government Analyst appointed under Chapter IV, subject to the modification that the references to “drug” in the said sections, shall be construed as references to 1Ayurvedic, Siddha or Unani] drug.
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1. Subs. by Act 68 of 1982, sec. 2, for “Ayurvedic (including Siddha) or Unani” (w.e.f. 1-2-1983).
Section 33-I. Penalty for manufacture, sale, etc., of Ayurvedic, Siddha or Unani drug in contravention of this Chapter.
1[33-I. Penalty for manufacture, sale, etc., of Ayurvedic, Siddha or Unani drug in contravention of this Chapter.—Whoever himself or by any other person on his behalf—
(1) Manufactures for sale or for distribution –
(a) Any Ayurvedic, Siddha or Unani drug –
(i) Deemed to be adulterated under section 33EE, or
(ii) Without a valid licence as required under clause ( c) of section 33EEC,
shall be punishable with imprisonment for a term which may extend to one year and with fine which shall not be less than two thousand rupees ;
(b) Any Ayurvedic, Siddha or Unani drug deemed to be spurious under section 33EEA, shall be punishable with imprisonment for a term which shall not be less than one year but which may extend to three years and with fine which shall not be less than five thousand rupees :
Provided that the Court may, for any adequate and special reasons to be mentioned in the judgment, impose a sentence of imprisonment for a term of less than one year and of fine of less than five thousand rupees ; or
(2) Contravenes any other provisions of this Chapter or of section 24 as applied by section 33H or any rule made under this Chapter, shall be punishable with imprisonment for a term which may extend to three months and with fine which shall not be less than five hundred rupees.
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1. Subs. by Act 68 of 1982, sec. 33, for sections 33-I (w.e.f. 1-2-1983).
Section 33 J. Penalty for subsequent offences.
1 33J. Penalty for subsequent offences. -Whoever having been convicted of an offences, –
(a) Under clause (a) of sub-section (1) of section 33I is again convicted of an offence under that clause, shall be punishable with imprisonment for a term which may extend to two years and with fine which shall not be less than two thousand rupees ;
(b) Under clause (b) of sub-section (1) of section 33I is again convicted of an offence under that clause, shall be punishable with imprisonment for a term which shall not be less than two years but which may extend to six years and with fine which shall not be less than five thousand rupees :
Provided that the Court may, for any adequate and special reasons to be mentioned in the judgment, impose a sentence of imprisonment for a term of less than two years and of fine of less than five thousand rupees ;
(c) Under sub-section (2) of section 33I is again convicted of an offence under that sub-section, shall be punishable with imprisonment for a term which may extend to six months and with fine which shall not be less than one thousand rupees.
——————————
1. Subs. by Act 68 of 1982, sec. 33, for sections 3J (w.e.f. 1-2-1983).
Section 33 K. Confiscation.
Where any person has been convicted under this Chapter, the stock of the 1[Ayurvedic, Siddha or Unani] drug, in respect of which the contravention has been made, shall be liable to confiscation.
——————————-
1. Subs. by Act 68 of 1982, sec. 2, for “Ayurvedic (including Siddha) or Unani” (w.e.f. 1-2-1983).
Section 33 L. Application of provisions to Government departments.
The provisions of this Chapter except those contained in section 33K shall apply in relation to the manufacture for sale, sale or distribution of any 1drug by any department of Government as they apply in relation to the manufacture for sale, sale or distribution of such drug by any other person.
——————————
1. Subs. by Act 68 of 1982, sec. 2, for “Ayurvedic (including Siddha) or Unani” (w.e.f. 1-2-1983).
Section 33 M. Cognizance of offences.
(1) No prosecution under this Chapter shall be instituted except by an Inspector 1with the previous sanction of the authority specified under sub-section (4) of section 33G].
(2) No Court inferior to that2 of a Metropolitan Magistrate or of a Judicial Magistrate of the first class] shall try an offence punishable under this Chapter.
——————————-
1. Ins. by Act 68 of 1982, sec. 34 (w.e.f. 1-2-1983).
2. Subs. by Act 68 of 1982, sec. 34, for “of a Presidency Magistrate or of a Magistrate of the first class” (w.e.f. 1-2-1983).
Section 33 N. Power of Central Government to make rules.
(1) The Central Government may, 1[after consultation with, or on the recommendation of, the Board] and after previous publication by notification in the Official Gazette, make rules for the purpose of giving effect to the provisions of this Chapter:
Provided that consultation with the Board may be dispensed with if the Central Government is of opinion that circumstances have arisen which render it necessary to make rules without such consultation, but in such a case, the Board shall be consulted within six months of the making of the rules and the Central Government shall take into consideration any suggestions which the Board may make in relation to the amendment of the said rules.
(2) Without prejudice to the generality of the foregoing power, such rules may—
(a) provide for the establishment of laboratories for testing and analysing 2[Ayurvedic, Siddha or Unani] drugs;
(b) prescribe the qualifications and duties of Government Analysts and the qualifications of Inspectors;
(c) prescribe the methods of test or analysis to be employed in determining whether any 2[Ayurvedic, Siddha or Unani] drug is labelled with the true list of the ingredients which it is purported to contain;
(d) specify any substance as a poisonous substance;
(e) prescribe the forms of licences for the manufacture for sale of 2[Ayurvedic, Siddha or Unani] drugs, 3[and for sale of processed Ayurvedic, Siddha or Unani drugs,] the form of application for such licences, the conditions subject to which such licences may be issued, the authority empowered to issue the same and the fees payable therefor; 3[and provide for the cancellation or suspension of such licences in any case where any provision of this Chapter or rules made thereunder is contravened or any of the conditions subject to which they are issued is not complied with];
4[(f) prescribe the conditions to be observed in the packing of Ayurvedic, Siddha and Unani drugs including the use of packing material which comes into direct contact with the drugs, regulate the mode of labelling packed drugs and prescribe the matters which shall or shall not be included in such labels;]
(g) prescribe the conditions subject to which small quantities of 5[Ayurvedic, Siddha or Unani] drugs may be manufactured for the purpose of examination, test or analysis; and
6[(gg) prescribe under clause (d) of section 33EE the colour or colours which an Ayurvedic, Siddha or Unani drug may bear or contain for purposes of colouring;
(gga) prescribe the standards for Ayurvedic, Siddha or Unani drugs under section 33EEB;]
(h) any other matter which is to be or may be prescribed under this Chapter.
——————————-
1. Subs. by Act 68 of 1982, sec. 35, for “after consultation with the Board” (w.e.f. 1-2-1983).
2. Subs. by Act 68 of 1982, sec. 2, for “Ayurvedic (including Siddha) or Unani” (w.e.f. 1-2-1983).
3. Ins. by Act 68 of 1982, sec. 35 (w.e.f. 1-2-1983).
4. Subs. by Act 68 of 1982, sec. 35, for “clause (f)” (w.e.f. 1-2-1983).
5. Subs. by Act 68 of 1982, sec. 2, for “Ayurvedic (including Siddha) or Unani” (w.e.f. 1-2-1983).
6. Ins. by Act 68 of 1982, sec. 35 (w.e.f. 1-2-1983).
Section 33-O. Power to amend First Schedule.
The Central Government, after consultation with the Board and after giving, by notification in the Official Gazette, not less than three months’ notice of its intention so to do, may, by a like notification, add to or otherwise amend the First Schedule for the purposes of this Chapter and thereupon the said Schedule shall be deemed to be amended accordingly.
Section 33 P. Power to give directions.
1[2[33P.] Power to give directions.—The Central Government may give such directions to any State Government as may appear to the Central Government to be necessary for carrying into execution in the State any of the provisions of this Act or of any rule or order made there under
——————————-
1. Ins. by Act 35 of 1960, sec. 11 (w.e.f. 16-3-1961).
2. Section 33A re-numbered as section 33P by Act 13 of 1964, sec. 27 (w.e.f. 15-9-1964).
Section 34. 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 provided in this Act if he proves that the offence was committed without his knowledge or that he 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 a firm or other association of individuals ; and
(b) “director” in relation to a firm means a partner in the firm.
Section 34 A. Offences by Government Departments.
Where an offence under Chapter IV or Chapter IVA has been committed by any department of Government, such authority as is specified by the Central Government to be in charge of manufacture, sale or distribution of drugs or where no authority is specified, the head of the department, 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 section shall render any such authority or person liable to any punishment provided in Chapter IV or Chapter IVA, as the case may be, if such authority or person proves that the offence was committed without its or his knowledge or that such authority or person exercised all due diligence to prevent the commission of such offence.
————————
1. Ins. by Act 13 of 1964, sec. 28 (w.e.f. 15-9-1964).
Section 34 AA. Penalty for vexatious search or seizure.
Any Inspector exercising powers under this Act or the rules made there under, who,-
(a) Without reasonable ground of suspicion searches any place, vehicle, vessel or other conveyance ; or
(b) Vexatiously and unnecessarily searches any person ; or
(c) Vexatiously and unnecessarily seizes any drug or cosmetic, or any substance or article, or any record, register, document or other material object ; or
(d) Commits, as such Inspector, any other act, to the injury of any person without having reason to believe that such act is required for the execution of his duty shall be punishable with fine which may extend to one thousand rupees.
——————————-
1. Ins. by Act 68 of 1982, sec. 36 (w.e.f. 1-2-1983).
Section 35. Publication of sentences passed under this Act.
(1) If any person is convicted of an offence under this Act, 1[the Court before which the conviction takes place shall, on application made to it by the Inspector, cause] the offender’s name, place of residence, the offence of which he has been convicted and the penalty which has been inflicted upon him, to be published at the expense of such person in such newspapers or in such other manner as the Court may direct.
(2) The expenses of such publication shall be deemed to form part of the costs relating to the conviction and shall be recoverable in the same manner as those costs are recoverable.
—————————-
1. Subs. by Act 68 of 1982, sec. 37, for certain words (w.e.f. 1-2-1983).
Section 36. Magistrate’s power to impose enhanced penalties.
Notwithstanding anything contained in 1[***] 2[the Code of Criminal Procedure, 1973 (2 of 1974)], it shall be lawful for 3[any Metropolitan Magistrate or any Judicial Magistrate of the first class] to pass any sentence authorized by this Act in excess of his powers under 1[***] the said Code.
——————————
1. The words “section 32 of” omitted by Act 13 of 1964, sec. 29 (w.e.f. 15-9-1964).
2. Subs. by Act 68 of 1982, sec. 38, for “the Code of Criminal Procedure,1898 (5 of 1898)” (w.e.f. 1-2-1983).
3. Subs. by Act 68 of 1982, sec. 38, for “any Presidency Magistrate or any Magistrate of the first class” (w.e.f. 1-2-1983).
36A. Certain offences to be tried summarily. –
1[36A. Certain offences to be tried summarily.—Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), all offences under this Act, punishable with imprisonment for a term not exceeding three years, other than an offence under clause (b) of sub-section (1) of section 33-I, shall be tried in a summary way by a Judicial Magistrate of the first class specially empowered in this behalf by the State Government or by a Metropolitan Magistrate and the provisions of sections 262 to 265 (both inclusive) of the said Code shall, as far as may be, apply to such trial:
Provided that, in the case of any conviction in a summary trial under this section, it shall be lawful for the Magistrate to pass a sentence of imprisonment for a term not exceeding one year:
Provided further that when at the commencement of, or in the course of, a summary trial under this section it appears to the Magistrate that the nature of the case is such that a sentence of imprisonment for a term exceeding one year may have to be passed or that it is, for any other reason, undesirable to try the case summarily, the Magistrate shall, after hearing the parties, record an order to that effect and thereafter recall any witness who has been examined and proceed to hear or rehear the case in the manner provided by the said Code.]
——————————
1. Ins. by Act 68 of 1982, sec. 39 (w.e.f. 1-2-1983).
Section 37. Protection of action taken in good faith.
No suit, prosecution or other legal proceeding shall lie against any person for anything which is in good faith done or intended to be done under this Act.
Section 38. Rules to be laid before Parliament.
Every rule made 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, 2[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.
——————–
1. Ins. by Act 13 of 1964, sec. 30 (w.e.f. 15-9-1964).
2. Subs. by Act 68 of 1982, sec. 40, for certain words (w.e.f. 1-2-1983).
THE FIRST SCHEDULE
[See section 3(a)]
[A.—AYURVEDIC AND SIDDHA SYSTEMS] Ayurveda
| Serial No. |
Name of book |
| AYURVEDA |
| 1. |
Arogya Kalpadruma |
| 2. |
Arka Prakasha |
| 3. |
Arya Bhishak |
| 4. |
Ashtanga Hridaya |
| 5. |
Ashtanga Samgraha |
| 6. |
Ayurveda Kalpadruma |
| 7. |
Ayurveda Prakasha |
| 8. |
Ayurveda Samgraha |
| 9. |
Bhaishajya Ratnavali |
| 10. |
Bharat Bhaishajya Ratnakara |
| 11. |
Bhava Prakasha |
| 12. |
Brihat Nighantu Ratnakara |
| 13. |
Charaka Samhita |
| 14. |
Chakra Datta |
| 15. |
Gada Nigraha |
| 16. |
Kupi Pakva Rasayana |
| 17. |
Nighantu Ratnakara |
| 18. |
Rasa Chandanshu |
| 19. |
Rasa Raja Sundara |
| 20. |
Rasaratna Samuchaya |
| 21. |
Rasatantra Sara Siddha Prayoga Samgraha |
| 22. |
Rasa Tarangini |
| 23. |
Rasa Yoga Sagra |
| 24. |
Rasa Yoga Ratnakara |
| 25. |
Rasa Yoga Samgraha |
| 26. |
Rasendra Sara Samgraha |
| 27. |
Rasa Pradipika |
| 28. |
Sahasrayoga |
| 29. |
Sarvaroga Chikitsa Ratnam |
| 30. |
Sarvayoga Chikitsa Ratnam |
| 31. |
Siddha Bhaishajya Manimala |
| 32. |
Sharangadhara Samhita |
| 33. |
Siddha Yoga Samgraha |
| 34. |
Sushruta Samhita |
| 35. |
Vaidya Chintamani |
| 36. |
Vaidyaka Shabda Sindu |
| 37. |
Vaidyaka Chikitsa Sara |
| 38. |
Vaidya Jiwan |
| 39. |
Basava Rajeeyam |
| 40. |
Yoga Ratnakara |
| 41. |
Yoga Tarangini |
| 42. |
Yoga Chintamani |
| 43. |
Kashyapasamhita |
| 44. |
Bhelasamhita |
| 45. |
Vishwanathachikitsa |
| 46. |
Vrindachikitsa |
| 47. |
Ayurvedachintamani |
| 48. |
Abhinavachintamani |
| 49. |
Ayurveda-ratnakar |
| 50. |
Yogaratnasangraha |
| 51. |
Rasamrita |
| 52. |
Dravyagunanighantu |
| 53. |
Rasamanjari |
| 54. |
Bangasena |
| 54-A. |
Aurvedic Formulary of India (Part-I) |
| 54-B. |
Aurveda Sara Sangraha.] |
| SIDDHA |
| 55. |
Siddha Vaidya Thirattu |
| 56. |
Therayar Maha Karisal |
| 57. |
Brahma Muni Karukkadi (300) |
| 58. |
Hogar (700) |
| 59. |
Pulippani (500) |
| 60. |
Agasthiya Paripuranam (400) |
| 61. |
Therayar Yamagam |
| 62. |
Agasthiya Chenduram (300) |
| 63. |
Agasthiyar (1500) |
| 64. |
Athmarakshamrutham |
| 65. |
Agasthiyar Pin (80) |
| 66. |
Agasthiyar Rathna Churukkam |
| 67. |
Therayar Karisal (300) |
| 68. |
Veeramamuni Nasa Kandam |
| 69. |
Agasthiyar (600) |
| 70. |
Agasthiyar Kanma Soothiram |
| 71. |
18 Siddhar’s Chillarai Kovai |
| 72. |
Yogi Vatha Kaviyam |
| 73. |
Therayar Tharu |
| 74. |
Agasthiyar Vaidya Kaviyam (1500) |
| 75. |
Bala Vagadam |
| 76. |
Chimittu Rathna (Rathna) Churukkam |
| 77. |
Nagamuni (200) |
| 78. |
Agasthiyar Chillarai Kovai |
| 79. |
Chiktsa Rathna Deepam |
| 80. |
Agasthiyar Nayana Vidhi |
| 81. |
Yugi Karisal (151) |
| 82. |
Therayar Thaila Varkam |
| 83. |
Agasthiya Vallathi (600) |
| 184. |
Siddha Formulary of Unani Medicine (Part-I) |
2[B. – UNANI TIBB SYSTEM] |
| 1. |
Karabadin Qadri |
| 2. |
Karabadin Kabir |
| 3. |
Karabadin Azam |
| 4. |
Iiaj-ul-amraz |
| 5. |
Al Karabadin |
| 6. |
Biaz Kabir Vol.II |
| 7. |
Karabadin Jadid |
| 8. |
Kitab-ul-Taklis |
| 9. |
Sanat-ul-Taklis |
| 10. |
Mifta-ul-Khazain |
| 11. |
Madan-ul-Aksir |
| 12. |
Makhzan-ul-Murabhat |
| 313. |
National Formulary of Unani Medicine 4[***]] |
| 514. |
Makhzan-ul-Murabhat |
1. Added by G.S.R. 735 (E), dated 28th August, 1987.
2. Subs. by Act 68 of 1982, sec. 41, for the heading “B.—UNANI (TIBB) SYSTEM” (w.e.f. 1-2-1983).
3. Added by G.S.R. 735 (E), dated 28th August, 1987.
4. The brackets, word and figure “(Part I)” omitted by G.S.R. 780 (E), dated 25th November, 2004.
5. Ins. by G.S.R. 780 (E), dated 25th November, 2004
THE SECOND SCHEDULE
(See sections 8 and 16)
STANDARDS TO BE COMPLIED WITH BY IMPORTED DRUGS AND BY DRUGS MANUFACTURED FOR SALE, SOLD, STOCKED OR EXHIBITED FOR SALE FOR DISTRIBUTED
| Serial No. |
Class of drug |
Standard to be complied with |
| 1. |
Patent or proprietary medicines [(Note: Ins. by Notification No. S.O. 887, dated 19th March, 1966, Gazette of India, Pt. II, Sec.3(ii), p.819) other than Homoeopathic medicines]. |
The formula or list of ingredients displayed in the prescribed manner on the label or container and such other standards as may be prescribed. |
| 22. |
Substances commonly known as vaccines, sera, toxine, toxoids, antitoxins, and antigens and biological products of such nature. |
The standards maintained at the International Laboratory for Biological Standards, Stantans Seruminstitut, Copenhagen, and such further standards of strength, quality and purity as may be prescribed. |
| 3. |
Vitamins, hormones and analogous products. |
The standards maintained at the International Laboratory for Biological Standards, National Institute for Medical Research, London, and such further standards of strength, quality and purity as may be prescribed. |
| 4. |
Substances (other than food) intended to affect the structure or any function of the human body or intended to be used for the destruction of vermin or insects which cause disease in human beings or animals. |
Such standards as may be prescribed. |
| 44-A. |
Homoeopathic Medicines: |
|
|
(a) Drugs included in the Homoeopathic Pharmacopoeia of India. |
Standards of identity, purity and strength specified in the edition of the Homoeopathic Pharmacopoeia of India for the time being and such other standards as may be prescribed. |
| (b) Drugs not included in the Homoeopathic Pharmacopoeia of India but which are included in the Homoeopathic Pharmacopoeia of United States of America or the United Kingdom or the German Homoeopathic Pharmacopoeia. |
Standards of identity, purity and strength prescribed for the drugs in the edition of such Pharmacopoeia for the time being in which they are given and such other standards as may be prescribed. |
| (c) Drugs not included in the Homoeopathic Pharmacopoeia of India or the United States of America, or the United Kingdom or the German Homoeopathic Pharmacopoeia. |
The formula or list of ingredients displayed in the prescribed manner on the lable of the container and such other standards as may be prescribed by the Central Government]. |
| 5 5. |
Other drugs: |
|
|
(a) Drugs included in the Indian Pharmacopoeia. |
Standards of identity, purity and strength specified in the edition of the Indian Pharmacopoeia for the time being and such other standards as may be prescribed.In case the standards of identity, purity and strength for drugs are not specified in the edition of the Indian Pharmacopoeia for the time being in force but are specified in the edition of the Indian Pharmacopoeia immediately preceding, the standards of identity, purity and strength shall be those occurring in such immediately preceding edition of the Indian Pharmacopoeia and such other standards as may be prescribed.(b) Drugs not included in the Indian Pharmacopoeia but which are included in the official Pharmacopoeia of any other country.
Standards of identity, purity and strength specified for drugs in the edition of such official Pharmacopoeia of any other country for the time being in force and such other standards as may be prescribed.In case the standards of identity, purity and strength for drugs are not specified in the edition of such official Pharmacopoeia for the time being in force but are specified in the edition immediately strength shall be those occurring in such immediately preceding edition of such official Pharmacopoeia and such other standards as may be prescribed.]
1. Ins. by S.O. 887, dated 19th March, 1966.
2. Subs. by G.S.R. 299 (E), dated 23rd April, 1984.
3. Omitted by G.S.R. 299 (E), dated 23rd April, 1984.
4. Subs. by G.S.R. 820, dated 6th June, 1978.
5. Subs. by G.S.R. 883, dated 18th August, 1973.
November 30, 2014
Section 1. SHORT TITLE, EXTENT AND COMMENCEMENT.
ACT NO. 69 OF 1980 [27th December, 1980.]
An Act to provide for the conservation of forests and for matters connected therewith or ancillary or incidental thereto. Be it enacted by Parliament in the Thirty-first Year of the Republic of India as follows:- 1. Short title, extent and commencement.(1) This Act may be called the Forest (Conservation) Act, 1980. (2) 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 25th day of October, 1980.
(1) This Act may be called the Forest (Conservation) Act, 1980.
(2) 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 25th day of October, 1980.
Section 2. RESTRICTION ON THE PRESERVATION OF FORESTS OR USE OF FOREST LAND FOR NON-FOREST PURPOSE.
Notwithstanding anything contained in any other law for the time being in force in a State, no State Government or other authority shall make, except with the prior approval of the Central Government, any order directing -
(i) That any reserved forest (within the meaning of the expression “reserved forest” in any law for the time being in force in that State) or any portion thereof, shall cease to be reserved.
(ii) That any forest land or any portion thereof may be used for any non-forest purpose.
(iii) That any forest land or any portion thereof may be assigned by way of lease or otherwise to any private person or to any authority, corporation, agency or any other organisation not owned, managed or controlled by Government;
(iv) That any forest land or any portion thereof may be cleared of trees
which have grown naturally in that land or portion, for the purpose of using it for reforestation.
Explanation : For the purpose of this section “non-forest purpose” means the breaking up or clearing of any forest land or portion thereof for -
(a) The cultivation of tea, coffee, spices, rubber, palms, oil-bearing plants, horticultural crops or medicinal plants;
(b) Any purpose other than reforestation, but does not include any work relating or ancillary to conservation, development and management of forests and wild life, namely, the establishment of check-posts, fire lines, wireless communications and construction of fencing, bridges and culverts, dams, waterholes, trench marks, boundary marks, pipelines or other like purposes.
Section 3. CONSTITUTION OF ADVISORY COMMITTEE.
The Central Government may constitute a Committee consisting of such number of persons as it may deem fit to advise that Government with regard to -
(i) The grant of approval under Section 2; and
(ii) Any other matter connected with the conservation of forest which may be referred to it by the Central Government.
Section 3-A. PENALTY FOR CONTRAVENTION OF THE PROVISIONS OF THE ACT.
Whoever contravenes or abets the contravention of any of the provisions of Section 2, shall be punishable with simple imprisonment for a period which may extend to fifteen days.
Section 3-B. OFFENCES BY AUTHORITIES AND GOVERNMENT DEPARTMENTS.
(1) Where any offence under this Act has been committed -
(a) by any department of Government, the head of the department; or
(b) by any authority, every person, who, at the time the offence was committed, was directly in charge, of, and was responsible to, the authority for the conduct of the business of the authority as well as the authority, 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 head of the department or any person referred to in clause (b), liable to any punishment if he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where an offence punishable under the Act has been committed by a department of Government or any authority referred to in clause (b) of sub-section (1) 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 officer, other than the head of the department, or in the case of any authority, any person other than the persons referred to in clause (b) of sub-section (1), such officer or persons shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Section 4. POWER TO MAKE RULES.
(1) The Central Government may, be notification in the Official Gazette, make rules for carrying out the provisions of this Act.
(2) Every rule 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 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.
Section 5. REPEAL AND SAVING.
(1) The Forest (Conservation) Ordinance, 1980 is hereby repealed.
(2) Notwithstanding such repeal, anything done or any action taken under the provisions of the said Ordinance shall be deemed to have been done or taken under the corresponding provisions of this Act.
November 30, 2014
Chapter 1 Preliminary
Section 1. Short title, extent and commencement.
(Act No. 47 of 1999)
An Act to amend and consolidate the law relating to trade marks, to provide for registration and better protection of trade marks for goods and services and for the prevention of the use of fraudulent marks.
Be it enacted by Parliament in the Fiftieth Year of the Republic of India as follows:-
(1) This Act may be called the Trade Marks Act, 1999.
(2) It extend 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:
Provided that 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 coming into force of that provision.
Section 2. Definitions and interpretation.
(1) In this Act , unless the context otherwise requires, -
(a) “Appellate Board” means the Appellate Board established under section 83:
(b) “assignment” means an assignment in writing by act of te parties concerned;
(c) “associated trade Marks” means trade marks deemed to be, or required to be, registered as associated trade marks under this Act;
(d) “Bench ” means a Bench of the Appellate Board;
(e) “certification trade mark” means a mark capable of distinguishing the goods or service in connection with which it is used in the course of trade which are certified by the proprietor of the mark in respect of origin, material, mode of manufacture of goods or performance of service not so certified and registrable as such under Chapter IX in respect of those goods or service in the name, as proprietor of the certification trade mark , of that person;
(f) “Chairman” means the Chairman of the Appellate Board.
(g) “collective mark” means a trade mark distinguishing the goods or services of members of an association of persons (not being a partnership within the meaning of the Indian Partnership Act, 1932 (9 of 1932) which is the proprietor of the mark from those of others.
(h) “deceptively similar”, – A mark shall be deemed to be deceptively similar to another mark if it so nearly resembles that other mark as to be likely to deceive or cause confusion.
(i) “false trade description” means-
(I) a trade description which is untrue or misleading in a material respect as regards the goods or services to which it is applied or
(II) any alteration of a trade description as regards the goods or services to which it is applied, whether by way of addition, effacement or otherwise, where that alteration makes the description untrue or misleading in a material respect, or
(III) any trade description which denotes or implies that there are contained, as regards the goods to which it is applied, more yards or meters than there are contained therein standard yards or standard meters, or
(IV) any marks or arrangement or combination thereof when applied-
(a) to goods in such a manner as to be likely to lead persons to believe that the goods are the manufacture or merchandise of some person other than the person whose merchandise or manufacture they really are.
(b) in relation to services in such a manner as to be likely to lead persons to believe that the services are provided or rendered by some persons other than the person whose services they really are, or
(V) any false name or initials of a person applied to goods or service in such manner as if such name or initials were a trade description in any case where the name or initials-
(a) is or are not a trade mark or part of a trade mark, and
(b) is or are identical with or deceptively similar to the name or initials of a person carrying on business in connection with goods or services of the same description or both and who has not authorized the use of such name or initials, and
(c) is or are either the name or initials of a fictions person or some person not bona fide carrying on business in connection with such goods or services.
And the fact that a trade description is a trade mark or part of a trade mark shall not prevent such trade description being a false trade description within the meaning of this Act.
(j) “goods” means anything which is the subject of trade or manufacture.
(k) “Judicial Member” means a Member of the Appellate Board appointed as such under this Act, and includes the Chairman and the Vice-Chairman.
(l) “limitations” (with its grammatical variations) means any limitation of the exclusive right to the use of a trade mark given by the registration of a person as proprietor thereof, including limitations of that right a to mode or area of use within India or outside India.
(m) “mark” includes a device, brand, heading, lable, ticket, name, signature, word, letter, numeral, shape of goods, packaging or combination of colours or any combination thereof.
(n) “Member” means a Judicial Member or a Technical Member of the Appellate Board and includes the Chairman and the Vice-Chairman.
(o) “name” includes and abbreviation of a name.
(p) “notify” means to notify in the Trade Mark Journal published by the Registrar.
(q) “package” includes any case, box, container, covering, folder, recetacle, vessel, casket, bottle, wrapper, labler, band, ticket, reel, frame, capsule, cap, lid, stopper and cork.
(r) “permitted use: in relation to a registered trade mark, means the use of trade mark-
(i) by a registered user of the trade mark in relation to goods or service-
(a) with which he is connected in the course of trade, and
(b) in respect of which the trade mark remains registered for the time being, and
(c) for which he is registered as registered user, and
(d) which complies with any conditions or limitations to which the registration of registered user is subject, or
(ii) by a person other than the registerd proprietor and registered user in relation to goods or services-
(a) with which he is connected in the course of trade, and
(b) in respect of which the trade mark remains registered for the time being, and
(c ) by consent of such registered proprietor in a written agreement, and
(d) which complies with any conditions or limitations to which such user is subject and to which the registration of the trade mark is subject.
(s) “prescribed” means prescribed by rules made under this Act.
(t) “register” means the Register of Trade Mark referred to in sub-section (1) of section 6.
(u) “registered” (with its grammatical variations) means registered under this Act.
(v) “registered proprietor” in relation to a trade mark, means the person for the time being entered in the register as proprietor of the trade mark.
(w) “registered trade mark” means a trade mark which is actually on the register and remaining in force.
(x) “registered user” means a person who is for the time being registered as such under section 49.
(y) “Registrar” means the Registrar of Trade Mark referred to in section 3.
(z) “service” means service of any description which is made available to potential users and includes the provisions of services in connection with business of any industrial or commercial matters such as banking, communication, education, financing, insurance, chit funds, real estate, transport, storage, material treatment, processing, supply of electrical or other energy, boarding, lodging, entertainment, amusement, construction, repair, conveying of news or information and advertising.
(za) “trade description” means any description, statement or other indication, direct or indirect,-
(i) as to the number, quantity, measure, gauge or weight of any goods, or
(ii) as to the standard of quality of any goods or services according to a classification commonly used or recognized in the trade, or
(iii) as t fitness fr the purpose, strength, performance or behaviour of any goods, being “drug” as defined in the Drugs and Cosmetics Act, 1940 (23 of 194)) or “food” as defined in the Prevention of Food Adulteration Act, 1954 (37 of 1954), or
(iv) as to the place or country in which or the time at which any goods or services were made, produced or provided, as the case may be, or
(v) as to the name and address or other indication of the identity of the manufacturer or of the person providing the services of the person for whom the goods are manufactured or services are provided, or
(vi) as to the mode of manufacture or producing any goods or providing services, or
(vii) as to the material of which any goods are composed, or
(viii) as to any goods being the subject of an existing patent, privilege or copyright, and includes-
(a) any description as to the use of any mark which according to the custom of the trade is commonly taken to be an indication of any of the above matters.
(b) the description as to any imported goods contained in any bill of entry or shipping bill.
(c) any other description which is likely to be misunderstood or mistaken for all or any of the said matters.
(zb) “trade mark” means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from choose of others and may include shape of goods, their packaging and combination of colours , and
in relation to Chapter XII (other than section 107), a registered trade mark or mark used in relation to goods or services for the purpose of indicating or so as to indicate a connection in the course of trade between the goods or services, as the case may be, and some person having the right as proprietor to use the mark, and
in relation to other provisions of this Act, a mark used or proposed to be used in relation to goods or services for the purpose of indicating or so to indicate to a connection in the course of trade between the goods or services, as the case may be, and some person having the right, either as proprietor or by way of permitted user, to use the mark whether with or without any indication of the identity of that person, and includes a certification trade mark or collective mark.
(zc) “transmission” means transmission by operation of law, devolution on the personal representative of a deceased person and any other mode of transfer, not being assignment.
(zd) “Technical Member” means a Member who is not a Judicial Member.
(Ze) “tribunal” means the Registrar or, as the case may be, the Appellate Board, before which the proceeding concerned is pending.
(zf) “Vice-Chairman” means a Vice-Chairman of the Appellate Board.
(zg) “well-known trade mark” in relation to any goods or service, means a mark which has becomes so to the substantial segment of the public which uses such goods or receives such services that the use of such mark in relation to other goods or services would be likely to be taken as indicating a connection in the course of trade or rendering of services between those goods or services and a person using the mark in relation to the first mentioned goods or services.
In this Act, unless the context otherwise requires, any reference – to “trade-mark” shall include reference to “collective mark” or “certification trade mark”.
To the use of a mark shall be construed as a reference to the use of printed or other visual representation of the mark.
To the use of a mark.- in relation to goods, shall be construed as a reference to the use of the mark upon, or n any physical or in any other relation whatsoever, to such goods.
In relation to goods, shall be construed as a reference to the use of the mark as or as part of any statement about the availability, provision or performance of such services.
To the Registrar shall be construed as including a reference to any officer when discharging the functions of the Registrar in pursuance of sub-section (2) of section 3.
To the Trade Marks Registry shall be construed as including a reference to any office of the Trade Marks Registry.
For the purposes of this Act, goods and services are associated with each other if it is likely that those goods might be sold or otherwise traded in and those services might be provided by the same business and so with description of goods and descriptions of services.
For the purposes of this Act, “existing registered trade mark” means a trade mark registered under the Trade and Merchandise Marks Act, 1958 (43 of 1958) immediately before the commencement of this Act.
Chapter 2 The Register and Conditions for Registration
Section 3. Appointment of Registrar and other officers.
(1) The Central Government may, by notification in the Official Gazette, appoint a person to be known as the Controller-General of Patents, Designs and Trade Marks, who shall be the Registrar of Trade Mark for the purposes of this Act.
The Central Government may appoint such other officers with such designations as it thinks fit for the purpose of discharging, under the superintendence and direction of the Registrar, such functions of the Registrar under this Act as he may from time to time authorise them to discharge.
Section 4. Power of Registrar to withdraw or transfer cases, etc.
Without prejudice to the generality of the provisions of such-section (2) of section 3, the Registrar may, by order in writing and for reasons to be recorded therein, withdraw any matter pending before an officer appointed under the said sub-section (2) and deal with such matter himself either de novo or from the stage it was so withdrawn or transfer the same to another officer so appointed who may, subject to special directions in the order of transfer, proceed with the matter either de novo or from the stage it was so transferred.
Section 5. Trade Marks Registry and offices thereof.
(1) For the purposes of this Act, there shall be a trade marks registry and the Trade Marks Registry established under the Trade and Merchandise Marks Act, 1958 (43 of 1958) shall be the Trade Marks Registry under this Act.
(2) The head office of the Trade Marks Registry shall be at such place as the Central Government may specify, and for the purpose of facilitating the registration of trade marks, there may be established at such places as the Central Government may think fit branch offices of the Trade Marks Registry.
(3) The Central Government may, by notification in the Official Gazette, define the territorial limits within which an office of the Trade Marks Registry may exercise its functions.
(4) There shall be a seal of the Trade Marks Registry.
Section 6. The Register of Trade Marks.
(1) For the purposes of this Act, a record called the Register of Trade Marks shall be kept at the head office of the Trade Marks Registry, wherein shall be entered all registered trade marks with the names, addresses and description of the proprietors, notifications of assignment and transmissions, the names, addresses and descriptions of registered users, conditions, limitations and such other matter relating to registered trade marks as may be prescribed.
(2) Notwithstanding anything contained in sub-section (1), it shall be lawful for the Registrar to keep the records wholly or partly in computer floppies, diskettes or in any other electronic form subject to such safeguards as may be prescribed.
(3) Where such register is maintained wholly or partly on computer under sub-section (2) any reference in this Act to entry in the register shall be construed as the reference to any entry as maintained on computer or in any other electronic form.
(4) No notice of any trust, express or implied or constructive, shall be entered in the register and no such notice shall be receivable by the Registrar.
(5) The register shall be kept under the control and management of the Registrar.
(6) There shall be kept at each branch office of the Trade Marks Registry a copy of the register and such of the other documents mentioned in section 148 as the Central Government may, by notification in the Official Gazette, direct.
(7) The Register of Trade Marks, both Part A and Part B, existing at the commencement of this Act, shall be incorporated in and form part of the register under this Act.
Section 7. Classification of goods and services.
(1) The Registrar shall classify goods and services, as far as may be, in accordance with the International classification of goods and services for the purposes of registration of trade marks.
(2) Any question arising as to the class within which any goods or services falls shall be determined by the Registrar whose decision shall be final.
Section 8. Publication of alphabetical index.
(1) The Registrar may publish in the prescribed manner an alphabetical index of classification of goods and services referred to in section 7.
(2) Where any goods or services are not specified in the alphabetical index of goods and services published under sub-section (1), the classification of goods or services shall be determined by the Registrar in accordance with sub-section (2) of section 7.
Section 9. Absolute grounds for refusal of registration.
(1) The trade marks—
(a) which are devoid of any distinctive character, that is to say, not capable of distinguishing the goods or services of one person from those of another person;
(b) which consist exclusively of marks or indications which may serve in trade to designate the kind, quality, quantity, intended purpose, values, geographical origin or the time of production of the goods or rendering of the service or other characteristics of the goods or service;
(c) which consist exclusively of marks or indications which have become customary in the current language or in the bona fide and established practices of the trade,
shall not be registered :
Provided that a trade mark shall not be refused registration if before the date of application for registration it has acquired a distinctive character as a result of the use made of it or is a well-known trade mark.
(2) A mark shall not be registered as a trade mark if—
(a) it is of such nature as to deceive the public or cause confusion;
(b) it contains or comprises of any matter likely to hurt the religious susceptibilities of any class or section of the citizens of India;
(c) it comprises or contains scandalous or obscene matter;
(d) its use is prohibited under the Emblems and Names (Prevention of Improper Use) Act, 1950 (12 of 1950).
(3) A mark shall not be registered as a trade mark if it consists exclusively of—
(a) the shape of goods which results from the nature of the goods themselves; or
(b) the shape of goods which is necessary to obtain a technical result; or
(c) the shape which gives substantial value to the goods.
Explanation.—
For the purposes of this section, the nature of goods or services in relation to which the trade mark is used or proposed to be used shall not be a ground for refusal of registration.
Section 10. Limitation as to colour.
(1) A trade mark may be limited wholly or in part to any combination of colours and any such limitation shall be taken into consideration by the tribunal having to decide on the distinctive character of the trade mark.
(2) So far as a trade mark is registered without limitation of colour, it shall be deemed to be registered for all colours.
Section 11. Relative grounds for refusal of registration.
(1) Save as provided in section 12, a trade mark shall not be registered if, because of—
(a) its identity with an earlier trade mark and similarity of goods or services covered by the trade mark; or
(b) its similarity to an earlier trade mark and the identity or similarity of the goods or services covered by the trade mark,
there exists a likelihood of confusion on the part of the public, which includes the likelihood of association with the earlier trade mark.
(2) A trade mark which—
(a) is identical with or similar to an earlier trade mark; and
(b) is to be registered for goods or services which are not similar to those for which the earlier trade mark is registered in the name of a different proprietor,
shall not be registered, if or to the extent, the earlier trade mark is a well-known trade mark in India and the use of the later mark without due cause would take unfair advantage of or be detrimental to the distinctive character or repute of the earlier trade mark.
(3) A trade mark shall not be registered if, or to the extent that, its use in India is liable to be prevented—
(a) by virtue of any law in particular the law of passing off protecting an unregistered trade mark used in the course of trade; or
(b) by virtue of law of copyright.
(4) Nothing in this section shall prevent the registration of a trade mark where the proprietor of the earlier trade mark or other earlier right consents to the registration, and in such case the Registrar may register the mark under special circumstances under section 12.
Explanation.—For the purposes of this section, earlier trade mark means—
(a) a registered trade mark or convention application referred to in section 154 which has a date of application earlier than that of the trade mark in question, taking account, where appropriate, of the priorities claimed in respect of the trade marks;
(b) a trade mark which, on the date of the application for registration of the trade mark in question, or where appropriate, of the priority claimed in respect of the application, was entitled to protection as a well-known trade mark.
(5) A trade mark shall not be refused registration on the grounds specified in sub-sections (2) and (3), unless objection on any one or more of those grounds is raised in opposition proceedings by the proprietor of the earlier trade mark.
(6) The Registrar shall, while determining whether a trade mark is a well-known trade mark, take into account any fact which he considers relevant for determining a trade mark as a well-known trade mark including—
(i) the knowledge or recognition of that trade mark in the relevant section of the public including knowledge in India obtained as a result of promotion of the trade mark;
(ii) the duration, extent and geographical area of any use of that trade mark;
(iii) the duration, extent and geographical area of any promotion of the trade mark, including advertising or publicity and presentation, at fairs or exhibition of the goods or services to which the trade mark applies;
(iv) the duration and geographical area of any registration of or any application for registration of that trade mark under this Act to the extent they reflect the use or recognition of the trade mark;
(v) the record of successful enforcement of the rights in that trade mark; in particular, the extent to which the trade mark has been recognised as a well-known trade mark by any court or Registrar under that record.
(7) The Registrar shall, while determining as to whether a trade mark is known or recognised in a relevant section of the public for the purposes of sub-section (6), take into account—
(i) the number of actual or potential consumers of the goods or services;
(ii) the number of persons involved in the channels of distribution of the goods or services;
(iii) the business circles dealing with the goods or services,
to which that trade mark applies.
(8) Where a trade mark has been determined to be well-known in at least one relevant section of the public in India by any court or Registrar, the Registrar shall consider that trade mark as a well-known trade mark for registration under this Act.
(9) The Registrar shall not require as a condition, for determining whether a trade mark is a well-known trade mark, any of the following, namely:—
(i) that the trade mark has been used in India;
(ii) that the trade mark has been registered;
(iii) that the application for registration of the trade mark has been filed in India;
(iv) that the trade mark—
(a) is well known in; or
(b) has been registered in; or
(c) in respect of which an application for registration has been filed in, any jurisdiction other than India; or
(v) that the trade mark is well-known to the public at large in India.
(10) While considering an application for registration of a trade mark and opposition filed in respect thereof, the Registrar shall—
(i) protect a well-known trade mark against the identical or similar trade marks;
(ii) take into consideration the bad faith involved either of the applicant or the opponent affecting the right relating to the trade mark.
(11) Where a trade mark has been registered in good faith disclosing the material informations to the Registrar or where right to a trade mark has been acquired through use in good faith before the commencement of this Act, then, nothing in this Act shall prejudice the validity of the registration of that trade mark or right to use that trade mark on the ground that such trade mark is identical with or similar to a well-known trade mark.
Section 12. Registration in the case of honest concurrent use, etc.
In the case of honest concurrent use or of other special circumstances which in the opinion of the Registrar, make it proper so to do, he may permit the registration by more than one proprietor of the trade marks which are identical or similar (whether any such trade mark is already registered or not) in respect of the same or similar goods or services, subject to such conditions and limitations, if any, as the Registrar may think fit to impose.
Section 13. Prohibition of registration of names of chemical elements or international non-proprietary names
No word—
(a) which is the commonly used and accepted name of any single chemical element or any single chemical compound (as distinguished from a mixture) in respect of a chemical substance or preparation, or
(b) which is declared by the World Health Organisation and notified in the prescribed manner by the Registrar from time to time, as an international non-proprietary name or which is deceptively similar to such name,
shall be registered as a trade mark and any such registration shall be deemed for the purpose of section 57 to be an entry made in the register without sufficient cause or an entry wrongly remaining on the register, as the circumstances may require.
Section 14. Use of names and representations of living persons or persons recently dead.
Where an application is made for the registration of a trade mark which falsely suggests a connection with any living person, or a person whose death took place within twenty years prior to the date of application for registration of the trade mark, the Registrar may, before he proceeds with the application, require the applicant to furnish him with the consent in writing of such living person or, as the case may be, of the legal representative of the deceased person to the connection appearing on the trade mark, and may refuse to proceed with the application unless the applicant furnishes the registrar with such consent.
Section 15. Registration of parts of trade marks and of trade marks as a series.
(1) Where the proprietor of a trade mark claims to be entitled to the exclusive use of any part thereof separately, he may apply to register the whole and the part as separate trade marks.
(2) Each such separate trade mark shall satisfy all the conditions applying to and have all the incidents of, an independent trade mark.
(3) Where a person claiming to be the proprietor of several trade marks in respect of the same or similar goods or services or description of goods or description of services, which, while resembling each other in the material particulars thereof, yet differ in respect of—
(a) statement of the goods or services in relation to which they are respectively used or proposed to be used; or
(b) statement of number, price, quality or names of places; or
(c) other matter of a non-distinctive character which does not substantially affect the identity of the trade mark; or
(d) colour,
seeks to register those trade marks, they may be registered as a series in one registration.
Section 16. Registration of trade marks as associated trade marks.
(1) Where a trade mark which is registered, or is the subject of an application for registration, in respect of any goods or services is identical with another trade mark which is registered, or is the subject of an application for registration, in the name of the same proprietor in respect of the same goods or description of goods or same services or description of services or so nearly resembles it as to be likely to deceive or cause confusion if used by a person other than the proprietor, the Registrar may, at any time, require that the trade marks shall be entered on the register as associated trade marks.
(2) Where there is an identity or near resemblance of marks that are registered, or are the subject of applications for registration in the name of the same proprietor, in respect of goods and in respect of services which are associated with those goods or goods of that description and with those services or services of that description, sub-section (1) shall apply as it applies as where there is an identity or near resemblance of marks that are registered, or are the subject of applications for registration, in the name of the same proprietor in respect of the same goods or description of goods or same services or description of services.
(3) Where a trade mark and any part thereof are, in accordance with the provisions of sub-section (1) of section 15, registered as separate trade marks in the name of the same proprietor, they shall be deemed to be, and shall be registered as, associated trade marks.
(4) All trade marks registered in accordance with the provisions of sub-section (3) of section 15 as a series in one registration shall be deemed to be, and shall be registered as, associated trade marks.
(5) On application made in the prescribed manner by the registered proprietor of two or more trade marks registered as associated trade marks, the Registrar may dissolve the association as respects any of them if he is satisfied that there would be no likelihood of deception or confusion being caused if that trade mark were used by any other person in relation to any of the goods or services or both in respect of which it is registered, and may amend the register accordingly.
Section 17. Effect of registration of parts of a mark.
(1) When a trade mark consists of several matters, its registration shall confer on the proprietor exclusive right to the use of the trade mark taken as a whole.
(2) Notwithstanding anything contained in sub-section (1), when a trade mark—
(a) contains any part—
(i) which is not the subject of a separate application by the proprietor for registration as a trade mark; or
(ii) which is not separately registered by the proprietor as a trade mark; or
(b) contains any matter which is common to the trade or is otherwise of a non-distinctive character,
the registration thereof shall not confer any exclusive right in the matter forming only a part of the whole of the trade mark so registered.
Chapter 3 Procedure for and Duration of Registration
Section 18. Application for registration.
(1) Any person claiming to be the proprietor of a trade mark used or proposed to be used by him, who is desirous of registering it, shall apply in writing to the Registrar in the prescribed manner for the registration of his trade mark.
(2) A single application may be made for registration of a trade mark for different classes of goods and services and fee payable therefor shall be in respect of each such class of goods or services.
(3) Every application under sub-section (1) shall be filed in the office of the Trade Marks Registry within whose territorial limits the principal place of business in India of the applicant or in the case of joint applicants the principal place of business in India of the applicant whose name is first mentioned in the application as having a place of business in India, is situate:
Provided that where the applicant or any of the joint applicants does not carry on business in India, the application shall be filed in the office of the Trade Marks Registry within whose territorial limits the place mentioned in the address for service in India as disclosed in the application, is situate.
(4) Subject to the provisions of this Act, the Registrar may refuse the application or may accept it absolutely or subject to such amendments, modifications, conditions or limitations, if any, as he may think fit.
(5) In the case of a refusal or conditional acceptance of an application, the Registrar shall record in writing the grounds for such refusal or conditional acceptance and the materials used by him in arriving at his decision.
Section 19. Withdrawal of acceptance.
Where, after the acceptance of an application for registration of a trade mark but before its registration, the Registrar is satisfied—
(a) that the application has been accepted in error; or
(b) that in the circumstances of the case the trade mark should not be registered or should be registered subject to conditions or limitations or to conditions additional to or different from the conditions or limitations subject to which the application has been accepted,
the Registrar may, after hearing the applicant if he so desires, withdraw the acceptance and proceed as if the application had not been accepted.
Section 20. Advertisement of application.
(1) When an application for registration of a trade mark has been accepted whether absolutely or subject to conditions or limitations, the Registrar shall, as soon as may be after acceptance, cause the application as accepted together with the conditions or limitations, if any, subject to which it has been accepted, to be advertised in the prescribed manner:
Provided that the Registrar may cause the application to be advertised before acceptance if it relates to a trade mark to which sub-section (1) of section 9 and sub-sections (1) and (2) of section 11 apply, or in any other case where it appears to him that it is expedient by reason of any exceptional circumstances so to do.
(2) Where—
(a) an application has been advertised before acceptance under sub-section (1); or
(b) after advertisement of an application,—
(i) an error in the application has been corrected; or
(ii) the application has been permitted to be amended under
section 22,
the Registrar may in his discretion cause the application to be advertised again or in any case falling under clause (b) may, instead of causing the application to be advertised again, notify in the prescribed manner the correction or amendment made in the application.
Section 21. Opposition to registration.
(1) Any person may, within three months from the date of the advertisement or re-advertisement of an application for registration or within such further period, not exceeding one month in the aggregate, as the Registrar, on application made to him in the prescribed manner and on payment of the prescribed fee, allows, give notice in writing in the prescribed manner to the Registrar, of opposition to the registration.
(2) The Registrar shall serve a copy of the notice on the applicant for registration and, within two months from the receipt by the applicant of such copy of the notice of opposition, the applicant shall send to the Registrar in the prescribed manner a counter-statement of the grounds on which he relies for his application, and if he does not do so he shall be deemed to have abandoned his application.
(3) If the applicant sends such counter-statement, the Registrar shall serve a copy thereof on the person giving notice of opposition.
(4) Any evidence upon which the opponent and the applicant may rely shall be submitted in the prescribed manner and within the prescribed time to the Registrar, and the Registrar shall give an opportunity to them to be heard, if they so desire.
(5) The Registrar shall, after hearing the parties, if so required, and considering the evidence, decide whether and subject to what conditions or limitations, if any, the registration is to be permitted, and may take into account a ground of objection whether relied upon by the opponent or not.
(6) Where a person giving notice of opposition or an applicant sending a counter-statement after receipt of a copy of such notice neither resides nor carries on business in India, the Registrar may require him to give security for the costs of proceedings before him, and in default of such security being duly given, may treat the opposition or application, as the case may be, as abandoned.
(7) The Registrar may, on request, permit correction of any error in, or any amendment of, a notice of opposition or a counter-statement on such terms as he thinks just.
Section 22. Correction and amendment.
The Registrar may, on such terms as he thinks just, at any time, whether before or after acceptance of an application for registration under section 18, permit the correction of any error in or in connection with the application or permit an amendment of the application:
Provided that if an amendment is made to a single application referred to in sub-section (2) of section 18 involving division of such application into two or more applications, the date of making of the initial application shall be deemed to be the date of making of the divided applications so divided.
Section 23. Registration.
(1) Subject to the provisions of section 19, when an application for registration of a trade mark has been accepted and either—
(a) the application has not been opposed and the time for notice of opposition has expired; or
(b) the application has been opposed and the opposition has been decided in favour of the applicant,
the Registrar shall, unless the Central Government otherwise directs, register the said trade mark and the trade mark when registered shall be registered as of the date of the making of the said application and that date shall, subject to the provisions of section 154, be deemed to be the date of registration.
(2) On the registration of a trade mark, the Registrar shall issue to the applicant a certificate in the prescribed form of the registration thereof, sealed with the seal of the Trade Marks Registry.
(3) Where registration of a trade mark is not completed within twelve months from the date of the application by reason of default on the part of the applicant, the Registrar may, after giving notice to the applicant in the prescribed manner, treat the application as abandoned unless it is completed within the time specified in that behalf in the notice.
(4) The Registrar may amend the register or a certificate of registration for the purpose of correcting a clerical error or an obvious mistake.
Section 24. Jointly owned trade marks.
(1) Save as provided in sub-section (2), nothing in this Act shall authorise the registration of two or more persons who use a trade mark independently, or propose so to use it, as joint proprietors thereof.
(2) Where the relations between two or more persons interested in a trade mark are such that no one of them is entitled as between himself and the other or others of them to use it except—
(a) on behalf of both or all of them; or
(b) in relation to an article or service with which both or all of them are connected in the course of trade,
those persons may be registered as joint proprietors of the trade mark, and this Act shall have effect in relation to any rights to the use of the trade mark vested in those persons as if those rights had been vested in a single person.
Section 25. Duration, renewal, removal and restoration of registration.
(1) The registration of a trade mark, after the commencement of this Act, shall be for a period of ten years, but may be renewed from time to time in accordance with the provisions of this section.
(2) The Registrar shall, on application made by the registered proprietor of a trade mark in the prescribed manner and within the prescribed period and subject to payment of the prescribed fee, renew the registration of the trade mark for a period of ten years from the date of expiration of the original registration or of the last renewal of registration, as the case may be (which date is in this section referred to as the expiration of the last registration).
(3) At the prescribed time before the expiration of the last registration of a trade mark the Registrar shall send notice in the prescribed manner to the registered proprietor of the date of expiration and the conditions as to payment of fees and otherwise upon which a renewal of registration may be obtained, and, if at the expiration of the time prescribed in that behalf those conditions have not been duly complied with the Registrar may remove the trade mark from the register:
Provided that the Registrar shall not remove the trade mark from the register if an application is made in the prescribed form and the prescribed fee and surcharge is paid within six months from the expiration of the last registration of the trade mark and shall renew the registration of the trade mark for a period of ten years under sub-section (2).
(4) Where a trade mark has been removed from the register for non-payment of the prescribed fee, the Registrar shall, after six months and within one year from the expiration of the last registration of the trade mark, on receipt of an application in the prescribed form and on payment of the prescribed fee, if satisfied that it is just so to do, restore the trade mark to the register and renew the registration of the trade mark either generally or subject to such conditions or limitations as he thinks fit to impose, for a period of ten years from the expiration of the last registration.
Section 26. Effect of removal from register for failure to pay fee for renewal.
Where a trade mark has been removed from the register for failure to pay the fee for renewal, it shall nevertheless, for the purpose of any application for the registration of another trade mark during one year, next after the date of the removal, be deemed to be a trade mark already on the register, unless the tribunal is satisfied either—
(a) that there has been no bona fide trade use of the trade mark which
has been removed during the two years immediately preceding its removal; or
(b) that no deception or confusion would be likely to arise from the use of the trade mark which is the subject of the application for registration by reason of any previous use of the trade mark which has been removed.
Chapter 4 Effect of Registration
Section 27. No action for infringement of unregistered trade mark.
(1) No person shall be entitled to institute any proceeding to prevent, or to recover damages for, the infringement of an unregistered trade mark.
(2) Nothing in this Act shall be deemed to affect rights of action against any person for passing off goods or services as the goods of another person or as services provided by another person, or the remedies in respect thereof.
Section 28. Rights conferred by registration.
(1) Subject to the other provisions of this Act, the registration of a trade mark shall, if valid, give to the registered proprietor of the trade mark the exclusive right to the use of the trade mark in relation to the goods or services in respect of which the trade mark is registered and to obtain relief in respect of infringement of the trade mark in the manner provided by this Act.
(2) The exclusive right to the use of a trade mark given under sub-section (1) shall be subject to any conditions and limitations to which the registration is subject.
(3) Where two or more persons are registered proprietors of trade marks, which are identical with or nearly resemble each other, the exclusive right to the use of any of those trade marks shall not (except so far as their respective rights are subject to any conditions or limitations entered on the register) be deemed to have been acquired by any one of those persons as against any other of those persons merely by registration of the trade marks but each of those persons has otherwise the same rights as against other persons (not being registered users using by way of permitted use) as he would have if he were the sole registered proprietor.
Section 29. Infringement of registered trade marks.
(1) A registered trade mark is infringed by a person who, not being a registered proprietor or a person using by way of permitted use, uses in the course of trade, a mark which is identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered and in such manner as to render the use of the mark likely to be taken as being used as a trade mark.
(2) A registered trade mark is infringed by a person who, not being a registered proprietor or a person using by way of permitted use, uses in the course of trade, a mark which because of—
(a) its identity with the registered trade mark and the similarity of the goods or services covered by such registered trade mark; or
(b) its similarity to the registered trade mark and the identity or similarity of the goods or services covered by such registered trade mark; or
(c) its identity with the registered trade mark and the identity of the goods or services covered by such registered trade mark,
is likely to cause confusion on the part of the public, or which is likely to have an association with the registered trade mark.
(3) In any case falling under clause (c) of sub-section (2), the court shall presume that it is likely to cause confusion on the part of the public.
(4) A registered trade mark is infringed by a person who, not being a registered proprietor or a person using by way of permitted use, uses in the course of trade, a mark which—
(a) is identical with or similar to the registered trade mark; and
(b) is used in relation to goods or services which are not similar to those for which the trade mark is registered; and
(c) the registered trade mark has a reputation in India and the use of the mark without due cause takes unfair advantage of or is detrimental to, the distinctive character or repute of the registered trade mark.
(5) A registered trade mark is infringed by a person if he uses such registered trade mark, as his trade name or part of his trade name, or name of his business concern or part of the name, of his business concern dealing in goods or services in respect of which the trade mark is registered.
(6) For the purposes of this section, a person uses a registered mark, if, in particular, he—
(a) affixes it to goods or the packaging thereof;
(b) offers or exposes goods for sale, puts them on the market, or stocks them for those purposes under the registered trade mark, or offers or supplies services under the registered trade mark;
(c) imports or exports goods under the mark; or
(d) uses the registered trade mark on business papers or in advertising.
(7) A registered trade mark is infringed by a person who applies such registered trade mark to a material intended to be used for labelling or packaging goods, as a business paper, or for advertising goods or services, provided such person, when he applied the mark, knew or had reason to believe that the application of the mark was not duly authorised by the proprietor or a licensee.
(8) A registered trade mark is infringed by any advertising of that trade mark if such advertising—
(a) takes unfair advantage of and is contrary to honest practices in industrial or commercial matters; or
(b) is detrimental to its distinctive character; or
(c) is against the reputation of the trade mark.
(9) Where the distinctive elements of a registered trade mark consist of or include words, the trade mark may be infringed by the spoken use of those words as well as by their visual representation and reference in this section to the use of a mark shall be construed accordingly.
Section 30. Limits on effect of registered trade mark.
(1) Nothing in section 29 shall be construed as preventing the use of a registered trade mark by any person for the purposes of identifying goods or services as those of the proprietor provided the use—
(a) is in accordance with honest practices in industrial or commercial matters, and
(b) is not such as to take unfair advantage of or be detrimental to the distinctive character or repute of the trade mark.
(2) A registered trade mark is not infringed where—
(a) the use in relation to goods or services indicates the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of services or other characteristics of goods or services;
(b) a trade mark is registered subject to any conditions or limitations, the use of the trade mark in any manner in relation to goods to be sold or otherwise traded in, in any place, or in relation to goods to be exported to any market or in relation to services for use or available or acceptance in any place or country outside India or in any other circumstances, to which, having regard to those conditions or limitations, the registration does not extend;
(c) the use by a person of a trade mark—
(i) in relation to goods connected in the course of trade with the proprietor or a registered user of the trade mark if, as to those goods or a bulk or which they form part, the registered proprietor or the registered user conforming to the permitted use has applied the trade mark and has not subsequently removed or obliterated it, or has at any time expressly or impliedly consented to the use of the trade mark; or
(ii) in relation to services to which the proprietor of such mark or of a registered user conforming to the permitted use has applied the mark, where the purpose and effect of the use of the mark is to indicate, in accordance with the fact, that those services have been performed by the proprietor or a registered user of the mark;
(d) the use of a trade mark by a person in relation to goods adapted to form part of, or to be accessory to, other goods or services in relation to which the trade mark has been used without infringement of the right given by registration under this Act or might for the time being be so used, if the use of the trade mark is reasonably necessary in order to indicate that the goods or services are so adapted, and neither the purpose nor the effect of the use of the trade mark is to indicate, otherwise than in accordance with the fact, a connection in the course of trade between any person and the goods or services, as the case may be;
(e) the use of a registered trade mark, being one of two or more trade marks registered under this Act which are identical or nearly resemble each other, in exercise of the right to the use of that trade mark given by registration under this Act.
(3) Where the goods bearing a registered trade mark are lawfully acquired by a person, the sale of the goods in the market or otherwise dealing in those goods by that person or by a person claiming under or through him is not infringement of a trade by reason only of—
(a) the registered trade mark having been assigned by the registered proprietor to some other person, after the acquisition of those goods; or
(b) the goods having been put on the market under the registered trade mark by the proprietor or with his consent.
(4) Sub-section (3) shall not apply where there exists legitimate reasons for the proprietor to oppose further dealings in the goods in particular, where the condition of the goods, has been changed or impaired after they have been put on the market.
Section 31. Registration to be prima facie evidence of validity.
(1) In all legal proceedings relating to a trade mark registered under this Act (including applications under section 57), the original registration of the trade mark and of all subsequent assignments and transmissions of the trade mark shall be prima facie evidence of the validity thereof.
(2) In all legal proceedings as aforesaid a registered trade mark shall not be held to be invalid on the ground that it was not a registrable trade mark under section 9 except upon evidence of distinctiveness and that such evidence was not submitted to the Registrar before registration, if it is proved that the trade mark had been so used by the registered proprietor or his predecessor in title as to have become distinctive at the date of registration.
Section 32. Protection of registration on ground of distinctiveness in certain cases.
Where a trade mark is registered in breach of sub-section (1) of section 9, it shall not be declared invalid if, in consequence of the use which has been made of it, it has after registration and before commencement of any legal proceedings challenging the validity of such registration, acquired a distinctive character in relation to the goods or services for which it is registered.
Section 33. Effect of acquiescence.
(1) Where the proprietor of an earlier trade mark has acquiesced for a continuous period of five years in the use of a registered trade mark, being aware of that use, he shall no longer be entitled on the basis of that earlier trade mark—
(a) to apply for a declaration that the registration of the later trade mark is invalid, or
(b) to oppose the use of the later trade mark in relation to the goods or services in relation to which it has been so used,unless the registration of the later trade mark was not applied in good faith.
(2) Where sub-section (1) applies, the proprietor of the later trade mark is not entitled to oppose the use of the earlier trade mark, or as the case may be, the exploitation of the earlier right, notwithstanding that the earlier trade mark may no longer be invoked against his later trade mark.
Section 34. Saving for vested rights.
Nothing in this Act shall entitle the proprietor or a registered user of registered trade mark to interfere with or restrain the use by any person of a trade mark identical with or nearly resembling it in relation to goods or services in relation to which that person or a predecessor in title of his has continuously used that trade mark from a date prior—
(a) to the use of the first-mentioned trade mark in relation to those goods or services be the proprietor or a predecessor in title of his; or
(b) to the date of registration of the first-mentioned trade mark in respect of those goods or services in the name of the proprietor of a predecessor in title of his;
whichever is the earlier, and the Registrar shall not refuse (on such use being proved), to register the second mentioned trade mark by reason only of the registration of the first mentioned trade mark.
Section 35. Saving for use of name, address or description of goods or services.
Nothing in this Act shall entitle the proprietor or a registered user of a registered trade mark to interfere with any bona fide use by a person of his own name or that of his place of business, or of the name, or of the name of the place of business, of any of his predecessors in business, or the use by any person of any bona fide description of the character or quality of his goods or services.
Section 36. Saving for words used as name or description of an article or substance or service.
(1) The registration of a trade mark shall not be deemed to have become invalid by reason only of any use after the date of the registration of any word or words which the trade mark contains or of which it consists as the name or description of an article or substance or service:
Provided that, if it is proved either—
(a) that there is a well known and established use of the said word as the name or description of the article or substance or service by a person or persons carrying on trade therein, not being used in relation to goods or services connected in the course of trade with the proprietor or a registered user of the trade mark or (in the case of a certification trade mark) in relation to goods or services certified by the proprietor; or
(b) that the article or substance was formerly manufactured under a patent that a period of two years or more after the cesser of the patent has elapsed and that the said word is the only practicable name or description of the article or substance,
the provisions of sub-section (2) shall apply.
(2) Where the facts mentioned in clause (a) or clause (b) of the proviso to sub-section (1) are proved with respect to any words, then,—
(a) for the purpose of any proceedings under section 57 if the trade mark consists solely of such words, the registration of the trade mark, so far as regards registration in respect of the article or substance in question or of any goods of the same description, or of the services or of any services of the same description, as the case requires, shall be deemed to be an entry wrongly remaining on the register;
(b) for the purposes of any other legal proceedings relating to the trade mark,—
(i) if the trade mark consists solely of such words, all rights of the proprietor under this Act or any other law to the use of the trade mark; or
(ii) if the trade mark contains such words and other matter, all such right of the proprietor to the use of such words,
in relation to the article or substance or to any goods of the same description, or to the service or to any services of the same description, as the case requires, shall be deemed to have ceased on the date on which the use mentioned in clause (a) of the proviso to sub-section (1) first became well known and established or at the expiration of the period of two years mentioned in clause (b) of the said proviso.
Chapter 5 Assignment and Transmission
Section 37. Power of registered proprietor to assign and give receipts.
The person for the time being entered in the register as proprietor of a trade mark shall, subject to the provisions of this Act and to any rights appearing from the register to be vested in any other person, have power to assign the trade mark, and to give effectual receipts for any consideration for such assignment.
Section 38. Assignability and transmissibility of registered trade marks.
Notwithstanding anything in any other law to the contrary, a registered trade mark shall, subject to the provisions of this Chapter, be assignable and transmissible, whether with or without the goodwill of the business concerned and in respect either of all the goods or services in respect of which the trade mark is registered or of some only of those goods or services.
Section 39. Assignability and transmissibility of unregistered trade marks.
An unregistered trade mark may be assigned or transmitted with or without the goodwill of the business concerned.
Section 40. Restriction on assignment or transmission where multiple exclusive rights would be created.
(1) Notwithstanding anything in sections 38 and 39, a trade mark shall not be assignable or transmissible in a case in which as a result of the assignment or transmission there would in the circumstances subsist, whether under this Act or any other law, exclusive rights in more than one of the persons concerned to the use, in relation to—
(a) same goods or services;
(b) same description of goods or services;
(c) goods or services or description of goods or services which are associated with each other,
of trade marks nearly resembling each other or of identical trade mark, if having regard to the similarity of the goods and services and to the similarity of the trade marks, the use of the trade marks in exercise of those rights would be likely to deceive or cause confusion:
Provided that an assignment or transmission shall not be deemed to be invalid under this sub-section if the exclusive rights subsisting as a result thereof in the persons concerned respectively are, having regard to limitations imposed thereon, such as not to be exercisable by two or more of those persons in relation to goods to be sold, or otherwise traded in, within India otherwise than for export therefrom, or in relation to goods to be exported to the same market outside India or in relation to services for use at any place in India or any place outside India in relation to services available for acceptance in India.
(2) The proprietor of a registered trade mark who proposes to assign it may submit to the Registrar in the prescribed manner a statement of case setting out the circumstances and the Registrar may issue to him a certificate stating whether, having regard to the similarity of the goods or services and of the trade marks referred to in the case, the proposed assignment would or would not be invalid under sub-section (1), and a certificate so issued shall, subject to appeal and unless it is shown that the certificate was obtained by fraud or misrepresentation, be conclusive as to the validity or invalidity under sub-section (1) of the assignment insofar as such validity or invalidity depends upon the facts set out in the case, but, as regards a certificate in favour of validity, only if application for the registration under section 45 of the title of the person becoming entitled is made within six months from the date on which the certificate is issued.
Section 42. Assignability and transmissibility of certification trade marks.
A certification trade mark shall not be assignable or transmissible otherwise than with the consent of the Registrar, for which application shall be made in writing in the prescribed manner.
Section 43. Assignability and transmissibility of certification trade marks.
A certification trade mark shall not be assignable or transmissible otherwise than with the consent of the Registrar, for which application shall be made in writing in the prescribed manner.
Section 44. Assignability and transmissibility of associated trade marks.
Associated trade marks shall be assignable and transmissible only as a whole and not separately, but, subject to the provisions of this Act, they shall, for all other purposes, be deemed to have been registered as separate trade marks.
Section 45. Registration of assignments and transmissions.
(1) Where a person becomes entitled by assignment or transmission to a registered trade mark, he shall apply in the prescribed manner to the Registrar to register his title, and the Registrar shall, on receipt of the application and on proof of title to his satisfaction, register him as the proprietor of the trade mark in respect of the goods or services in respect of which the assignment or transmission has effect, and shall cause particulars of the assignment or transmission to be entered on the register:
Provided that where the validity of an assignment or transmission is in dispute between the parties, the Registrar may refuse to register the assignment or transmission until the rights of the parties have been determined by a competent court.
(2) Except for the purpose of an application before the Registrar under sub-section (1) or an appeal from an order thereon, or an application under section 57 or an appeal from an order thereon, a document or instrument in respect of which no entry has been made in the register in accordance with sub-section (1), shall not be admitted in evidence by the Registrar or the Appellate Board or any court in proof of title to the trade mark by assignment or transmission unless the Registrar or the Appellate Board or the court, as the case may be, otherwise directs.
Chapter 6 Use of Trade Marks and Registered Users
Section 46. Proposed use of trade mark by company to be formed, etc.
(1) No application for the registration of a trade mark in respect of any goods or services shall be refused nor shall permission for such registration be withheld, on the ground only that it appears that the applicant does not use or propose to use the trade mark if the Registrar is satisfied that—
(a) a company is about to be formed and registered under the Companies Act, 1956 (1 of 1956) and that the applicant intends to assign the trade mark to that company with a view to the use thereof in relation to those goods or services by the company, or
(b) the proprietor intends it to be used by a person, as a registered user after the registration of the trade mark.
(2) The provisions of section 47 shall have effect, in relation to a trade mark registered under the powers conferred by this sub-section, as if for the reference, in clause (a) of sub-section (1) of that section, to the intention on the part of an applicant for registration that a trade mark should be used by him there were substituted a reference to the intention on his part that it should be used by the company or registered user concerned.
(3) The tribunal may, in a case to which sub-section (1) applies, require the applicant to give security for the costs of any proceedings relating to any opposition or appeal, and in default of such security being duly given, may treat the application as abandoned.
(4) Where in a case to which sub-section (1) applies, a trade mark in respect of any goods or services is registered in the name of an applicant who, relies on intention to assign the trade mark to a company, then, unless within such period as may be prescribed or within such further period not exceeding six months as the Registrar may, on application being made to him in the prescribed manner, allow, the company has been registered as the proprietor of the trade mark in respect of those goods or services, the registration shall cease to have effect in respect thereof at the expiration of that period and the Registrar shall amend the register accordingly.
Section 47. Removal from register and imposition of limitations on ground of non-use.
(1) A registered trade mark may be taken off the register in respect of the goods or services in respect of which it is registered on application made in the prescribed manner to the Registrar or the Appellate Board by any person aggrieved on the ground either—
(a) that the trade mark was registered without any bona fide intention on
the part of the applicant for registration that it should be used in relation to those goods or services by him or, in a case to which the provisions of section 46 apply, by the company concerned or the registered user, as the case may be, and that there has, in fact, been no bona fide use of the trade mark in relation to those goods or services by any proprietor thereof for the time being up to a date three months before the date of the application; or
(b) that up to a date three months before the date of the application, a continuous period of five years from the date on which the trade mark is actually entered in the register or longer had elapsed during which the trade mark was registered and during which there was no bona fide use thereof in relation to those goods or services by any proprietor thereof for the time being:
Provided that except where the applicant has been permitted under section 12 to register an identical or nearly resembling trade mark in respect of the goods or services in question, or where the tribunal is of opinion that he might properly be permitted so to register such a trade mark, the tribunal may refuse an application under clause (a) or clause (b) in relation to any goods or services, if it is shown that there has been, before the relevant date or during the relevant period, as the case may be, bona fide use of the trade mark by any proprietor thereof for the time being in relation to—
(i) goods or services of the same description; or
(ii) goods or services associated with those goods or services of that description being goods or services, as the case may be, in respect of which the trade mark is registered.
(2) Where in relation to any goods or services in respect of which a trade mark is registered—
(a) the circumstances referred to in clause (b) of sub-section (1) are shown to exist so far as regards non-use of the trade mark in relation to goods to be sold, or otherwise traded in a particular place in India (otherwise than for export from India), or in relation to goods to be exported to a particular market outside India; or in relation to services for use or available for acceptance in a particular place in India or for use in a particular market outside India; and
(b) a person has been permitted under section 12 to register an identical or nearly resembling trade mark in respect of those goods, under a registration extending to use in relation to goods to be so sold, or otherwise traded in, or in relation to goods to be so exported, or in relation to services for use or available for acceptance in that place or for use in that country, or the tribunal is of opinion that he might properly be permitted so to register such a trade mark,
on application by that person in the prescribed manner to the Appellate Board or to the Registrar, the tribunal may impose on the registration of the first-mentioned trade mark such limitations as it thinks proper for securing that registration shall cease to extend to such use.
(3) An applicant shall not be entitled to rely for the purpose of clause (b) of sub-section (1) or for the purposes of sub-section (2) on any non-use of a trade mark which is shown to have been due to special circumstances in the trade, which includes restrictions on the use of the trade mark in India imposed by any law or regulation and not to any intention to abandon or not to use the trade mark in relation to the goods or services to which the application relates.
Section 48. Registered users.
(1) Subject to the provisions of section 49, a person other than the registered proprietor of a trade mark may be registered as a registered user thereof in respect of any or all of the goods or services in respect of which the trade mark is registered.
(2) The permitted use of a trade mark shall be deemed to be used by the proprietor thereof, and shall be deemed not to be used by a person other than the proprietor, for the purposes of section 47 or for any other purpose for which such use is material under this Act or any other law.
Section 49. Registration as registered user.
(1) Where it is proposed that a person should be registered as a registered user of a trade mark, the registered proprietor and the proposed registered user shall jointly apply in writing to the Registrar in the prescribed manner, and every such application shall be accompanied by—
(a) the agreement in writing or a duly authenticated copy thereof, entered into between the registered proprietor and the proposed registered user with respect to the permitted use of the trade mark; and
(b) an affidavit made by the registered proprietor or by some person authorised to the satisfaction of the Registrar to act on his behalf,—
(i) giving particulars of the relationship, existing or proposed, between the registered proprietor and the proposed registered user, including particulars showing the degree of control by the proprietor over the permitted use which their relationship will confer and whether it is a term of their relationship that the proposed registered user shall be the sole registered user or that there shall be any other restriction as to persons for whose registration as registered users application may be made;
(ii) stating the goods or services in respect of which registration is
proposed;
(iii) stating the conditions or restrictions, if any, proposed with respect to the characteristics of the goods or services, to the mode or place of permitted use, or to any other matter;
(iv) stating whether the permitted use is to be for a period or without limit of period, and, if for a period, the duration thereof; and
(c) such further documents or other evidence as may be required by the Registrar or as may be prescribed.
(2) When the requirements of sub-section (1) have been complied with, the Registrar shall register the proposed registered user in respect of the goods or services as to which he is so satisfied.
(3) The Registrar shall issue notice in the prescribed manner of the registration of a person as a registered user, to other registered users of the trade mark, if any.
(4) The Registrar shall, if so requested by the applicant, take steps for securing that information given for the purposes of an application under this section (other than matters entered in the register) is not disclosed to rivals in trade.
Section 50. Power of Registrar for variation or cancellation of registration as registered user.
(1) Without prejudice to the provisions of section 57, the registration of a person as registered user—
(a) may be varied by the Registrar as regards the goods or services in respect of which it has effect on the application in writing in the prescribed manner of the registered proprietor of the trade mark;
(b) may be cancelled by the Registrar on the application in writing in the prescribed manner of the registered proprietor or of the registered user or of any other registered user of the trade mark;
(c) may be cancelled by the Registrar on the application in writing in the prescribed manner of any person on any of the following grounds,
namely:—
(i) that the registered user has used the trade mark otherwise than in accordance with the agreement under clause (a) of sub-section (1) of section 49 or in such way as to cause or to be likely to cause, deception or confusion;
(ii) that the proprietor or the registered user misrepresented, or failed to disclose, some fact material to the application for registration which if accurately represented or disclosed would not have justified the registration of the registered user;
(iii) that the circumstances have changed since the date of registration in such a way that at the date of such application for cancellation they would not have justified registration of the registered user;
(iv) that the registration ought not to have been effected having regard to rights vested in the applicant by virtue of a contract in the performance of which he is interested;
(d) may be cancelled by the Registrar on his own motion or on the application in writing in the prescribed manner by any person, on the ground that any stipulation in the agreement between the registered proprietor and the registered user regarding the quality of the goods or services in relation to which the trade mark is to be used is either not being enforced or is not being complied with;
(e) may be cancelled by the Registrar in respect of any goods or services in relation to which the trade mark is no longer registered.
(2) The Registrar shall issue notice in the prescribed manner in respect of every application under this section to the registered proprietor and each registered user (not being the applicant) of the trade mark.
(3) The procedure for cancelling a registration shall be such as may be prescribed:
Provided that before cancelling of registration, the registered proprietor shall be given a reasonable opportunity of being heard.
Section 51. Power of Registrar to call for information relating to agreement in respect of registered users.
(1) The Registrar may, at any time during the continuance of the registration of the registered user, by notice in writing, require the registered proprietor to confirm to him within one month that the agreement filed under clause (a) of sub-section (1) of section 49 continues to be in force.
(2) If the registered proprietor fails to furnish the confirmation within one month as required under sub-section (1), the registered user shall cease to be the registered user on the day immediately after the expiry of the said period and the Registrar shall notify the same.
Section 52. Right of registered user to take proceedings against infringement.
(1) Subject to any agreement subsisting between the parties, a registered user may institute proceedings for infringement in his own name as if he were the registered proprietor, making the registered proprietor a defendant and the rights and obligations of such registered user in such case being concurrent with those of the registered proprietor.
(2) Notwithstanding anything contained in any other law, a registered proprietor so added as defendant shall not be liable for any costs unless he enters an appearance and takes part in the proceedings.
Section 53. No right of permitted user to take proceeding against infringement.
A person referred to in sub-clause (ii) of clause (r) of sub-section (1) of section 2 shall have no right to institute any proceeding for any infringement.
Section 54. Registered user not to have right of assignment or transmission.
Nothing in this Act shall confer on a registered user of a trade mark any assignable or transmissible right to the use thereof.
Explanation I.—The right of a registered user of a trade mark shall not be deemed to have been assigned or transmitted within the meaning of this section in the following cases, namely:—
(a) where the registered user being an individual enters into a partnership with any other person for carrying on the business concerned; but in any such case the firm may use the trade mark, if otherwise in force, only for so long as the registered user is a member of the firm;
(b) where the registered user being a firm subsequently undergoes a change in its constitution; but in any such case the reconstituted firm may use the trade mark, if otherwise in force, only for so long as any partner of the original firm at the time of its registration as registered user, continues to be a partner of the reconstituted firm.
Explanation II.—For the purposes of Explanation 1, “firm” has the same meaning as in the Indian Partnership Act, 1932 (9 of 1932).
Section 55. Use of one of associated or substantially identical trade marks equivalent to use of another.
(1) Where under the provisions of this Act, use of a registered trade mark is required to be proved for any purpose, the tribunal may, if and, so far as it shall think right, accept use of a registered associated trade mark, or of the trade mark with additions or alterations not substantially affecting its identity, as an equivalent for the use required to be proved.
(2) The use of the whole of a registered trade mark shall, for the purpose of this Act, be deemed to be also use of any trade mark being a part thereof and registered in accordance with sub-section (1) of section 15 in the name of the same proprietor.
(3) Notwithstanding anything in section 32, the use of part of the registered trade mark in sub-section (2) shall not be conclusive as to its evidence of distinctiveness for any purpose under this Act.
Section 56. Use of trade mark for export trade and use when form of trade connection changes.
(1) The application in India of trade mark to goods to be exported from India or in relation to services for use outside India and any other act done in India in relation to goods to be so exported or services so rendered outside India which, if done in relation to goods to be sold or services provided or otherwise traded in within India would constitute use of a trade mark therein, shall be deemed to constitute use of the trade mark in relation to those goods or services for any purpose for which such use is material under this Act or any other law.
(2) The use of a registered trade mark in relation to goods or services between which and the person using the mark any form of connection in the course of trade subsists shall not be deemed to be likely to cause deception or confusion on the ground only that the mark has been or is used in relation to goods or services between which and the said person or a predecessor in title of that person a different form of connection in the course of trade subsisted or subsists.
Chapter 7 Rectification and Correction of the Register
Section 57. Power to cancel or vary registration and to rectify the register.
(1) On application made in the prescribed manner to the Appellate Board or to the Registrar by any person aggrieved, the tribunal may make such order as it may think fit for cancelling or varying the registration of a trade mark on the ground of any contravention, or failure to observe a condition entered on the register in relation thereto.
(2) Any person aggrieved by the absence or omission from the register of any entry, or by any entry made in the register without sufficient cause, or by any entry wrongly remaining on the register, or by any error or defect in any entry in the register, may apply in the prescribed manner to the Appellate Board or to the Registrar, and the tribunal may make such order for making, expunging or varying the entry as it may think fit.
(3) The tribunal may in any proceeding under this section decide any question that may be necessary or expedient to decide in connection with the rectification of the register.
(4) The tribunal, of its own motion, may, after giving notice in the prescribed manner to the parties concerned and after giving them an opportunity of being heard, make any order referred to in sub-section (1) or sub-section (2).
(5) Any order of the Appellate Board rectifying the register shall direct that notice of the rectification shall be served upon the Registrar in the prescribed manner who shall upon receipt of such notice rectify the register accordingly.
Section 58. Correction of register.
(1) The Registrar may, on application made in the prescribed manner by the registered proprietor,—
(a) correct any error in the name, address or description of the registered proprietor of a trade mark, or any other entry relating to the trade mark;
(b) enter any change in the name, address or description of the person who is registered as proprietor of a trade mark;
(c) cancel the entry of a trade mark on the register;
(d) strike out any goods or classes of goods or services from those in respect of which a trade mark is registered,
and may make any consequential amendment or alteration in the certificate of registration, and for that purpose, may require the certificate of registration to be produced to him.
(2) The Registrar may, on application made in the prescribed manner by a registered user of a trade mark, and after notice to the registered proprietor, correct any error, or enter any change, in the name, address or description of the registered user.
Section 59. Alteration of registered trade marks.
(1) The registered proprietor of a trade mark may apply in the prescribed manner to the Registrar for leave to add to or alter the trade mark in any manner not substantially affecting the identity thereof, and the Registrar may refuse leave or may grant it on such terms and subject to such limitations as he may think fit.
(2) The Registrar may cause an application under this section to be advertised in the prescribed manner in any case where it appears to him that it is expedient so to do, and where he does so, if within the prescribed time from the date of advertisement any person gives notice to the Registrar in the prescribed manner of opposition to the application, the Registrar shall, after hearing the parties if so required, decide the matter.
(3) Where leave is granted under this section, the trade mark as altered shall be advertised in the prescribed manner, unless the application has already been advertised under sub-section (2).
Section 60. Adaptation of entries in register to amended or substituted classification of goods or services.
(1) The Registrar shall not make any amendment of the register which would have the effect of adding any goods or classes of goods or services to those in respect of which a trade mark is registered (whether in one or more classes) immediately before the amendment is to be made or of antedating the registration of a trade mark in respect of any goods or services:
Provided that this sub-section, shall not apply when the Registrar is satisfied that compliance therewith would involve undue complexity and that the addition or antedating, as the case may be, would not affect any substantial quantity of goods or services and would not substantially prejudice the rights of any person.
(2) A proposal so to amend the register shall be brought to the notice of the registered proprietor of the trade mark affected and advertised in the prescribed manner, and may be opposed before the Registrar by any person aggrieved on the ground that the proposed amendment contravenes the provisions of sub-section (1).
Chapter 8 Collective Marks
Section 61. Special provisions for collective marks.
(1) The provisions of this Act shall apply to collective marks subject to the provisions contained in this Chapter.
(2) In relation to a collective mark the reference in clause (zb) of sub-section (1) of section 2 to distinguishing the goods or services of one person from those of others shall be construed as a reference to distinguishing the goods or services of members of an association of persons which is the proprietor of the mark from those of others.
Section 62. Collective mark not to be misleading as to character or significance.
A collective mark shall not be registered if it is likely to deceive or cause confusion on the part of public in particular if it is likely to be taken to be something other than a collective mark, and in such case the Registrar may require that a mark in respect of which application is made for registration comprises some indication that it is a collective mark.
Section 63. Application to be accompanied by regulations governing use of collective marks.
(1) An application for registration of a collective mark shall be accompanied by the regulations governing the use of such collective mark.
(2) The regulations referred to in sub-section (1) shall specify the persons authorised to use the mark, the conditions of membership of the association and, the conditions of use of the mark, including any sanctions against misuse and such other matters as may be prescribed.
Section 64. Acceptance of application and regulations by Registrar.
If it appears to the Registrar that the requirements for registration are satisfied, he shall accept the application together with the regulations, either unconditionally or subject to such conditions including amendments of the said regulations, if any, as he may deem fit or refuse to accept it and if accepted shall notify the regulations.
Section 65. Regulations to be open to inspection.
The regulations referred to in sub-section (1) of section 63 shall be open to public inspection in the same way as the register as provided in section 148.
Section 66. Amendment of regulations.
Any amendment of regulations referred to in sub-section (1) of section 63 shall not be effective unless the amended regulations are filed with the Registrar, and accepted and published by him in accordance with section 64.
Section 67. Infringement proceedings by registered proprietor of collective mark.
In a suit for infringement instituted by the registered proprietor of a collective mark as plaintiff the court shall take into account any loss suffered or likely to be suffered by authorised users and may give such directions as it thinks fit as to the extent to which the plaintiff shall hold the proceeds of any pecuniary remedy on behalf of such authorised users.
Section 68. Additional grounds for removal of registration of collective mark.
The registration of a collective mark may also be removed from the register on the ground—
(a) that the manner in which the collective mark has been used by the proprietor or authorised user has caused it to become liable to mislead the public as a collective mark; or
(b) that the proprietor has failed to observe, or to secure the observance of the regulations governing the use of the mark.
Explanation I.—For the purposes of this Chapter, unless the context otherwise requires, “authorised user” means a member of an association authorised to use the registered collective mark of the association.
Explanation II.—For the purposes of this Act, use of a collective mark by an authorised user referred to in Explanation I shall be deemed to be the use by the registered proprietor thereof.
Chapter 9 Certification Trade Marks
Section 69. Certain provisions of this Act not applicable to certification trade marks.
The following provisions of this Act shall not apply to certification trade marks, that is to say,—
(a) clauses (a) and (c) of sub-section (1) of section 9;
(b) sections 18, 20 and 21, except as expressly applied by this Chapter;
(c) sections 28, 29, 30, 41, 42, 47, 48, 49, 50, 52, 54 and sub-section (2) of section 56;
(d) Chapter XII, except section 107.
Section 70. Registration of certification trade marks.
A mark shall not be registrable as a certification trade mark in the name of a person who carries on a trade in goods of the kind certified or a trade of the provision of services of the kind certified.
Section 71. Applications for registration of certification trade marks.
(1) An application for the registration of a mark as a certification trade mark shall be made to the Registrar in the prescribed manner by the person proposed to be registered as the proprietor thereof, and accompanied by a draft of the regulations to be deposited under section 74.
(2) Subject to the provisions of section 70, the provisions of sections 18, 19 and 22 shall apply in relation to an application under this section as they apply in relation to an application under section 18, subject to the modification that references therein to acceptance of an application shall be construed as references to authorisation to proceed with an application.
(3) In dealing under the said provision with an application under this section, the tribunal shall have regard to the like considerations, so far as relevant, as if the application were application under section 18 and to any other considerations relevant to applications under this section, including the desirability of securing that a certification trade mark shall comprise some indication that it is a certification trade mark.
Section 72. Consideration of application for registration by the Registrar.
(1) The Registrar shall consider the application made under section 71 with regard to the following matters, namely:—
(a) whether the applicant is competent to certify the goods in respect of which the mark is to be registered;
(b) whether the draft of the regulations to be filed under section 74 is satisfactory;
(c) whether in all the circumstances the registration applied for would be to the public advantage,
and may either—
(i) refuse the application; or
(ii) accept the application and approve the said draft of the regulations either without modification and unconditionally or subject to any conditions or limitations, or to any amendments or modifications of the application or of the regulations, which he thinks requisite having regard to any of the said matters.
(2) Except in the case of acceptance and approval without modification and unconditionally, the Registrar shall not decide any matter under sub-section (1) without giving the applicant an opportunity of being heard
Section 73. Opposition to registration of certification trade marks.
When an application has been accepted, the Registrar shall, as soon as may be thereafter, cause the application as accepted to be advertised in the prescribed manner, and the provisions of section 21 shall apply in relation to the registration of the mark as they apply in relation to an application under section 18.
Section 74. Filing of regulations governing use of a certification trade mark.
(1) There shall be filed at the Trade Marks Registry in respect of every mark registered as a certification trade mark regulations for governing the use thereof, which shall include provisions as to the cases in which the proprietor is to certify goods or services and to authorise the use of the certification trade mark, and may contain any other provisions which the Registrar may by general or special order, require or permit to be inserted therein (including provisions conferring a right of appeal to the Registrar against any refusal of the proprietor to certify goods or to authorise the use of the certification trade mark in accordance with the regulations); and regulations so filed shall be open to inspection in like manner as the register as provided in section 148.
(2) The regulations so filed may, on the application of the registered proprietor, be altered by the Registrar.
(3) The Registrar may cause such application to be advertised in any case where it appears to him expedient so to do, and where he does so, if within the time specified in the advertisement any person gives notice of opposition to the application, the Registrar shall not decide the matter without giving the parties an opportunity of being heard.
Section 75. Infringement of certification trade marks.
The right conferred by section 78 is infringed by any person who, not being the registered proprietor of the certification trade mark or a person authorised by him in that behalf under the regulations filed under section 74, using it in accordance therewith, uses in the course of trade, a mark, which is identical with, or deceptively similar to the certification trade mark in relation to any goods or services in respect of which it is registered, and in such manner as to render the use of the mark likely to be taken as being a use as a trade mark.
Section 76. Acts not constituting infringement of certification trade marks.
(1) Notwithstanding anything contained in this Act, the following acts do not constitute an infringement of the right to the use of a registered certification trade mark—
(a) where a certification trade mark is registered subject to any conditions or limitations entered on the register, the use of any such mark in any mode, in relation to goods to be sold or otherwise traded in any place, or in relation to goods to be exported to any market or in relation to services for use or available for acceptance in any place, country or territory or in any other circumstances, to which having regard to any such limitations, the registration does not extend;
(b) the use of a certification trade mark in relation to goods or services certified by the proprietor of the mark if, as to those goods or services or a bulk of which they form part, the proprietor or another in accordance with his authorisation under the relevant regulations has applied the mark and has not subsequently removed or obliterated it, or the proprietor has at any time expressly or impliedly consented to the use of the mark;
(c) the use of a certification trade mark in relation to goods or services adapted to form part of, or to be accessory to, other goods in relation to which the mark has been used without infringement of the right given as aforesaid or might for the time being be so used, if the use of the mark is reasonably necessary in order to indicate that the goods or services as so adapted and neither the purpose nor the effect of the use of the mark is to indicate otherwise than in accordance with the fact that the goods or services are certified by the proprietor.
(2) Clause (b) of sub-section (1) shall not apply to the case of use consisting of the application of a certification trade mark to goods or services, notwithstanding that they are such goods or services as are mentioned in that clause if such application is contrary to the regulations referred to in that clause.
(3) Where a certification trade mark is one of two or more trade marks registered under this Act, which are identical or nearly resemble each other, the use of any of those trade marks in exercise of the right to the use of that trade mark given by registration, shall not be deemed to be an infringement of the right so given to the use of any other of those trade marks.
Section 77. Cancellation or varying of registration of certification trade marks.
The Registrar may, on the application in the prescribed manner of any person aggrieved and after giving the proprietor an opportunity of opposing the application, make such order as he thinks fit for expunging or varying any entry in the register to a certification trade mark, or for varying the regulations, on any of the following grounds, namely:—
(a) that the proprietor is no longer competent, in the case of any of the goods or services in respect of which the mark is registered, to certify those goods or services;
(b) that the proprietor has failed to observe any provisions of the regulations to be observed on his part;
(c) that it is no longer to the public advantage that the mark should remain registered;
(d) that it is requisite for the public advantage that if the mark remains registered, the regulations should be varied.
Section 78. Rights conferred by registration of certification trade marks.
(1) Subject to the provisions of sections 34, 35 and 76, the registration of a person as a proprietor of certification trade mark in respect of any goods or services shall, if valid, give to that person the exclusive right to the use of the mark in relation to those goods or services.
(2) The exclusive right to the use of a certification trade mark given under sub-section (1) shall be subject to any conditions and limitations to which the registration is subject.
Chapter 10 Special Provisions for Textile Goods
Section 79. Textile goods.
The Central Government may prescribe classes of goods (in this Chapter referred to as textile goods) to the trade marks used in relation to which the provisions of this Chapter shall apply; and subject to the said provisions, the other provisions of this Act shall apply to such trade marks as they apply to trade marks used in relation to other classes of goods.
80. Restriction on registration of textile goods.—
(1) In respect of textile goods being piece goods—
(a) no mark consisting of a line heading alone shall be registrable as a trade mark;
(b) a line heading shall not be deemed to be capable of distinguishing;
(c) the registration of trade mark shall not give any exclusive right to the use of a line heading.
(2) In respect of any textile goods, the registration of letters or numerals, or any combination thereof, shall be subject to such conditions and restrictions as may be prescribed.
Section 81. Stamping of piece goods, cotton yarn and thread.
(1) Piece goods, such as are ordinarily sold by length or by the piece, which have been manufactured, bleached, dyed, printed or finished in premises which are a factory, as defined in the Factories Act, 1948 (63 of 1948), shall not be removed for sale from the last of such premises in which they underwent any of the said processes without having conspicuously stamped in international form of Indian numerals on each piece the length thereof in standard yards, or in standard yards and a fraction of such a yard, or in standard metres or in standard metres and a fraction of such a metre, according to the real length of the piece, and, except when the goods are sold from the factory for export from India, without being conspicuously marked on each piece with the name of the manufacturer or of the occupier of the premises in which the piece was finally processed or of the wholesale purchaser in India of the piece.
(2) Cotton yarn such as is ordinarily sold in bundles, and cotton thread, namely, sewing, darning, crochet or handicraft thread, which have been manufactured, bleached, dyed or finished in any premises not exempted by the rules made under section 82 shall not be removed for sale from those premises unless, in accordance with the said rules in the case of yarn—
(a) the bundles are conspicuously marked with an indication of the weight of yarn in English or the metric system in each bundles; and
(b) the count of the yarn contained in the bundles and in the case of thread each unit is conspicuously marked with the length or weight of thread in the unit and in such other manner as may be required by the said rules; and
(c) except where the goods are sold from the premises for export from India, unless each bundle or unit is conspicuously marked with the name of the manufacturer or of the wholesale purchaser in India of the goods:
Provided that the rules made under section 82 shall exempt all premises where the work is done by members of one family with or without the assistance of not more than ten other employees, and all premises controlled by a co-operative society where not more than twenty workers are employed in the premises.
Section 82. Determination of character of textile goods by sampling.
(1) For the purposes of this Act, the Central Government may make rules—
(a) to provide, with respect to any goods which purport or are alleged to be of uniform number, quantity, measure, gauge or weight, for the number of samples to be selected and tested and for the selection of the samples;
(b) to provide, for the manner in which for the purposes of section 81 cotton yarn and cotton thread shall be marked with the particulars required by that section, and for the exemption of certain premises used for the manufacture, bleaching, dying or finishing of cotton yarn or cotton thread from the provisions of that section; and
(c) declaring what classes of goods are included in the expression “piece goods such as are ordinarily sold by length or by the piece” for the purpose of section 81, of this Act or clause (n) of sub-section (2) of section 11 of the Customs Act, 1962 (52 of 1962).
(2) With respect to any goods for the selection and testing of samples of which provision is not made in any rules for the time being in force under sub-section (1), the court or officer of customs, as the case may be, having occasion to ascertain the number, quantity, measure, gauge or weight of the goods, shall by order in writing, determine the number of samples to be selected and tested and the manner in which the samples are to be selected.
(3) The average of the results of the testing in pursuance of rules under sub-
section (1) or of an order under sub-section (2) shall be prima facie evidence of the number, quantity, measure, gauge or weight, as the case may be, of the goods.
(4) If a person having any claim to, or in relation to, any goods of which samples have been selected and tested in pursuance of rules under sub-section (1), or of an order under sub-section (2), desires that any further samples of the goods be selected and tested, such further samples shall, on his written application and on the payment in advance by him to the court or officer of customs, as the case may be, of such sums for defraying the cost of the further selection and testing as the court or officer may from time to time require, be selected and tested to such extent as may be permitted by rules made by the Central Government in this behalf or as, in the case of goods with respect to which provision is not made in such rules, the court or officer of customs may determine in the circumstances to be reasonable, the samples being selected in the manner prescribed under sub-section (1), or in sub-section (2), as the case may be.
(5) The average of the results of the testing referred to in sub-section (3) and of the further testing under sub-section (4) shall be conclusive proof of the number, quantity, measure, gauge or weight, as the case may be, of the goods.
Section 83. Establishment of Appellate Board1.
The Central Government shall, by notification in the Official Gazette, establish an Appellate Board to be known as the Intellectual Property Appellate Board to exercise the jurisdiction, powers and authority conferred on it by or under this Act.
Chapter 11 Appellate Board
Section 84. Composition of Appellate Board.
(1) The Appellate Board shall consist of a Chairman, Vice-Chairman and such number of other Members, as the Central Government may, deem fit and, subject to the other provisions of this Act, the jurisdiction, powers and authority of the Appellate Board may be exercised by Benches thereof.
(2) Subject to the other provisions of this Act, a Bench shall consist of one Judicial Member and one Technical Member and shall sit at such place as the Central Government may, by notification2 in the Official Gazette, specify.
(3) Notwithstanding anything contained in sub-section (2), the Chairman—
(a) may, in addition to discharging the functions of the Judicial Member or Technical Member of the Bench to which he is appointed, discharge the functions of the Judicial Member or, as the case may be, the Technical Member, of any other Bench;
(b) may transfer a Member from one Bench to another Bench;
(c) may authorise the Vice-Chairman, the Judicial Member or the Technical Member appointed to one Bench to discharge also the functions of the Judicial Member or the Technical Member, as the case may be, of another Bench.
(4) Where any Benches are constituted, the Central Government may, from time to time, by notification, make provisions as to the distribution of the business of the Appellate Board amongst the Benches and specify the matters which may be dealt with by each Bench.
(5) If any question arises as to whether any matter falls within the purview of the business allocated to a Bench, the decision of the Chairman shall be final.
Explanation.—For the removal of doubts, it is hereby declared that the expression “matter” includes an appeal under section 91.
(6) If the Members of a Bench differ in opinion on any point, they shall state the point or points on which they differ, and make a reference to the Chairman who shall either hear the point or points himself or refer the case for hearing on such point or points by one or more of the other Members and such point or points shall be decided according to the opinion of the majority of the Members who have heard the case, including those who first heard it.
Section 85. Qualifications for appointment as Chairman, Vice-Chairman, or other Members.
(1) A person shall not be qualified for appointment as the Chairman unless he—
(a) is, or has been, a Judge of a High Court; or
(b) has, for at least two years, held the office of a Vice-Chairman.
(2) A person shall not be qualified for appointment as the Vice-Chairman, unless he—
(a) has, for at least two years, held the office of a Judicial Member or a Technical Member; or
(b) has been a member of the Indian Legal Service and has held a post in Grade I of that Service or any higher post for at least five years.
(3) A person shall not be qualified for appointment as a Judicial Member, unless he—
(a) has been a member of the Indian Legal Service and has held the post in Grade I of that Service for at least three years; or
(b) has, for at least ten years, held a civil judicial office.
(4) A person shall not be qualified for appointment as a Technical Member, unless he—
(a) has, for at least ten years, exercised functions of a tribunal under this Act or under the Trade and Merchandise Marks Act, 1958 (43 of 1958), or both, and has held a post not lower than the post of a Joint Registrar for at least five years; or
(b) has, for at least ten years, been an advocate of a proven specialised experience in trade mark law.
(5) Subject to the provisions of sub-section (6), the Chairman, Vice-Chairman and every other Member shall be appointed by the President of India.
(6) No appointment of a person as the Chairman shall be made except after consultation with the Chief Justice of India.
86. Term of office of Chairman, Vice-Chairman and other Members.—
The Chairman, Vice-Chairman or other Members shall hold office as such for a term of five years from the date on which he enters upon his office or until he attains,—
(a) in the case of Chairman and Vice-Chairman, the age of sixty-five years; and
(b) in the case of a Member, the age of sixty-two years,
whichever is earlier.
Section 87. Vice-Chairman or senior-most Member to act as Chairman or discharge his functions in certain circumstances.
(1) In the event of or any vacancy in the office of the Chairman by reasons of his death, resignation or otherwise, the Vice-Chairman and in his absence the senior-most Member shall act as Chairman until the date on which a new Chairman, appointed in accordance with the provisions of this Act to fill such vacancy, enters upon his office.
(2) When the Chairman is unable to discharge his functions owing to his absence, illness or any other cause, the Vice-Chairman and in his absence the senior-most Member shall discharge the functions of the Chairman until the date on which the Chairman resumes his duty.
Section 88. Salaries, allowances and other terms and conditions of service of Chairman, Vice-Chairman and other Members.
(1) The salaries and allowances payable to, and other terms and conditions of service (including pension, gratuity and other retirement benefits) of the Chairman, Vice-Chairman and other Members shall be such as may be prescribed.
(2) Notwithstanding anything contained in sub-section (1), a person who, immediately before the date of assuming office as the Chairman, Vice-Chairman or other Member was in service of Government, shall be deemed to have retired from service on the date on which he enters upon office as the Chairman, Vice-Chairman or other Member.
Section 89. Resignation and removal.
(1) The Chairman, Vice-Chairman or any other Member may, by notice in writing under his hand addressed to the President of India, resign his office:
Provided that the Chairman, Vice-Chairman or any other Member shall, unless he is permitted by the President of India 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 earlier.
(2) The Chairman, Vice-Chairman or any other Member shall not be removed from his office except by an order made by the President of India on the ground of proved misbehaviour or incapacity after an inquiry made by a Judge of the Supreme Court in which the Chairman, Vice-Chairman or other Member had been informed of the charges against him and given a reasonable opportunity of being heard in respect of those charges.
(3) The Central Government may, by rules, regulate the procedure for the investigation of misbehaviour or incapacity of the Chairman, Vice-Chairman or other Member referred to in sub-section (2).
Section 90. Staff of Appellate Board.
(1) The Central Government shall determine the nature and categories of the officers and other employees required to assist the Appellate Board in the discharge of its functions and provide the Appellate Board with such officers and other employees as it may think fit.
(2) The salaries and allowances and conditions of service of the officers and other employees of the Appellate Board shall be such as may be prescribed.
(3) The officers and other employees of the Appellate Board shall discharge their functions under the general superintendence of the Chairman in the manner as may be prescribed.
Section 91. Appeals to Appellate Board.
(1) Any person aggrieved by an order or decision of the Registrar under this Act, or the rules made thereunder may prefer an appeal to the Appellate Board within three months from the date on which the order or decision sought to be appealed against is communicated to such person preferring the appeal.
(2) No appeal shall be admitted if it is preferred after the expiry of the period specified under sub-section (1):
Provided that an appeal may be admitted after the expiry of the period specified therefor, if the appellant satisfies the Appellate Board that he had sufficient cause for not preferring the appeal within the specified period.
(3) An appeal to the Appellate Board shall be in the prescribed form and shall be verified in the prescribed manner and shall be accompanied by a copy of the order or decision appealed against and by such fees as may be prescribed.
Section 92. Procedure and powers of Appellate Board.
(1) The Appellate Board shall not be bound by the procedure laid down in the Code of Civil Procedure, 1908 (5 of 1908) but shall be guided by principles of natural justice and subject to the provisions of this Act and the rules made thereunder, the Appellate Board shall have powers to regulate its own procedure including the fixing of places and times of its hearing.
(2) The Appellate Board shall have, for the purpose 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) receiving evidence;
(b) issuing commissions for examination of witnesses;
(c) requisitioning any public record; and
(d) any other matter which may be prescribed.
(3) Any proceeding before the Appellate Board shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196, of the Indian Penal Code (45 of 1860), and the Appellate Board shall be deemed to be a civil court for all the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).
Section 93. Bar of jurisdiction of courts, etc.
No court or other authority shall have or, be entitled to, exercise any jurisdiction, powers or authority in relation to the matters referred to in sub-section (1) of section 91.
Section 94. Bar to appear before Appellate Board.
On ceasing to hold office, the Chairman, Vice-Chairman or other Members shall not appear before the Appellate Board or the Registrar.
Section 95. Conditions as to making of interim orders.
Notwithstanding anything contained in any other provisions of this Act or in any other law for the time being in force, no interim order (whether by way of injunction or stay or any other manner) shall be made on, or in any proceedings relating to, an appeal unless -
(a) copies of such appeal and of all documents in support of the plea for such interim order are furnished to the party against whom such appeal is made or proposed to be made, and
(b) opportunity is given to such party to be heard in the matter.
Section 96. Power of Chairman to transfer cases from one Bench to another.
On the application of any of the parties and after notice to the parties, and after hearing such of them as he may desire to be heard, or on his own motion without such notice, the Chairman may transfer any case pending before one Bench, for disposal, to any other Bench.
Section 97. Procedure for application for rectification, etc., before Appellate Board.
(1) An application for rectification of the register made to the Appellate Board under section 57 shall be in such form as may be prescribed.
(2) A certified copy of every order or judgment of the Appellate Board relating to a registered trade mark under this Act shall be communicated to the Registrar by the Board and the Registrar shall give effect to the order of the Board and shall, when so directed, amend the entries in, or rectify, the register in accordance with such order.
Section 98. Appearance of Registrar in legal proceedings.
(1) The Registrar shall have the right to appear and be heard—
(a) in any legal proceedings before the Appellate Board in which the relief sought includes alteration or rectification of the register or in which any question relating to the practice of the Trade Marks Registry is raised;
(b) in any appeal to the Board from an order of the Registrar on an application for registration of a trade mark—
(i) which is not opposed, and the application is either refused by the Registrar or is accepted by him subject to any amendments, modifications, conditions or limitations, or
(ii) which has been opposed and the Registrar considers that his appearance is necessary in the public interest,
and the Registrar shall appear in any case if so directed by the Board.
(2) Unless the Appellate Board otherwise directs, the Registrar may, in lieu of appearing, submit a statement in writing signed by him, giving such particulars as he thinks proper of the proceedings before him relating to the matter in issue or of the grounds of any decision given by him affecting it, or of the practice of the Trade Marks Registry in like cases, or of other matters relevant to the issues and within his knowledge as Registrar, and such statement shall be evidence in the proceeding.
Section 99. Costs of Registrar in proceedings before Appellate Board.
In all proceedings under this Act before the Appellate Board the costs of the Registrar shall be in the discretion of the Board, but the Registrar shall not be ordered to pay the costs of any of the parties.
Section 100. Transfer of pending proceedings to Appellate Board.
All cases of appeals against any order or decision of the Registrar and all cases pertaining to rectification of register, pending before any High Court, shall be transferred to the Appellate Board from the date as notified by the Central Government in the Official Gazette and the Appellate Board may proceed with the matter either de novo or from the stage it was so transferred.
Chapter 12 Offences, Penalties and Procedure
Section 101. Meaning of applying trade marks and trade descriptions.
(1) A person shall be deemed to apply a trade mark or mark or trade description to goods or services who—
(a) applies it to the goods themselves or uses it in relation to services; or
(b) applies it to any package in or with which the goods are sold, or exposed for sale, or had in possession for sale or for any purpose of trade or manufacture, or
(c) places, encloses or annexes any goods which are sold, or exposed for sale, or had in possession for sale or for any purpose of trade or manufacture, in or with any package or other thing to which a trade mark or mark or trade description has been applied; or
(d) uses a trade mark or mark or trade description in any manner reasonably likely to lead to the belief that the goods or services in connection with which it is used are designated or described by that trade mark or mark or trade description; or
(e) in relation to the goods or services uses a trade mark or trade description in any sign, advertisement, invoice, catalogue, business letter, business paper, price list or other commercial document and goods are delivered or services are rendered to a person in pursuance of a request or order made by reference to the trade mark or trade description as so used.
(2) A trade mark or mark or trade description shall be deemed to be applied to goods whether it is woven in, impressed on, or otherwise worked into, or annexed or affixed to, the goods or to any package or other thing.
Section 102. Falsifying and falsely applying trade marks.
(1) A person shall be deemed to falsify a trade mark who, either,—
(a) without the assent of the proprietor of the trade mark makes that trade mark or a deceptively similar mark; or
(b) falsifies any genuine trade mark, whether by alteration, addition, effacement or otherwise.
(2) A person shall be deemed to falsely apply to goods or services a trade mark who, without the assent of the proprietor of the trade mark,—
(a) applies such trade mark or a deceptively similar mark to goods or services or any package containing goods;
(b) uses any package bearing a mark which is identical with or deceptively similar to the trade mark of such proprietor, for the purpose of packing, filling or wrapping therein any goods other than the genuine goods of the proprietor of the trade mark.
(3) Any trade mark falsified as mentioned in sub-section (1) or falsely applied as mentioned in sub-section (2), is in this Act referred to as a false trade mark.
(4) In any prosecution for falsifying a trade mark or falsely applying a trade mark to goods or services, the burden of proving the assent of the proprietor shall lie on the accused.
Section 103. Penalty for applying false trade marks, trade descriptions, etc.
Any person who—
(a) falsifies any trade mark; or
(b) falsely applies to goods or services any trade mark; or
(c) makes, disposes of, or has in his possession, any die, block, machine, plate or other instrument for the purpose of falsifying or of being used for falsifying, a trade mark; or
(d) applies any false trade description to goods or services; or
(e) applies to any goods to which an indication of the country or place in which they were made or produced or the name and address of the manufacturer or person for whom the goods are manufactured is required to be applied under section 139, a false indication of such country, place, name or address; or
(f) tampers with, alters or effaces an indication of origin which has been applied to any goods to which it is required to be applied under section 139; or
(g) causes any of the things above-mentioned in this section to be done,
shall, unless he proves that he acted, without intent to defraud, be punishable with imprisonment for a term which shall not be less than six months but which may extend to three years and with fine which shall not be less than fifty thousand rupees but which may extend to two lakh rupees:
Provided that the court may, for adequate and special reasons to be mentioned in the judgment, impose a sentence of imprisonment for a term of less than six months or a fine of less than fifty thousand rupees.
Section 104. Penalty for selling goods or providing services to which false trade mark or false trade description is applied.
Any person who sells, lets for hire or exposes for sale, or hires or has in his possession for sale, goods or things, or provides or hires services, to which any false trade mark or false trade description is applied or which, being required under section 139 to have applied to them an indication of the country or place in which they were made or produced or the name and address of the manufacturer, or person for whom the goods are manufactured or services provided, as the case may be, are without the indications so required, shall, unless he proves,—
(a) that, having taken all reasonable precautions against committing an offence against this section, he had at the time of commission of the alleged offence no reason to suspect the genuineness of the trade mark or trade description or that any offence had been committed in respect of the goods or services; or
(b) that, on demand by or on behalf of the prosecutor, he gave all the information in his power with respect to the person from whom he obtained such goods or things or services; or
(c) that otherwise he had acted innocently,
be punishable with imprisonment for a term which shall not be less than six months but which may extend to three years and with fine which shall not be less than fifty thousand rupees but which may extend to two lakh rupees:
Provided that the court may, for adequate and special reasons to be mentioned in the judgment, impose a sentence of imprisonment for a term of less than six months or a fine of less than fifty thousand rupees.
Section 105. Enhanced penalty on second or subsequent conviction.
Whoever having already been convicted of an offence under section 103 or section 104 is again convicted of any such offence shall be punishable for the second and for every subsequent offence, with imprisonment for a term which shall not be less than one year but which may extend to three years and with fine which shall not be less than one lakh rupees but which may extend to two lakh rupees:
Provided that the court may, for adequate and special reasons to be mentioned in the judgment, impose a sentence of imprisonment for a term of less than one year or a fine of less than one lakh rupees:
Provided further that for the purposes of this section, no cognizance shall be taken of any conviction made before the commencement of this Act.
Section 106. Penalty for removing piece goods, etc., contrary to section 81.
If any person removes or attempts to remove or causes or attempts to cause to be removed for sale from any premises referred to in section 81 or sells or exposes for sale or has in his possession for sale or for any purpose of trade or manufacture piece goods or cotton yarn or cotton thread which is not marked as required by that section, every such piece and every such bundle of yarn and all such thread and everything used for the packing thereof shall be forfeited to Government and such person shall be punishable with fine which may extend to one thousand rupees.
Section 107. Penalty for falsely representing a trade mark as registered.
(1) No person shall make any representation—
(a) with respect to a mark, not being a registered trade mark, to the effect that it is a registered trade mark; or
(b) with respect to a part of a registered trade mark, not being a part separately registered as a trade mark, to the effect that it is separately registered as a trade mark; or
(c) to the effect that a registered trade mark is registered in respect of any goods or services in respect of which it is not in fact registered; or
(d) to the effect that registration of a trade mark gives an exclusive right to the use thereof in any circumstances in which, having regard to limitation entered on the register, the registration does not in fact give that right.
(2) If any person contravenes any of the provisions of sub-section (1), he shall be punishable with imprisonment for a term which may extend to three years, or with fine, or with both.
(3) For the purposes of this section, the use in India in relation to a trade mark of the word “registered”, or of any other expression, symbol or sign referring whether expressly or impliedly to registration, shall be deemed to import a reference to registration in the register, except—
(a) where that word or other expression, symbol or sign is used in direct association with other words delineated in characters at least as large as those in which that word or other expression, symbol or sign is delineated and indicating that the reference is to registration as a trade mark under the law of a country outside India being a country under the law of which the registration referred to is in fact in force; or
(b) where that other expression, symbol or sign is of itself such as to indicate that the reference is to such registration as is mentioned in clause (a); or
(c) where that word is used in relation to a mark registered as a trade mark under the law of a country outside India and in relation solely to goods to be exported to that country or in relation to services for use in that country.
Section 108. Penalty for improperly describing a place of business as connected with the Trade Marks Office.
If any person uses on his place of business, or on any document issued by him, or otherwise, words which would reasonably lead to the belief that his place of business is, or is officially connected with, the Trade Marks Office, he shall be punishable with imprisonment for a term which may extend to two years, or with fine, or with both.
Section 109. Penalty for falsification of entries in the register.
If any person makes, or causes to be made, a false entry in the register, or a writing falsely purporting to be a copy of an entry in the register, or produces or tenders or causes to be produced or tendered, in evidence any such writing, knowing the entry or writing to be false, he shall be punishable with imprisonment for a term which may extend to two years, or with fine, or with both.
Section 110. No offence in certain cases.
The provisions of sections 102, 103, 104 and 105 shall, in relation to a registered trade mark or proprietor of such mark, be subject to the rights created or recognised by this Act and no act or omission shall be deemed to be an offence under the aforesaid sections if,—
(a) the alleged offence relates to a registered trade mark and the act or omission is permitted under this Act; and
(b) the alleged offence relates to a registered or an unregistered trade mark and the act or omission is permitted under any other law for the time being in force.
Section 111. Forfeiture of goods.
(1) Where a person is convicted of an offence under section 103 or section 104 or section 105 or is acquitted of an offence under section 103 or section 104 on proof that he acted without intent to defraud, or under section 104 on proof of the matters specified in clause (a), clause (b) or clause (c) of that section, the court convicting or acquitting him may direct the forfeiture to Government of all goods and things by means of, or in relation to, which the offence has been committed, or but for such proof as aforesaid would have been committed.
(2) When a forfeiture is directed on a conviction and an appeal lies against the conviction, an appeal shall lie against the forfeiture also.
(3) When a forfeiture is directed on acquittal and the goods or things to which the direction relates are of value exceeding fifty rupees, an appeal against the forfeiture may be preferred, within thirty days from the date of the direction, to the court to which in appealable cases appeals lie from sentences of the court which directed the forfeiture.
(4) When a forfeiture is directed on a conviction, the court, before whom the person is convicted, may order any forfeited articles to be destroyed or otherwise disposed of as the court thinks fit.
Section 112. Exemption of certain persons employed in ordinary course of business.
Where a person accused of an offence under section 103 proves—
(a) that in the ordinary course of his business he is employed on behalf of other persons to apply trade marks or trade descriptions, or as the case may be, to make dies, blocks, machines, plates, or other instruments for making, or being used in making, trade marks; and
(b) that in the case which is the subject of the charge he was so employed, and was not interested in the goods or other thing by way of profit or commission dependent on the sale of such goods or providing of services, as the case may be; and
(c) that, having taken all reasonable precautions against committing the offence charged, he had, at the time of the commission of the alleged offence, no reason to suspect the genuineness of the trade mark or trade description; and
(d) that, on demand made by or on behalf of the prosecutor, he gave all the information in his power with respect to the persons on whose behalf the trade mark or trade description was applied, he shall be acquitted.
Section 113. Procedure where invalidity of registration is pleaded by the accused.
(1) Where the offence charged under section 103 or section 104 or section 105 is in relation to a registered trade mark and the accused pleads that the registration of the trade mark is invalid, the following procedure shall be followed:—
(a) If the court is satisfied that such defence is prima facie tenable, it shall not proceed with the charge but shall adjourn the proceeding for three months from the date on which the plea of the accused is recorded to enable the accused to file an application before the Appellate Board under this Act, for the rectification of the register on the ground that the registration is invalid.
(b) If the accused proves to the court that he has made such application within the time so limited or within such further time as the court may for sufficient cause allow, the further proceedings in the prosecution shall stand stayed till the disposal of such application for rectification.
(c) If within a period of three months or within such extended time as may be allowed by the court the accused fails to apply to the Appellate Board for rectification of the register, the court shall proceed with the case as if the registration were valid.
(2) Where before the institution of a complaint of an offence referred to in sub-section (1), any application for the rectification of the register concerning the trade mark in question on the ground of invalidity of the registration thereof has already been properly made to and is pending before the tribunal, the court shall stay the further proceedings in the prosecution pending the disposal of the application aforesaid and shall determine the charge against the accused in conformity with the result of the application for rectification in so far as the complainant relies upon the registration of his mark.
Section 114. Offences by companies.
(1) If the person committing an offence under this Act is a company, the company as well as every person in charge of, and responsible to, the company for the conduct of its business at the time of the commission of the offence 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 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 that the commission of the offence 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 any body corporate and includes a firm or other association of individuals; and
(b) “director”, in relation to a firm, means a partner in the firm.
Section 115. Cognizance of certain offences and the powers of police officer for search and seizure.
(1) No court shall take cognizance of an offence under section 107 or section 108 or section 109 except on complaint in writing made by the Registrar or any officer authorised by him in writing:
Provided that in relation to clause (c) of sub-section (1) of section 107, a court shall take cognizance of an offence on the basis of a certificate issued by the Registrar to the effect that a registered trade mark has been represented as registered in respect of any goods or services in respect of which it is not in fact registered.
(2) No court inferior to that of a Metropolitan Magistrate or Judicial Magistrate of the first class shall try an offence under this Act.
(3) The offences under section 103 or section 104 or section 105 shall be cognizable.
(4) Any police officer not below the rank of deputy superintendent of police or equivalent, may, if he is satisfied that any of the offences referred to in sub-section (3) has been, is being, or is likely to be, committed, search and seize without warrant the goods, die, block, machine, plate, other instruments or things involved in committing the offence, wherever found, and all the articles so seized shall, as soon as practicable, be produced before a Judicial Magistrate of the first class or Metropolitan Magistrate, as the case may be:
Provided that the police officer, before making any search and seizure, shall obtain the opinion of the Registrar on facts involved in the offence relating to trade mark and shall abide by the opinion so obtained.
(5) Any person having an interest in any article seized under sub-section (4), may, within fifteen days of such seizure, make an application to the Judicial Magistrate of the first class or Metropolitan Magistrate, as the case may be, for such article being restored to him and the Magistrate, after hearing the applicant and the prosecution, shall make such order on the application as he may deem fit.
Section 116. Evidence of origin of goods imported by sea.
In the case of goods brought into India by sea, evidence of the port of shipment shall, in a prosecution for an offence under this Act or under clause (b) of section 112 of the Customs Act, 1962 (52 of 1962), relating to confiscation of goods under clause (d) of section 111 and notified by the Central Government under clause (n) of sub-section (2) of section 11 of the said Act for the protection of trade marks relating to import of goods, be prima facie evidence of the place or country in which the goods are made or produced.
Section 117. Costs of defence or prosecution.
In any prosecution under this Act, the court may order such costs to be paid by the accused to the complainant, or by the complainant to the accused, as the court deems reasonable having regard to all the circumstances of the case and the conduct of the parties and the costs so awarded shall be recoverable as if they were a fine.
Section 118. Limitation of prosecution.
No prosecution for an offence under this Act or under clause (b) of section 112 of the Customs Act, 1962 (52 of 1962), relating to confiscation of goods under clause (d) of section 111 and notified by the Central Government under clause (n) of sub-section (2) of section 11 of the said Act for the protection of trade marks, relating to import of goods shall be commenced after expiration of three years next after the commission of the offence charged, or two years after the discovery thereof by the prosecutor, whichever expiration first happens
Section 119. Information as to commission of offence.
An officer of the Government whose duty it is to take part in the enforcement of the provisions of this Chapter shall not be compelled in any court to say whence he got any information as to the commission of any offence against this Act.
Section 120. Punishment of abetment in India of acts done out of India.
If any person, being within India, abets the commission, without India, of any act which, if committed in India, would, under this Act, be an offence, he may be tried for such abetment in any place in India in which he may be found, and be punished therefor with the punishment to which he would be liable if he had himself committed in that place the act which he abetted.
Section 121. Instructions of Central Government as to permissible variation to be observed by criminal courts.
The Central Government may, by notification in the Official Gazette, issue instructions for the limits of variation, as regards number, quantity, measure, gauge or weight which are to be recognized by criminal courts as permissible in the case of any goods.
Chapter 13 Miscellaneous
Section 122. Protection of action taken in good faith.
No suit or other legal proceedings shall lie against any person in respect of anything which is in good faith done or intended to be done in pursuance of this Act.
Section 123. Certain persons to be public servants.
Every person appointed under this Act and every Member of the Appellate Board shall be deemed to be a public servant within the meaning of section 21 of the Indian Penal Code (45 of 1860).
Section 124. Stay of proceedings where the validity of registration of the trade mark is questioned, etc.
(1) Where in any suit for infringement of a trade mark—
(a) the defendant pleads that registration of the plaintiff’s trade mark is invalid; or
(b) the defendant raises a defence under clause (e) of sub-section (2) of section 30 and the plaintiff pleads the invalidity of registration of the defendant’s trade mark, the court trying the suit (hereinafter referred to as the court), shall,—
(i) if any proceedings for rectification of the register in relation to the plaintiff’s or defendant’s trade mark are pending before the Registrar or the Appellate Board, stay the suit pending the final disposal of such proceedings;
(ii) if no such proceedings are pending and the court is satisfied that the plea regarding the invalidity of the registration of the plaintiff’s or defendant’s trade mark is prima facie tenable, raise an issue regarding the same and adjourn the case for a period of three months from the date of the framing of the issue in order to enable the party concerned to apply to the Appellate Board for rectification of the register.
(2) If the party concerned proves to the court that he has made any such application as is referred to in clause (b) (ii) of sub-section (1) within the time specified therein or within such extended time as the court may for sufficient cause allow, the trial of the suit shall stand stayed until the final disposal of the rectification proceedings.
(3) If no such application as aforesaid has been made within the time so specified or within such extended time as the court may allow, the issue as to the validity of the registration of the trade mark concerned shall be deemed to have been abandoned and the court shall proceed with the suit in regard to the other issues in the case.
(4) The final order made in any rectification proceedings referred to in sub-section (1) or sub-section (2) shall be binding upon the parties and the court shall dispose of the suit conformably to such order in so far as it relates to the issue as to the validity of the registration of the trade mark.
(5) The stay of a suit for the infringement of a trade mark under this section shall not preclude the court from making any interlocutory order (including any order granting an injunction directing account to be kept, appointing a receiver or attaching any property), during the period of the stay of the suit
Section 125. Application for rectification of register to be made to Appellate Board in certain cases.
(1) Where in a suit for infringement of a registered trade mark the validity of the registration of the plaintiff’s trade mark is questioned by the defendant or where in any such suit the defendant raises a defence under clause (e) of sub-section (2) of section 30 and the plaintiff questions the validity of the registration of the defendant’s trade mark, the issue as to the validity of the registration of the trade mark concerned shall be determined only on an application for the rectification of the register and, notwithstanding anything contained in section 47 or section 57, such application shall be made to the Appellate Board and not to the Registrar.
(2) Subject to the provisions of sub-section (1), where an application for rectification of the register is made to the Registrar under section 47 or section 57, the Registrar may, if he thinks fit, refer the application at any stage of the proceedings to the Appellate Board.
Section 126. Implied warranty on sale of marked goods.
Where a mark or a trade mark or trade description has been applied to the goods on sale or in the contract for sale of any goods or in relation to any service, the seller shall be deemed to warrant that the mark is a genuine mark and not falsely applied, or that the trade description is not a false trade description within the meaning of this Act unless the contrary is expressed in writing signed by or on behalf of the seller and delivered at the time of the sale of goods or providing of services on contract to and accepted by the buyer.
Section 127. Powers of Registrar.
In all proceedings under this Act before the Registrar,—
(a) the Registrar shall have all the powers of a civil court for the purposes of receiving evidence, administering oaths, enforcing the attendance of witnesses, compelling the discovery and production of documents and issuing commissions for the examination of witnesses;
(b) the Registrar may, subject to any rules made in this behalf under section 157, make such orders as to costs as he considers reasonable, and any such order shall be executable as a decree of a civil court:
Provided that the Registrar shall have no power to award costs to or against any party on an appeal to him against a refusal of the proprietor of a certification trade mark to certify goods or provision of services or to authorise the use of the mark;
(c) the Registrar may, on an application made in the prescribed manner, review his own decision.
Section 128. Exercise of discretionary power by Registrar.
Subject to the provisions of section 131, the Registrar shall not exercise any discretionary or other power vested in him by this Act or the rules made thereunder adversely to a person applying for the exercise of that power without (if so required by that person within the prescribed time) giving to the person an opportunity of being heard.
Section 129. Evidence before Registrar.
In any proceeding under this Act before the Registrar, evidence shall be given by affidavit.
Provided that the Registrar may, if he thinks fit, take oral evidence in lieu of, or in addition to, such evidence by affidavit.
Section 130. Death of party to a proceeding.
If a person who is a party to a proceeding under this Act (not being a proceeding before the Appellate Board or a court) dies pending the proceeding, the Registrar may, on request, and on proof to his satisfaction of the transmission of the interest of the deceased person, substitute in the proceeding his successor in interest in his place, or, if the Registrar is of opinion that the interest of the deceased person is sufficiently represented by the surviving parties, permit the proceeding to continue without the substitution of his successor in interest.
Section 131. Extension of time.
(1) If the Registrar is satisfied, on application made to him in the prescribed manner and accompanied by the prescribed fee, that there is sufficient cause for extending the time for doing any act (not being a time expressly provided in this Act), whether the time so specified has expired or not, he may, subject to such conditions as he may think fit to impose, extend the time and inform the parties accordingly.
(2) Nothing in sub-section (1) shall be deemed to require the Registrar to hear the parties before disposing of an application for extension of time, and no appeal shall lie from any order of the Registrar under this section.
Section 132. Abandonment.
Where, in the opinion of the Registrar, an applicant is in default in the prosecution of an application filed under this Act or any Act relating to trade marks in force prior to the commencement of this Act, the Registrar may, by notice require the applicant to remedy the default within a time specified and after giving him, if so, desired, an opportunity of being heard, treat the application as abandoned, unless the default is remedied within the time specified in the notice.
Section 133. Preliminary advice by the Registrar as to distinctiveness.
(1) The Registrar may, on application made to him in the prescribed manner by any person who proposes to apply for the registration of a trade mark, give advice as to whether the trade mark appears to him prima facie to be distinctive.
(2) If, on an application for the registration of a trade mark as to which the Registrar has given advice as aforesaid in the affirmative made within three months after the advice was given, the Registrar, after further investigation or consideration, gives notice to the applicant of objection on the ground that the trade mark is not distinctive, the applicant shall be entitled, on giving notice of withdrawal of the application within the prescribed period, to have repaid to him any fee paid on the filing of the application.
Section 134. Suit for infringement, etc., to be instituted before District Court.
(1) No suit—
(a) for the infringement of a registered trade mark; or
(b) relating to any right in a registered trade mark; or
(c) for passing off arising out of the use by the defendant of any trade mark which is identical with or deceptively similar to the plaintiff’s trade mark, whether registered or unregistered, shall be instituted in any court inferior to a District Court having jurisdiction to try the suit.
(2) For the purpose of clauses (a) and (b) of sub-section (1), a “District Court having jurisdiction” shall, notwithstanding anything contained in the Code of Civil Procedure, 1908 (5 of 1908) or any other law for the time being in force, include a District Court within the local limits of whose jurisdiction, at the time of the institution of the suit or other proceeding, the person instituting the suit or proceeding, or, where there are more than one such persons any of them, actually and voluntarily resides or carries on business or personally works for gain.
Explanation.—For the purposes of sub-section (2), “person” includes the registered proprietor and the registered user.
Section 135. Relief in suits for infringement or for passing off.
(1) The relief which a court may grant in any suit for infringement or for passing off referred to in section 134 includes injunction (subject to such terms, if any, as the court thinks fit) and at the option of the plaintiff, either damages or an account of profits, together with or without any order for the delivery-up of the infringing labels and marks for destruction or erasure.
(2) The order of injunction under sub-section (1) may include an ex parte injunction or any interlocutory order for any of the following matters, namely:—
(a) for discovery of documents;
(b) preserving of infringing goods, documents or other evidence which are related to the subject-matter of the suit;
(c) restraining the defendant from disposing of or dealing with his assets in a manner which may adversely affect plaintiff’s ability to recover damages, costs or other pecuniary remedies which may be finally awarded to the plaintiff.
(3) Notwithstanding anything contained in sub-section (1), the court shall not grant relief by way of damages (other than nominal damages) or on account of profits in any case—
(a) where in a suit for infringement of a trade mark, the infringement complained of is in relation to a certification trade mark or collective mark; or
(b) where in a suit for infringement the defendant satisfies the court—
(i) that at the time he commenced to use the trade mark complained of in the suit, he was unaware and had no reasonable ground for believing that the trade mark of the plaintiff was on the register or that the plaintiff was a registered user using by way of permitted use; and
(ii) that when he became aware of the existence and nature of the plaintiff’s right in the trade mark, he forthwith ceased to use the trade mark in relation to goods or services in respect of which it was registered; or
(c) where in a suit for passing off, the defendant satisfies the court—
(i) that at the time he commenced to use the trade mark complained of in the suit he was unaware and had no reasonable ground for believing that the trade mark of the plaintiff was in use; and
(ii) that when he became aware of the existence and nature of the plaintiff’s trade mark he forthwith ceased to use the trade mark complained of.
Section 136. Registered user to be impleaded in certain proceedings.
(1) In every proceeding under Chapter VII or under section 91, every registered user of a trade mark using by way of permitted use, who is not himself an applicant in respect of any proceeding under that Chapter or section, shall be made a party to the proceeding.
(2) Notwithstanding anything contained in any other law, a registered user so made a party to the proceeding shall not be liable for any costs unless he enters an appearance and takes part in the proceeding.
Section 137. Evidence of entries in register, etc., and things done by the Registrar.
(1) A copy of any entry in the register or of any document referred to in sub-section (1) of section 148 purporting to be certified by the Registrar and sealed with the seal of the Trade Marks Registry shall be admitted in evidence in all courts and in all proceedings without further proof or production of the original.
(2) A certificate purporting to be under the hand of the Registrar as to any entry, matter or thing that he is authorised by this Act or the rules to make or do shall be prima facie evidence of the entry having been made, and of the contents thereof, or of the matter or things having been done or not done.
Section 138. Registrar and other officers not compellable to produce register, etc.
The Registrar or any officer of the Trade Marks Registry shall not, in any legal proceedings to which he is not a party, be compellable to produce the register or any other document in his custody, the contents of which can be proved by the production of a certified copy issued under this Act or to appear as a witness to prove the matters therein recorded unless by order of the court made for special cause.
Section 139. Power to require goods to show indication of origin.
(1) The Central Government may, by notification in the Official Gazette. require that goods of any class specified in the notification which are made or produced beyond the limits of India and imported into India, or, which are made or produced within the limits of India, shall, from such date as may be appointed by the notification not being less than three months from its issue, have applied to them an indication of the country or place in which they were made or produced, or of the name and address of the manufacturer or the person for whom the goods were manufactured.
(2) The notification may specify the manner in which such indication shall be applied that is to say, whether to goods themselves or in any other manner, and the times or occasions on which the presence of the indication shall be necessary, that is to say, whether on importation only, or also at the time of sale, whether by wholesale or retail or both.
(3) No notification under this section shall be issued, unless application is made for its issue by persons or associations substantially representing the interests of dealers in, or manufacturers, producers, or users of, the goods concerned, or unless the Central Government is otherwise convinced that it is necessary in the public interest to issue the notification, with or without such inquiry, as the Central Government may consider necessary.
(4) The provisions of section 23 of the General Clauses Act, 1897 (10 of 1897) shall apply to the issue of a notification under this section as they apply to the making of a rule or bye-law the making of which is subject to the condition of previous publication.
(5) A notification under this section shall not apply to goods made or produced beyond the limits of India and imported into India, if in respect of those goods, the Commissioner of Customs is satisfied at the time of importation that they are intended for exportation whether after transhipment in or transit through India or otherwise.
Section 140. Power to require information of imported goods bearing false trade marks.
(1) The proprietor or a licensee of a registered trade mark may give notice in writing to the Collector of Customs to prohibit the importation of any goods if the import of the said goods constitute infringement under clause (c) of sub-section (6) of section 29.
(2) Where goods, which are prohibited to be imported into India by notification of the Central Government under clause (n) of sub-section (2) of section 11 of the Customs Act, 1962 (52 of 1962), for the protection of trade marks, and are liable to confiscation on importation under that Act, are imported into India, the Commissioner of Customs if, upon representation made to him, he has reason to believe that the trade mark complained of is used as a false trade mark, may require the importer of the goods, or his agent, to produce any documents in his possession relating to the goods and to furnish information as to the name and address of the person by whom the goods were consigned to India and the name and address of the person to whom the goods were sent in India.
(3) The importer or his agent shall, within fourteen days, comply with the requirement as aforesaid, and if he fails to do so, he shall be punishable with fine which may extend to five hundred rupees.
(4) Any information obtained from the importer of the goods or his agent under this section may be communicated by the Commissioner of Customs to the registered proprietor or registered user of the trade mark which is alleged to have been used as a false trade mark.
Section 141. Certificate of validity.
If in any legal proceeding for rectification of the register before the Appellate Board a decision is on contest given in favour of the registered proprietor of the trade mark on the issue as to the validity of the registration of the trade mark, the Appellate Board may grant a certificate to that effect, and if such a certificate is granted, then, in any subsequent legal proceeding in which the said validity comes into question the said proprietor on obtaining a final order or judgment in his favour affirming validity of the registration of the trade mark shall, unless the said final order or judgment for sufficient reason directs otherwise, be entitled to his full cost charges and expenses as between legal practitioner and client.
Section 142. Groundless threats of legal proceedings.
(1) Where a person, by means of circulars, advertisements or otherwise, threatens a person with an action or proceeding for infringement of a trade mark which is registered, or alleged by the first-mentioned person to be registered, or with some other like proceeding, a person aggrieved may, whether the person making the threats is or is not the registered proprietor or the registered user of the trade mark, bring a suit against the first-mentioned person and may obtain a declaration to the effect that the threats are unjustifiable, and an injunction against the continuance of the threats and may recover such damages (if any) as he has sustained, unless the first-mentioned person satisfies the court that the trade mark is registered and that the acts in respect of which the proceedings were threatened, constitute, or, if done, would constitute, an infringement of the trade mark.
(2) The last preceding sub-section does not apply if the registered proprietor of the trade mark, or a registered user acting in pursuance of sub-section (1) of section 52 with due diligence commences and prosecutes an action against the person threatened for infringement of the trade mark.
(3) Nothing in this section shall render a legal practitioner or a registered trade marks agent liable to an action under this section in respect of an act done by him in his professional capacity on behalf of a client.
(4) A suit under sub-section (1) shall not be instituted in any court inferior to a District Court.
Section 143. Address for service.
An address for service stated in an application or notice of opposition shall for the purposes of the application or notice of opposition be deemed to be the address of the applicant or opponent, as the case may be, and all documents in relation to the application or notice of opposition may be served by leaving them at or sending them by post to the address for service of the applicant or opponent, as the case may be.
Section 144. Trade usages, etc., to be taken into consideration.
In any proceeding relating to a trade mark, the tribunal shall admit evidence of the usages of the trade concerned and of any relevant trade mark or trade name or get up legitimately used by other persons.
Section 145. Agents.
Where, by or under this Act, any act, other than the making of an affidavit, is required to be done before the Registrar by any person, the act may, subject to the rules made in this behalf, be done instead of by that person himself, by a person duly authorised in the prescribed manner, who is—
(a) a legal practitioner, or
(b) a person registered in the prescribed manner as a trade marks agent, or
(c) a person in the sole and regular employment of the principal.
Section 146. Marks registered by an agent or representative without authority.
If an agent or a representative of the proprietor of a registered trade mark, without authority uses or attempts to register or registers the mark in his own name, the proprietor shall be entitled to oppose the registration applied for or secure its cancellation or rectification of the register so as to bring him as the registered proprietor of the said mark by assignment in his favour:
Provided that such action shall be taken within three years of the registered proprietor of the trade mark becoming aware of the conduct of the agent or representative.
Section 147. Indexes.
There shall be kept under the direction and supervision of the Registrar—
(a) an index of registered trade marks,
(b) an index of trade marks in respect of which applications for registration are pending,
(c) an index of the names of the proprietors of registered trade marks, and
(d) an index of the names of registered users.
Section 148. Documents open to public inspection.
(1) Save as otherwise provided in sub-section (4) of section 49,—
(a) the register and any document upon which any entry in the register is based;
(b) every notice of opposition to the registration of a trade mark application for rectification before the Registrar, counter-statement thereto, and any affidavit or document filed by the parties in any proceedings before the Registrar;
(c) all regulations deposited under section 63 or section 74, and all applications under section 66 or section 77 for varying such regulations;
(d) the indexes mentioned in section 147; and
(e) such other documents as the Central Government may, by notification in the Official Gazette, specify, shall, subject to such conditions as may be prescribed, be open to public inspection at the Trade Marks Registry:
Provided that when such register is maintained wholly or partly on computer, the inspection of such register under this section shall be made by inspecting the computer print-out of the relevant entry in the register so maintained on computer.
(2) Any person may, on an application to the Registrar and on payment of such fees as may be prescribed, obtain a certified copy of any entry in the register or any document referred to in sub-section (1).
Section 149. Reports of Registrar to be placed before Parliament.
The Central Government shall cause to be placed before both Houses of Parliament once a year a report respecting the execution by or under the Registrar of this Act.
Section 150. Fees and surcharge.
(1) There shall be paid in respect of applications and registration and other matters under this Act such fees and surcharge as may be prescribed by the Central Government.
(2) Where a fee is payable in respect of the doing of an act by the Registrar, the Registrar shall not do that act until the fee has been paid.
(3) Where a fee is payable in respect of the filing of a document at the Trade Marks Registry, the document shall be deemed not to have been filed at the registry until the fee has been paid.
Section 151. Savings in respect of certain matters in Chapter XII.
Nothing in Chapter XII shall—
(a) exempt any person from any suit or other proceeding which might, but for anything in that Chapter, be brought against him; or
(b) entitle any person to refuse to make a complete discovery, or to answer any question or interrogatory in any suit or other proceeding, but such discovery or answer shall not be admissible in evidence against such person in any such prosecution for an offence under that Chapter or against clause (h) of section 112 of the Customs Act, 1962 (52 of 1962), relating to confiscation of goods under clause (d) of section 111 of that Act and notified by the Central Government under clause (n) of sub-section (2) of section 11 thereof for the protection of trade marks relating to import of goods; or
(c) be construed so as to render liable to any prosecution or punishment any servant of a master resident in India who in good faith acts in obedience to the instructions of such master, and, on demand made by or on behalf of the prosecutor, has given full information as to his master and as to the instructions which he has received from his master.
Section 152. Declaration as to ownership of trade mark not registrable under the Registration Act, 1908.
Notwithstanding anything contained in the Registration Act, 1908 (16 of 1908), no document declaring or purporting to declare the ownership or title of a person to a trade mark other than a registered trade mark shall be registered under that Act.
Section 153. Government to be bound.
The provisions of this Act shall be binding on the Government.
Section 154. Special provisions relating to applications for registration from citizens of convention countries.
(1) With a view to the fulfilment of a treaty, convention or arrangement with any country or country which is a member of a group of countries or union of countries or Inter-Governmental Organisation outside India which affords to citizens of India similar privileges as granted to its own citizens, the Central Government may, by notification in the Official Gazette, declare such country or group of countries or union of countries or Inter-Governmental Organisation to be a convention country or group of countries or union of countries, or Inter-Governmental Organisations as the case may be, for the purposes of this Act.
(2) Where a person has made an application for the registration of a trade mark in a convention country or country which is a member of a group of countries or union of countries or Inter-Governmental Organisation and that person, or his legal representative or assignee, makes an application for the registration of the trade mark in India within six months after the date on which the application was made in the convention country or country which is a member of a group of countries or union of countries or Inter-Governmental Organisations the trade mark shall, if registered under this Act, be registered as of the date on which the application was made in the convention country or country which is a member of a group of countries or union of countries or Inter-Governmental organisations and that date shall be deemed for the purposes of this Act to be the date of registration.
(3) Where applications have been made for the registration of a trade mark in two or more convention countries or country which are members of group of countries or union of countries or Inter-Governmental Organisation the period of six months referred to in the last preceding sub-section shall be reckoned from the date on which the earlier or earliest of those applications was made.
(4) Nothing in this Act shall entitle the proprietor of a trade mark to recover damages for infringement which took place prior to the date of application for registration under this Act.
Section 155. Provision as to reciprocity.
Where any country or country which is a member of a group of countries or union of countries or Inter-Governmental Organisation specified by the Central Government in this behalf by notification in the Official Gazette does not accord to citizens of India the same rights in respect of the registration and protection of trade marks as it accords to its own nationals, no national of such country or country which is a member of a group of countries or union of countries or Inter-Governmental Organisation, as the case may be, shall be entitled, either solely or jointly with any other person,—
(a) to apply for the registration of, or be registered as the proprietor of, a trade mark;
(b) to be registered as the assignee of the proprietor of a registered trade mark; or
(c) to apply for registration or be registered as a registered user of a trade mark under section 49.
Section 156. Power of Central Government to remove difficulties.
(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 may appear to be necessary for removing the difficulty:
Provided that no order shall be made under this section after the expiry of five years from the commencement of this Act.
(2) Every order made under this section shall, as soon as may be after it is made, be laid before each House of Parliament.
Section 157. Power to make rules.
(1) The Central Government may, by notification in the Official Gazette and subject to the conditions of previous publication, 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:—
(i) the matters to be included in the Register of Trade Marks under sub-section (1) of section 6, and the safeguards to be observed in the maintenance of records on computer floppies or diskettes or in any other electronic form under sub-section (2) of that section;
(ii) the manner of publication of alphabetical index of classification of goods and services under sub-section (1) of section 8;
(iii) the manner in which the Registrar may notify a word as an international non-proprietary name under section 13:
(iv) the manner of making an application for dissolution of an association under sub-section (5) of section 16;
(v) the manner of making an application for registration of a trade mark under sub-section (1) of section 18;
(vi) the manner of advertising of an application for registration under sub-section (1), and the manner of notifying corrections or amendments under sub-section (2), of section 20;
(vii) the manner of making an application and the fee payable for such application giving notice under sub-section (1) and sending counter-statements under sub-section (2) and submission of evidence and the time therefor under sub-section (4) of section 21;
(viii) the form of certificate of registration under sub-section (2), and the manner of giving notice to the applicant under sub-section (3) of section 23;
(ix) the forms of application for renewal and restoration the time within which such application is to be made and fee and surcharge if any payable with each application, under section 25 and the time within which the Registrar shall send a notice and the manner of such notice under sub-section (3) of that section;
(x) the manner of submitting statement of cases under sub-section (2) of section 40;
(xi) the manner of making an application by the proprietor of a trade mark under section 4l;
(xii) the manner of making an application for assignment or transmission of a certification trade mark under section 43;
(xiii) the manner of making an application to the Registrar to register title under sub-section (1) of section 45;
(xiv) the manner in which and the period within which an application is to be made under sub-section (4) of section 46;
(xv) the manner of marking an application under sub-section (2) of section 47;
(xvi) the manner of making an application, documents and other evidence to accompany such application under sub-section (1) and the manner in which notice is to be issued under sub-section (3) of section 49;
(xvii) the manner of making an application under sub-section (1), the manner of issuing a notice under sub-section (2) and the procedure for cancelling a registration under sub-section (3) of section 50;
(xviii) the manner of making applications under sub-sections (1) and (2), the manner of giving notice under sub-section (4) and the manner of service of notice of rectification under sub-section (5) of section 57;
(xix) the manner of making an application under section 58;
(xx) the manner of making an application under sub-section (1), the manner of advertising an application, time and manner of notice by which application may be opposed under sub-sections (2) and (3) of section 59;
(xxi) the manner of advertisement under sub-section (2) of section 60;
(xxii) the other matters to be specified in the regulations under sub-section (2) of section 63;
(xxiii) the manner of making an application under sub-section (1) of section 71;
(xxiv) the manner of advertising an application under section 73;
(xxv) the manner of making an application under section 77;
(xxvi) the classes of goods under section 79;
(xxvii) the conditions and restrictions under sub-section (2) of section 80;
(xxviii) determination of character of textile goods by sampling under section 82;
(xxix) the salaries and allowances payable to and the other terms and conditions of service of the Chairman, Vice-Chairman and other Members under sub-section (1) of section 88;
(xxx) the procedure for investigation of misbehaviour or incapacity of the Chairman, Vice-Chairman and other members under sub-section (3) of section 89;
(xxxi) the salaries and allowances and other conditions of service of the officers and other employees of the Appellate Board under sub-section (2) and the manner in which the officers and other employees of the Appellate Board shall discharge their functions under sub-section (3) of section 90;
(xxxii) the form of making an appeal, the manner of verification and the fee payable under sub-section (3) of section 91;
(xxxiii) the form in which and the particulars to be included in the application to the Appellate Board under sub-section (1) of section 97;
(xxxiv) the manner of making an application for review under clause (c) of section 127;
(xxxv) the time within which an application is to be made to the Registrar for exercising his discretionary power under section 128;
(xxxvi) the manner of making an application and the fee payable therefor under sub-section (1) of section 131;
(xxxvii) the manner of making an application under sub-section (1) and the period for withdrawal of such application under sub-section (2) of section 133;
(xxxviii) the manner of authorising any person to act and the manner of registration as a trade mark agent under section 145;
(xxxix) the conditions for inspection of documents under sub-section (1) and the fee payable for obtaining a certified copy of any entry in the register under sub-section (2) of section 148;
(xl) the fees and surcharge payable for making applications and registration and other matters under section 150;
(xli) any other matter which is required to be or may be prescribed.
(3) The power to make rules conferred by this section shall include the power to give retrospective effect in respect of the matters referred to in clauses (xxix) and (xxxi) of sub-section (2) from a date not earlier than the date of commencement of this Act, but no retrospective effect shall be given to any such rule so as to prejudicially affect the interests of any person to whom sub-rule may be applicable.
(4) 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.
Section 158. Amendments.
The enactment specified in the Schedule shall be amended in the manner specified therein.
Section 159. Repeal and savings.
(1) The Trade and Merchandise Marks Act, 1958 (43 of 1958) is hereby repealed.
(2) Without prejudice to the provisions contained in the General Clauses Act, 1897 (10 of 1897), with respect to repeals, any notification, rule, order, requirement, registration, certificate, notice, decision, determination, direction, approval, authorisation, consent, application, request or thing made, issued, given or done under the Trade and Merchandise Marks Act, 1958 (43 of 1958) shall, if in force at the commencement of this Act, continue to be in force and have effect as if made, issued, given or done under the corresponding provisions of this Act.
(3) The provisions of this Act shall apply to any application for registration of a trade mark pending at the commencement of this Act and to any proceedings consequent thereon and to any registration granted in pursuance thereof.
(4) Subject to the provisions of section 100 and notwithstanding anything contained in any other provision of this Act, any legal proceeding pending in any court at the commencement of this Act may be continued in that court as if this Act had not been passed.
(5) Notwithstanding anything contained in this Act, where a particular use of a registered trade mark is not an infringement of a trade mark registered before the commencement of this Act, then, the continued use of that mark shall not be an infringement under this Act.
(6) Notwithstanding anything contained in sub-section (2), the date of expiration of registration of a trade mark registered before the commencement of this Act shall be the date immediately after the period of seven years for which it was registered or renewed:
Provided that the registration of a defensive trade mark referred to in section 47 of the Trade and Merchandise Marks Act, 1958 (43 of 1958), shall cease to have effect on the date immediately after the expiry of five years of such commencement or after the expiry of the period for which it was registered or renewed, whichever is earlier.
THE SCHEDULE
(See section 158) Amendments
| Year |
Act No. |
Short title |
Amendment |
| 1 |
2 |
3 |
4 |
| 1956 |
1 |
The CompaniesAct, 1956 |
(1) In section 20, for sub-section (2), the following sub sections shall Act, 1956 be substituted, namely:- |
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(2) Without prejudice to the generality of the foregoing power, a name which is identical with, or too nearly resembles,- |
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(i) the name by which a company in existence has been previously registered, or |
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(ii) a registered trade mark, or a trade mark which is subject of an application for registration, of any other person under the Trade Marks Act, 1999. |
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May be deemed to be undesirable by the Central Government within the meaningof sub-section (1). |
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(3) The Central Government may, before deeming a name as undesirable under clause (ii) of sub section (2), consult and Registrar of Trade Marks. |
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(II) In section 22, in sub-section (1), |
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(i) for the portion beginning with “if, through” and ending with “the fist’ mentioned company” the following shall be substituted, namely:- |
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“If, through inadvertence or otherwise, a company on its first registration or on its registration by a new name, is registered by a name which,- |
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(i) in the opinion of the Central Government, is identical with, or too nearly resembles, the name by which a company in existence has been previously registered, whether under this Act or any previous companies law, the first mentioned company, or |
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(ii) on an application by a registered proprietor of a trade mark, is in the opinion of the Central Government identical with, or too nearly resembles, a registered trade mark of such proprietor under the Trade Marks Act, 1999 such company- |
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(ii) the following proviso shall be added, namely :- |
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“Provided that no application under clause (ii) made by a registered proprietor of a trade mark after five years of coming to notice of registration of the company shall be considered by the Central Government”. |
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November 30, 2014
Section 1. Short titled, extent and commencement.
(1) This Act may be called the Child Marriage Restraint Act (1929).
(2) It extends to the whole of Pakistan and applies to all citizens of Pakistan wherever they may be.
(3) It shall come into force on the 1st day of April, 1939.
Section 2. Definitions.
In this Act, unless there is anything repugnant in the subject or context,
(a) “child” means a person who, if a male, is under eighteen years of age, and if a female, is under sixteen years of age;
(b) “child marriage” means a marriage to which either of the contracting parties is a child;
(c) “contracting party” to a marriage means either of the parties whose marriage is or is about to be thereby solemnized;
(d) “minor” means person of either sex who is under eighteen years of age,
(e) “Union Council” means the Union Council or the Town Committee constituted under the Law relating to Local Government for the time being in force.
PUNJAB AMENDMENT IN SECTION 2:
(i) at the end of clause ©, the word “and” shall be added;
(ii) the comma appearing at the end of clause (d) shall be replaced by a full stop; and
(iii) clause e shall be omitted.
Punjab Ordinance, 23 of 1971.
Section 3. Omitted by Muslim Family Laws Ordinance, 1961 (VIII of 1961 S. 12 (w.e.f. 15.07.1961).
Section 4. Punishment for male adult above eighteen years of age marrying a child.
Whoever, being a male above eighteen years of age, contracts child marriage shall be punishable with simple imprisonment which may extend to one month, or with fine which may extend to one thousand rupees, or with both.
Section 5. Punishment for solemnizing a child marriage.
Whoever performs, conducts or directs any child marriage shall be punishable with simple imprisonment which may extend to one month, or with fine which may extend to one thousand rupees, or with both, unless he proves that he had reason to believe that the marriage was not a child marriage.
Section 6. Punishment for parent or guardian concerned in a child marriage.
(1) Where a minor contracts a child marriage any person having charge of the minor, whether as parent or guardian or in any other capacity, lawful or unlawful, who does any act to promote the marriage or permits it to be solemnized, or negligently fails to prevent it from being solemnized, shall be punishable with simple imprisonment which may extend to one month, or with fine which may extend to one thousand rupees, or with both:
Provided that no woman shall be punishable with imprisonment.
(2) For the purpose of this section, it shall be presumed, unless and until the contrary is proved, that where a minor has contracted a child marriage, the person having charge of such minor has negligently failed to prevent the marriage from being solemnized.
Section 7. Imprisonment not to be awarded for offence under section 3.
Notwithstanding anything contained in section 25 of the General Clauses At, 1897, or section 64 of the Pakistan Penal Code, Court sentencing an offender under section 3 shall not be competent to direct that, in default of payment of the fine imposed, he shall undergo only term of imprisonment.
Section 8. Jurisdiction under this Act.
Notwithstanding anything contained in section 90 of the Code of Criminal Procedure, 1898, no Court other than that of a Magistrate of the First Class shall take cognizance of or try any offence under this Act.
Section 9. Mode of taking cognizance of offence.
No Court shall take cognizance of any offence under this Act except on a complaint made by the Union Council, or if there is no Union Council in the area, by such authority as the Provincial Government may in this behalf prescribe, and such cognizance shall in no case be taken after the expiry of one year from the date on which the offence is alleged to have been committed.
Punjab Amendment
In section 9:
The words and commas “except on a complaint made by the Union Council, or if there is no Union Council in the area, by such authority as the Provincial Government may in this behalf prescribe, and such cognizance shall in no case be taken” occurring after the words “under this Act” and before the words “after the expiry” shall be omitted.
Punjab Ordinance, 23 of 1971, S. 3.
Section 10. Preliminary inquiries into offences under this Act.
The Court taking cognizance of an offence under this Act shall, unless it dismisses the complaint under section 203 of the Code of Criminal Procedure, 1898, either itself make an inquiry under section 202 of that Code or direct a Magistrate of the First Class subordinate to it to make such inquiry.
Section 11. Omitted by Muslim Family Laws Ordinance, 1961.
Section 12. Power to issue injunction prohibiting marriage in contravention of this Act.
(1) Notwithstanding anything to the contrary contained in this Act, the Court may, if satisfied from information laid before it through a complaint or otherwise that a child marriage in contravention of this Act has been arranged or is about to be solemnized, issue an injunction against any of the persons mentioned in sections 3, 4, 5 and 9 of this Act prohibiting such marriage.
(2) No injunction under sub-section (1) shall be issued against any person unless the Court has previously given notice to such person, and has afforded him an opportunity to show-cause against the issue of the injunction.
(3) The Court may either on its own motion or on the application of any person aggrieved, rescind or alter any order made under sub-section (1).
(4) Where such an application is received, the Court shall afford the applicant an early opportunity of appearing before it either in person or by pleader, and if the Court rejects the application wholly or in part, it shall record in writing its reasons for so doing.
(5) Whoever, knowing that an injunction has been issued against him under sub-section (1) of this section disobeys such injunction shall be punished with imprisonment of either description for a term which may extend to three months, or with fine which may extend to one thousand rupees, or with both:
Provided that no woman shall be punishable with imprisonment.
November 30, 2014
CHAPTER 1: Preliminary
Section 1: Short title, extent and commencement.
- (1) This Act may be called the Income-tax Act, 1961.
(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
Section 2: Definitions.
- In this Act, unless the context otherwise requires,—
[(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.
- —For the purposes of this sub-clause, “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 year51;]]
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.]
- —In its application to an Indian company whose business consists mainly in the construction of ships or in the manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other form of power, item (B) shall have effect as if for the words “not less than fifty per cent”, the words “not less than forty per cent” had been substituted ;]]
(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]].
- —For the purposes of this sub-clause, “trust” includes any other legal obligation ;]
(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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Section 3: 61[“Previous year” defined.
- For the purposes of this Act, “previous year” means the financial year immediately preceding the assessment year :
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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CHAPTER II: BASIS OF CHARGE
Section 4: Charge of income-tax.
- 62 63(1) Where any Central Act enacts that income-tax64 shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year 65in accordance with, and 66[subject to the provisions (including provisions for the levy of additional income-tax) of, this Act] in respect of the total income65 of the previous year 67[* * *] of every person :
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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Section 5: Scope of total income.
- 68 69(1) Subject to70 the provisions of this Act, the total income65 of any previous year of a person who is a resident includes all income from whatever source derived which—
(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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Section 5A: 75[Apportionment of income between spouses governed by Portuguese Civil Code.
- (1) Where the husband and wife are governed by the system of commu- nity of property (known under the Portuguese Civil Code of 1860 as “COMMUNIAO DOS BENS”) in force in the State of Goa and in the Union territories of Dadra and Nagar Haveli and Daman and Diu, the income of the husband and of the wife under any head of income shall not be assessed as that of such community of proper-ty (whether treated as an association of persons or a body of individuals), but such income of the husband and of the wife under each head of income (other than under the head “Salaries”) shall be apportioned equally between the husband and the wife and the income so apportioned shall be included separately in the total income of the husband and of the wife respectively, and the remaining provisions of this Act shall apply accordingly.
(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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Section 6: Residence in India.
- 76 For the purposes of this Act,—
(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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Section 7: Income deemed to be received.
- The following incomes shall be deemed to be received in the previous year :—
(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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Section 8: Dividend income.
- 86[For the purposes of inclusion in the total income of an assessee,—
(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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Section 9: Income deemed to accrue or arise in India.
- 88 89(1) The following incomes shall be deemed90 to accrue or arise in India :—
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
CHAPTER III: INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME
Section 10: Incomes not included in total income.
- In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included—
(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.
- —For the purposes of this clause, the share of a partner in the total income of a firm separately assessed as such shall, notwithstanding anything contained in any other law, be an amount which bears to the total income of the firm the same proportion as the amount of his share in the profits of the firm in accordance with the partnership deed bears to such profits ;]
(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.
- —For the purposes of this clause,—
(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.
- —For the purposes of this clause, “family”, in relation to an individual, means—
(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].
- —For the purposes of this clause 49[and clause (6B)],—
(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.
- —In this clause, “consultant” means—
(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[* * *]
- —73[In this clause, and in clause (10AA)], “salary” shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule ;]
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[* * *]
- —For the purposes of sub-clause (ii),—
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.]
- —For the purposes of this clause—
(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.]
- —For the purposes of this sub-clause, the expression “non-resident Indian” shall have the meaning assigned to it in clause (e) of section 115C;]
(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.
- —For the purposes of this sub-clause, “scheduled bank” shall have the meaning assigned to it in 58[clause (ii) of the Explanation to clause (viia) of sub-section (1) of section 36];]
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.]
- —For the purposes of 88[items (f) 89[, (fa)] and (g)], the expression 90“foreign currency” shall have the meaning assigned to it in 91[the Foreign Exchange Management Act, 1999 (42 of 1999)];]
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.
- —For the purposes of this sub-clause, the expression “public sector bank” shall have the meaning assigned to it in the Explanation to clause (23D);]
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]].]
- —For the purposes of this clause, the expression “foreign enterprise” means a person who is a non-resident;]
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.]
- —For the purposes of this clause,—
(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.
- —For the purposes of this clause, 76“khadi” and “village industries” have the meanings respectively assigned to them in the Khadi and Village Industries Commission Act, 1956 (61 of 1956);]
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.
- —For the purposes of this clause, “European Economic Community” means the European Economic Community established by the Treaty of Rome of 25th March, 1957;]
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.]
- —For the purposes of this clause,—
(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.
- —For the purposes of this clause,—
(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.
- —For the purposes of this clause,—
(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.
- —For the purposes of this clause, “minority community” means a community notified15 as such by the Central Government in the Official Gazette in this behalf;]
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.
- —In this clause, “Tea Board” means the Tea Board established under section 4 of the Tea Act, 1953 (29 of 1953);]
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.
- —In this clause, “concerned Board” means,—
(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.
- —For the purposes of this clause, the expressions “investor” and “securitisation trust” shall have the meanings respectively assigned to them in the Explanation below section 115TC;]
(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.
- —For the purposes of this clause, the expression “compensation or consideration” includes the compensation or con-sideration enhanced or further enhanced by any court, Tribunal or other authority;
(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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Section 10A: 57[Special provision in respect of newly established undertakings in free trade zone, etc.58
- (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the export59 of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture59 or produce such articles or things or computer software, as the case may be, shall be allowed from the total income59 of the assessee :
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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Section 10AA: 86[Special provisions in respect of newly established Units in Special Economic Zones.87
- (1) Subject to the provisions of this section, in computing the total income of an assessee, being an entrepreneur as referred to in clause (j) of section 288 of the Special Economic Zones Act, 2005, from his Unit, who begins to manufacture or produce articles or things or provide any services during the previous year relevant to any assessment year commencing on or after the 1st day of April, 200689, a deduction of—
(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).
- —For the removal of doubts, it is hereby declared that an undertaking, being the Unit, which had already availed, before the commencement of the Special Economic Zones Act, 2005, the deductions referred to in section 10A for ten consecutive assessment years, such Unit shall not be eligible for deduction from income under this section :
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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Section 10B: 95[Special provisions in respect of newly established hundred per cent export-oriented undertakings96.
- (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by a hundred per cent export-oriented undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee :
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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Section 10BA: 16[Special provisions in respect of export of certain articles or things.16a
- (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the export out of India of eligible articles or things, shall be allowed from the total income of the assessee :
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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Section 10BA: 16[Special provisions in respect of export of certain articles or things.16a
- (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the export out of India of eligible articles or things, shall be allowed from the total income of the assessee :
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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Section 10C: 20[Special provision in respect of certain industrial undertakings in North-Eastern Region.
- (1) Subject to the provisions of this section, any profits and gains derived by an assessee from an industrial undertaking, which has begun or begins to manufacture or produce any article or thing on or after the 1st day of April, 1998 in any Integrated Infrastructure Development Centre or Industrial Growth Centre located in the North-Eastern Region (hereafter in this section referred to as the industrial undertaking) shall not be included in the total income of the assessee.
(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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Section 11: 23Income24 from property held for charitable or religious purposes.
- 25 (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income—
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.
- —In this sub-section,—
(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).
- —In this clause, “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);
(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.
- —For the purposes of this clause,—
(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.
- —“Immovable property” does not include any machi-nery or plant (other than machinery or plant installed in a building for the convenient occupation of the building) even though attached to, or permanently fastened to, anything attached to the earth;]
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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Section 12: 73[Income of trusts or institutions from contributions.
- 74 75[(1)] 76Any voluntary contributions77 received by a trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes (not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution) shall for the purposes of section 11 be deemed to be income derived from77 property held under trust wholly for charitable or religious purposes and the provisions of that section and section 13 shall apply accordingly.]
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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Section 12A: 82[83[Conditions for applicability of sections 11 and 12.]
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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Section 12AA: 1[Procedure for registration.
- (1) The 2[***] 2a[Principal Commissioner or] Commissioner, on receipt of an application for registration of a trust or institution made under clause (a) 99[or clause (aa) of sub-section (1)] of section 12A, shall—
(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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Section 13: 7[Section 11 not to apply in certain cases.
- 8 (1) Nothing contained in section 11 9[or section 12] shall operate so as to exclude from the total income of the previous year of the person in receipt thereof—
(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.
- —Where the trust or institution has any other income in addition to profits and gains of business, the provisions of clause (iii) of this proviso shall not apply unless the trust or institution maintains separate books of account in respect of such business.]
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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Section 13A: 41[Special provision relating to incomes of political parties.
- Any income of a political party which is chargeable under the head 42[***] “Income from house property” or “Income from other sources” or 43[“Capital gains” or] any income by way of voluntary contributions received by a political party from any person shall not be included in the total income of the previous year of such political party :
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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Section 13B: 48[Special provisions relating to voluntary contributions received by electoral trust.
- Any voluntary contributions received by an electoral trust shall not be included in the total income of the previous year of such electoral trust, if—
(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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Chapter IV: Computation of total income
Section -14: Heads of income
Heads of income.
- 50 Save as otherwise provided by this Act, all income shall, for the purposes of charge of income-tax and computation of total income, be classified under the following heads of income :—
- —Salaries.
- —51[***]
- —Income from house property.
- —Profits and gains of business or profession.
- —Capital gains.
- —Income from other sources.
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Section 14A: 52[Expenditure incurred in relation to income not includible in total income53.
- 54[(1)] For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred55 by the assessee in relation to55 income which does not form part of the total income55 under this Act.]
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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Section 15: Salaries
- 58 59The following income60 shall be chargeable to income-tax under the head “Salaries” —
(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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Section 16: Deductions from salaries.
- 63 The income chargeable under the head “Salaries” shall be computed after making the following deductions, namely :—
(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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Section 17: “Salary”, “perquisite” and “profits in lieu of salary” defined.
- 70 71For the purposes of sections 15 and 16 and of this section,—
(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.]
- —For the purposes of clause (2),—
(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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Section 18, Income-tax Act, 1961-2014
17[***]
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Section 19, Income-tax Act, 1961-2014
17[***]
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Section 20, Income-tax Act, 1961-2014
17[***]
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Section 21, Income-tax Act, 1961-2014
17[***]
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Section 22: Income from house property
Income from house property.
- 18 19The annual value of property consisting of any buildings20 or lands appurtenant20 thereto of which the assessee is the owner20, other than such portions of such property as he may occupy20 for the purposes of any business or profession carried on by him the profits of which are chargeable to income-tax, shall be chargeable to income-tax under the head “Income from house property” .
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Section 23: 21[Annual value how determined.
- (1) For the purposes of section 22, the annual value of any property shall be deemed to be—
(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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Section 24: 25[ Deductions from income from house property.
- Income chargeable under the head “Income from house property” shall be computed after making the following deductions, namely:—
(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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Section 25: Amounts not deductible from income from house property.
- Notwithstanding anything contained in section 24, any 28[***] 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 and in respect of which there is no person in India who may be treated as an agent under section 163 shall not be deducted in computing the income chargeable under the head “Income from house property” .
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Section 25A: 29[Special provision for cases where unrealised rent allowed as deduction is realised subsequently.
- Where a deduction has been made under clause (x) of sub-section (1) of section 24 30[as it stood immediately before its substitution by the Finance Act, 2001] in the assessment for any year in respect of rent from property let to a tenant which the assessee cannot realise and subsequently during any previous year the assessee has realised any amount in respect of such rent, the amount so realised shall be deemed to be income chargeable under the head “Income from house property” and accordingly charged to income-tax (without making any deduction under section 23 or section 24 31[as it stood immediately before its substitution by the Finance Act, 2001]) as the income of that previous year, whether the assessee is the owner of that property in that year or not.]
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Section 25AA: 31[Unrealised rent received subsequently to be charged to income-tax.
- Where the assessee cannot realise rent from a property let to a tenant and subsequently the assessee has realised any amount in respect of such rent, the amount so realised shall be deemed to be 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 realised whether or not the assessee is the owner of that property in that previous year.]
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Section 25B: 32[Special provision for arrears of rent received.
- Where the assessee—
(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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Section 26: Property owned by co-owners.
- 34 35Where property consisting of buildings or buildings and lands appurtenant thereto is owned by two or more persons and their respective shares are definite and ascertainable, such persons shall not in respect of such property be assessed as an association of persons, but the share of each such person in the income from the property as computed in accordance with sections 22 to 25 shall be included in his total income.
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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Section 27: “Owner of house property”, “annual charge”, etc., defined.
- 37 For the purposes of sections 22 to 26—
(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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Section 28: Profits and gains of business or profession
Profits and gains of business or profession.
- 41 42The following income shall be chargeable to income-tax under the head “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.
- —For the purposes of this clause,—
(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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Section 29: Income from profits and gains of business or profession, how computed.
- 57The income referred to in section 28 shall be computed in accordance with the provisions contained in sections 30 to 58[43D].
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Section 30: Rent, rates, taxes, repairs and insurance for buildings.
- 57 In respect of rent, rates, taxes, repairs and insurance for premises, used for the purposes of the business59 or profession, the following deductions shall be allowed—
(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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Section 31: Repairs and insurance of machinery, plant and furniture.
- 61 62In respect of repairs and insurance of machinery, plant or furniture used for the purposes of the business or profession, the following deductions shall be allowed—
(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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Section 32: Depreciation.
- 65 (1) 66[In respect of depreciation of—
(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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Section 32A: 1[Investment allowance.2
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.]
- —For the purposes of this sub-section and 13[sub-sections (2B) 14[, (2C)] and (4)],—
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.
- —The provisions of this sub-section 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.
(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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Section 32AB: 35[Investment deposit account.
- (1) Subject to the other provisions of this section, where an assessee, whose total income includes income chargeable to tax under the head “Profits and gains of business or profession”, has, out of such income,—
(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].
- —In this section,—
(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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Section 32AC: 62[Investment in new plant or machinery.
- (1) Where an assessee, being a company, engaged in the business of manufacture or production of any article or thing, acquires and installs new asset after the 31st day of March, 2013 but before the 1st day of April, 2015 and the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees, then, there shall be allowed a deduction,—
(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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Section 33: Development rebate.
- 63[(1)(a) In respect of a new ship64 or new machinery or plant (other than office appliances or road transport vehicles) which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section and of section 34, be allowed 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, a sum by way of development rebate as specified in clause (b).
(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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Section 33A: 82[Development allowance.
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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Section 33AB: 1[Tea development account 2[,coffee development account and rubber development account].
- (1) Where an assessee carrying on business of growing and manufacturing tea 2[or coffee or rubber] in India has, before the expiry of six months from the end of the previous year or before 2[the due date of] furnishing the return of his income, 3[whichever is earlier,—
(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.
- —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, 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.
- —In this section,—
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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Section 33ABA: 21[Site Restoration Fund.22
- (1) Where an assessee is carrying on business consisting of the prospecting for, or extraction or production of, petroleum or natural gas or both in India and in relation to which the Central Government has entered into an agreement with such assessee for such business, has before the end of the previous year—
(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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Section 33AC: 26[Reserves for shipping business.
- (1) 27[In the case of an assessee, being a Government company or a public company formed and registered in India with the main object of carrying on the business of operation of ships, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction of an amount not exceeding fifty per cent of profits derived from the business of operation of ships (computed under the head “Profits and gains of business or profession” and before making any deduction under this section), 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 utilised in the manner laid down in sub-section (2) :]
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.]
- —For the purposes of this section,—
(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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Section 33B: 38[Rehabilitation allowance.
- Where the business of any industrial undertaking carried on in India is discontinued in any previous year by reason of extensive damage to, or destruction of, any building, machinery, plant or furniture owned by the assessee and used for the purposes of such business as a direct 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),
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.]
- —In this section, “industrial undertaking” means any undertaking which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining.]
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Section 34: Conditions for depreciation allowance and development rebate.
- (1) 40[***]
(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.]
- —[Omitted by the Finance Act, 1990, w.r.e.f. 1-4-1962. Earlier, it was inserted by the Finance Act, 1966, w.r.e.f. 1-4-1962.]
(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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Section 34A: 46[Restriction on unabsorbed depreciation and unabsorbed investment allowance for limited period in case of certain domestic companies.
- (1) In computing the profits and gains of the business of a domestic company in relation to the previous year relevant to the assessment year commencing on the 1st day of April, 1992, where effect is to be given to the unabsorbed depreciation allowance or unabsorbed investment allowance or both in relation to any previous year relevant to the assessment year commencing on or before the 1st day of April, 1991, the deduction shall be restricted to two-third of such allowance or allowances and the balance,—
(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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Section 35: 47[Expenditure on scientific research.
- 48 (1) In respect of expenditure on scientific research, the following deductions shall be allowed—
(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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Section 35A: 22[Expenditure on acquisition of patent rights or copyrights.
- (1) In respect of any expenditure of a capital nature incurred after the 28th day of February, 1966 23[but before the 1st day of April, 1998], on the acquisition of patent rights or copyrights (hereafter, in this section, referred to as rights) used for the purposes of the business, there shall, subject to and in accordance with the provisions of this section, be allowed for each of the relevant previous years, a deduction equal to the appropriate fraction of the amount of such expenditure.
- —For the purposes of this section,—
(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.
- —Where the whole or any part of the rights is sold 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 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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Section 35AB: 26[Expenditure on know-how.
- (1) Subject to the provisions of sub-section (2), where the assessee has paid in any previous year 27[relevant to the assessment year commencing on or before the 1st day of April, 1998] any lump sum consideration for acquiring28 any know-how for use 28for the purposes of his business, one-sixth of the amount so paid shall be deducted in computing the profits and gains of the business for that previous year, and the balance amount shall be deducted in equal instalments for each of the five immediately succeeding previous years.
(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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Section 35ABB: 30[Expenditure for obtaining licence to operate telecommunication services.
- (1) In respect of any expenditure, being in the nature of capital expenditure, incurred for acquiring any right to operate telecommunication services 31[either before the commencement of the business to operate telecommunication services or thereafter at any time during any previous year] and for which payment has actually been made to obtain a licence, there shall, subject to and in accordance with the provisions of this section, be allowed for each of the relevant previous years, a deduction equal to the appropriate fraction of the amount of such expenditure.
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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Section 35AC: 35[Expenditure on eligible projects or schemes.36
- (1) Where an assessee incurs any expenditure by way of payment of any sum to a public sector company or a local authority or to an association or institution approved37 by the National Committee38 for carrying out any eligible project or scheme, the assessee shall, subject to the provisions of this section, be allowed a deduction of the amount of such expenditure incurred during the previous year :
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.]
- —For the purposes of this section,—
(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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Section 35AD: 47[Deduction in respect of expenditure on specified business.
- (1) An assessee shall be allowed a deduction in respect of the whole of any expenditure of capital nature incurred, wholly and exclusively, for the purposes of any specified business carried on by him during the previous year in which such expenditure is incurred by him :
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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Section 35B: Export markets development allowance.
- 65[Omitted by the Direct Tax Laws (Amendment) Act, 1987, as amended by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Original section 35B was inserted by the Finance Act, 1968, w.e.f. 1-4-1968.]
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Section 35C: Agricultural development allowance.
- 66[Omitted by the Direct Tax Laws (Amendment) Act, 1987, as amended by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Original section 35C was inserted by the Finance Act, 1968, w.e.f. 1-4-1968.]
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Section 35CC: Rural development allowance.
- 67[Omitted by the Direct Tax Laws (Amendment) Act, 1987, as amended by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. Original section 35CC was inserted by the Finance (No. 2) Act, 1977, w.e.f. 1-9-1977.]
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Section 35CCA: 68[Expenditure by way of payment to associations and institutions for carrying out rural development programmes.
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.]
- —For the purposes of this section, “programme of rural development” shall have the meaning assigned to it in the Explanation to sub-section (1) of section 35CC80.
(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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Section 35CCB: 81[Expenditure by way of payment to associations and institutions for carrying out programmes of conservation of natural resources.
- 82[(1) Where an assessee incurs any expenditure 83[on or before the 31st day of March, 2002] by way of payment of any sum—
(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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Section 35CCC: 88[Expenditure on agricultural extension project.
- (1) Where an assessee incurs any expenditure on agricultural extension project notified by the Board in this behalf in accordance with the guidelines as may be prescribed88a, then, there shall be allowed a deduction of a sum equal to one and one-half times of such expenditure.
(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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Section 35CCD: 89[Expenditure on skill development project.
- (1) Where a company incurs any expenditure (not being expenditure in the nature of cost of any land or building) on any skill development project notified by the Board in this behalf in accordance with the guidelines as may be prescribed89a, then, there shall be allowed a deduction of a sum equal to one and one-half times of such expenditure.
(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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Section 35D: 90[Amortisation of certain preliminary expenses.
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.]
- —In this sub-section—
(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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Section 35DD: 1[Amortisation of expenditure in case of amalgamation or demerger.
- (1) Where an assessee, being an Indian company, incurs any expenditure, on or after the 1st day of April, 1999, wholly and exclusively for the purposes of amalgamation or demerger of an undertaking, the assessee shall be allowed a deduction of an amount equal to one-fifth of such expenditure for each of the five successive previous years beginning with the previous year in which the amalgamation or demerger takes place.
(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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Section 35DDA: 2[Amortisation of expenditure incurred under voluntary retirement scheme.
- (1) Where an assessee incurs any expenditure in any previous year by way of payment of any sum to an employee 3[in connection with] his voluntary retirement, in accordance with any scheme or schemes of voluntary retirement, one-fifth of the amount so paid shall be deducted in computing the profits and gains of the business for that previous year, and the balance shall be deducted in equal instalments for each of the four immediately succeeding previous years.
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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Section 35E: 7[Deduction for expenditure on prospecting, etc., for certain minerals.
- (1) Where an assessee, being an Indian company or a person (other than a company) who is resident in India, is engaged in any operations relating to prospecting for, or extraction or production of, any mineral and incurs, after the 31st day of March, 1970, any expenditure specified in sub-section (2), the assessee shall, in accordance with and subject to the provisions of this section, be allowed for each one of the relevant previous years a deduction of an amount equal to one-tenth of the amount of such expenditure.
(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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Section 36: Other deductions.
- 10 (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28—
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.]
- —Recurring subscriptions paid periodically by shareholders, or subscribers in Mutual Benefit Societies which fulfil such conditions as may be prescribed, shall be deemed to be capital borrowed within the meaning of this clause;
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.
- —For the purposes of this clause, “due date” means the date by which the assessee is required as an employer to credit an employee’s contribution to the employee’s account in the relevant fund under any Act, rule, order or notification issued thereunder or under any standing order, award, contract of service or otherwise;]
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.]
- —For the purposes of this clause,—
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” .
- —For the purposes of this clause, the expressions “comm-odities transaction tax” and “taxable commodities transaction” shall have the meanings respectively assigned to them under Chapter VII of the Finance Act, 2013.]]
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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Section 37: General.
- 97 98(1) 99Any expenditure1 (not being expenditure of the nature described in sections 30 to 36 2[***] and not being in the nature of capital expenditure3 or personal expenses of the assessee), laid out or expended wholly and exclusively3 for the purposes of the business3 or profession shall be allowed in computing the income chargeable under the head “Profits and gains of business or profession” .
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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Section 38: Building, etc., partly used for business, etc., or not exclusively so used.
- 16 (1) Where a part of any premises is used as dwelling house by the assessee,—
(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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Section 39: Managing agency commission.
- [Omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.]
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Section 40: Amounts not deductible.
- Notwithstanding anything to the contrary in sections 30 to 19[38], the following amounts shall not be deducted in computing the income chargeable under the head “Profits and gains of business or profession”,—
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.
- —For the purposes of this sub-clause, “wealth-tax” means wealth-tax chargeable under the Wealth-tax Act, 1957 (27 of 1957), or any tax of a similar character chargeable under any law in force in any country outside India or any tax chargeable under such law with reference to the value of the assets of, or the capital employed in, a business or profession carried on by the assessee, whether or not the debts of the business or profession are allowed as a deduction in computing the amount with reference to which such tax is charged, but does not include any tax chargeable with reference to the value of any particular asset of the business or profession;]
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.
- —For the purposes of this sub-clause, a State Government undertaking includes—
(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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Section 40A: 44[Expenses or payments not deductible in certain circumstances.
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.
- —For the purposes of this sub-section, a person shall be deemed to have a substantial interest in a business or profession, if,—
(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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Section 41: Profits chargeable to tax.
- 70[71(1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first-mentioned person) and subse-quently during any previous year,—
(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.
- —Where the moneys payable in respect of any asset referred to in this sub-section become due 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.
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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Section 42: Special provision for deductions in the case of business for prospecting, etc., for mineral oil.
- 89[(1)] For the purpose of computing the profits or gains of any business consisting of the prospecting for or extraction or production of mineral oils in relation to which the Central Government has entered into an agreement with any person for the association or participation 90[of the Central Government or any person authorised by it in such business] (which agreement has been laid on the Table of each House of Parliament), there shall be made in lieu of, or in addition to, the allowances admissible under this Act, such allowances as are specified in the agreement in relation—
(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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Section 43: Definitions of certain terms relevant to income from profits and gains of business or profession.
- In sections 28 to 41 and in this section, unless the context otherwise requires96—
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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Section 43A: 54[Special provisions consequential to changes in rate of exchange of currency.
- Notwithstanding anything contained in any other provision of this Act, where an assessee has acquired any asset in any previous year from a country outside India for the purposes of his business or profession and, in consequence of a change in the rate of exchange during any previous year after the acquisition of such asset, there is an increase or reduction in the liability of the assessee as expressed in Indian currency (as compared to the liability existing at the time of acquisition of the asset) at the time of making payment—
(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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Section 43B: 57[Certain deductions to be only on actual payment57a.
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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Section 43C: 87[Special provision for computation of cost of acquisition of certain assets.
- (1) Where an asset [not being an asset referred to in sub-section (2) of section 45] which becomes the property of an amalgamated company under a scheme of amalgamation, is sold after the 29th day of February, 1988, by the amalgamated company as stock-in-trade of the business carried on by it, the cost of acquisition of the said asset to the amalgamated company in computing the profits and gains from the sale of such asset shall be the cost of acquisition of the said asset to the amalgamating company, 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 the amalgamating company.
(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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Section 43CA: 88[Special provision for full value of consideration for transfer of assets other than capital assets in certain cases.
- (1) Where the consideration received or accruing as a result of the transfer by an assessee of an asset (other than a capital asset), being land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration received or accruing as a result of such transfer.
(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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Section 43D: 89[Special provision in case of income of public financial institutions, public companies, etc.
- Notwithstanding anything to the contrary contained in any other provision of this Act,—
(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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Section 44: Insurance business.
- 95 Notwithstanding anything to the contrary contained in the provisions of this Act relating to the computation of income chargeable under the head “Interest on securities”, “Income from house property”, “Capital gains” or “Income from other sources”, or in section 199 or in sections 28 to 96[43B], the profits and gains of any business of insurance, including any such business carried on by a mutual insurance company or by a co-operative society, shall be computed in accordance with the rules contained in the First Schedule.
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Section 44A: 97[Special provision for deduction in the case of trade, professional or similar association.
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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Section 44AA: 2[Maintenance of accounts by certain persons carrying on profession or business.
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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Section 44AB: 17[Audit of accounts of certain persons carrying on business or profession.
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.
- —For the purposes of 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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Section 44AC: Special provision for computing profits and gains from the business of trading in certain goods.
- 39[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
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Section 44AD: 40[41Special provision for computing profits and gains of business on presumptive basis.
- (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an eligible assessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, 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) 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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Section 44AE: 45[Special provision for computing profits and gains of business of plying, hiring or leasing goods carriages.
- (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an assessee, who owns not more than ten goods carriages 46[at any time during the previous year] and who is engaged in the business of plying, hiring or leasing such goods carriages, the income of such business chargeable to tax under the head “Profits and gains of business or profession” shall be deemed47 to be the aggregate of the profits and gains, from all the goods carriages owned by him in the previous year, computed in accordance with the provisions of sub-section (2).
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.]
- —For the purposes of this section,—
(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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Section 44AF: 53[Special provisions for computing profits and gains of retail business.
- (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an assessee engaged in retail trade in any goods or merchandise, a sum equal to five per cent of the total turnover in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum as declared by the assessee in his return of income 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” :
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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Section 44B: 56[Special provision for computing profits and gains of shipping business in the case of non-residents.
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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Section 44BB: 59[Special provision for computing profits and gains in connection with the business of exploration, etc., of mineral oils.
- (1) Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A, in the case of an assessee 60[, being a non-resident,] engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils, a sum equal to ten 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” :
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.]
- —For the purposes of this section,—
(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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Section 44BBA: 63[Special provision for computing profits and gains of the business of operation of aircraft in the case of non-residents.
- (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 aircraft, a sum equal to five 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 :—
(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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Section 44BBB: 64[Special provision for computing profits and gains of foreign companies engaged in the business of civil construction, etc., in certain turnkey power projects.
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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Section 44C: 69[Deduction of head office expenditure in the case of non-residents.70
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.
- —For the purposes of this section,—
(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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Section 44D: 76[Special provisions for computing income by way of royalties, etc., in the case of foreign companies.
- Notwithstanding anything to the contrary contained in sections 28 to 44C, in the case of an assessee, being a foreign company,—
(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[***]
- —For the purposes of this section,—
(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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Section 44DA: 84[Special provision for computing income by way of royalties, etc., in case of non-residents.
- (1) The income by way of royalty or fees for technical services received from Government or an Indian concern in pursuance of an agreement made by a non-resident (not being a company) or a foreign company with Government or the Indian concern after the 31st day of March, 2003, where such non-resident (not being a company) or a foreign company carries on business in India through a permanent establishment situated therein, or performs professional services from a fixed place of profession situated therein, and the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed place of profession, as the case may be, shall be computed under the head “Profits and gains of business or profession” in accordance with the provisions of this Act :
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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Section 44DB: 87[Special provision for computing deductions in the case of business reorganization of co-operative banks.
- (1) The deduction under section 32, section 35D, section 35DD or section 35DDA shall, in a case where business reorganisation of a co-operative bank has taken place during the financial year, be allowed in accordance with the provisions of this section.
(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—
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—
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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Section 45: Capital gains
Capital gains.
- 89 90[(1)] Any profits or gains arising from the transfer91 of a capital asset91 effected91 in the previous year shall, save as otherwise provided in sections 92[***] 93[54, 54B, 94[***] 95[96[54D, 97[54E, 98[54EA, 54EB,] 54F 99[, 54G and 54H]]]]], be chargeable to income-tax under the head “Capital gains”, and shall be deemed to be the income of the previous year in which the transfer took place.
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.
- —For the purposes of this sub-section, “capital value of such units” means any amount invested by the assessee in the units referred to in sub-section (2) of section 80CCB.]
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Section 46: Capital gains on distribution of assets by companies in liquidation.
- 14 (1) Notwithstanding anything contained in section 45, where the assets of a company are distributed to its shareholders on its liquidation15, such distribution shall not be regarded as a transfer by the company for the purposes of section 45.
(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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Section 46A: 16[Capital gains on purchase by company of its own shares or other specified securities.
- Where a shareholder or a holder of other specified securities receives any consideration from any company for purchase of its own shares or other specified securities held by such shareholder or holder of other specified securities, then, subject to the provisions of section 48, the difference between the cost of acquisition and the value of consideration received by the shareholder or the holder of other specified securities, as the case may be, shall be deemed to be the capital gains arising to such shareholder or the holder of other specified securities, as the case may be, in the year in which such shares or other specified securities were purchased by the company.
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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Section 47: Transactions not regarded as transfer18.
- 19 Nothing contained in section 45 shall apply to the following transfers :—
(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.
- —For the purposes of this clause, “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;]
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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Section 47A: 61[Withdrawal of exemption in certain cases.
- 62[(1)] Where at any time before the expiry of a period of eight years from the date of the transfer of a capital asset referred to in clause (iv) or, as the case may be, clause (v) of section 47,—
(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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Section 48: 65[Mode of computation.
- 66 The income chargeable under the head “Capital gains” shall be computed, by deducting from the full value of the consideration received or accruing67 as a result of the transfer of the capital asset the following amounts, namely :—
(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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Section 49: Cost with reference to certain modes of acquisition.
- 78 79[(1)] Where the capital asset became the property of the assessee—
(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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Section 50: 6[Special provision for computation of capital gains in case of depreciable assets.
- 7 Notwithstanding anything contained in clause (42A) of section 2, where the capital asset is an asset forming part of a block of assets8 in respect of which depreciation has been allowed under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), the provisions of sections 48 and 49 shall be subject to the following modifications :—
(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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Section 50A: 9[Special provision for cost of acquisition in case of depreciable asset.
- Where the capital asset is an asset in respect of which a deduction on account of depreciation under clause (i) of sub-section (1) of section 32 has been obtained by the assessee in any previous year, the provisions of sections 48 and 49 shall apply subject to the modification that the written down value, as defined in clause (6) of section 43, of the asset, as adjusted, shall be taken as the cost of acquisition of the asset.]
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Section 50B: 10[Special provision for computation of capital gains in case of slump sale.
- (1) Any profits or gains arising from the slump sale effected in the previous year shall be chargeable to income-tax as capital gains arising from the transfer of long-term capital assets and shall be deemed to be the income of the previous year in which the transfer took place :
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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Section 50C: 15[Special provision for full value of consideration in certain cases.
- (1) Where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed 16[or assessable] by any authority of a State Government (hereafter in this section referred to as the “stamp valuation authority” ) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed 16[or assessable] shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer.
(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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Section 50D: 19[Fair market value deemed to be full value of consideration in certain cases.
- Where the consideration received or accruing as a result of the transfer of a capital asset by an assessee is not ascertainable or cannot be determined, then, for the purpose of computing income chargeable to tax as capital gains, the fair market value of the said asset on the date of transfer shall be deemed to be the full value of the consideration received or accruing as a result of such transfer.]
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Section 51: Advance money received.
- Where any capital asset was on any previous occasion the subject of negotiations for its transfer, any advance or other money20 received and retained by the assessee in respect of such negotiations shall 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.
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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Section 52: Consideration for transfer in cases of understatement.
- 21[Omitted by the Finance Act, 1987, w.e.f. 1-4-1988.]
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Section 53: Exemption of capital gains from a residential house.
- 22[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
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Section 54: Profit on sale of property used for residence.
- 23 24[(1)] 25[26[Subject to the provisions of sub-section (2), where, in the case of an assessee27 being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset 28[***], being buildings or 29lands appurtenant thereto, and being a residential house29, the income of which is chargeable under the head “Income from house property” (hereafter in this section referred to as the original asset), and the assessee has within a period of 30[one year before or two years after the date on which the transfer took place purchased31], or has within a period of three years after that date 31a[constructed, a residential house], 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 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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Section 54B: 38[Capital gain on transfer of land used for agricultural purposes not to be charged in certain cases.
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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Section 54C: Capital gain on transfer of jewellery held for personal use not to be charged in certain cases.
- [Omitted by the Finance Act, 1976, w.e.f. 1-4-1976. Original section was inserted by the Finance Act, 1972, w.e.f. 1-4-1973.]
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Section 54D: 47[Capital gain on compulsory acquisition of lands and buildings not to be charged in certain cases.
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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Section 54E: 56[Capital gain on transfer of capital assets not to be charged in certain cases.
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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Section 54EA: 8[Capital gain on transfer of long-term capital assets not to be charged in the case of investment in 9[specified securities].
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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Section 54EB: Capital gain on transfer of long-term capital assets not to be charged in certain cases.
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.
- —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.
(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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Section 54EC: 19[Capital gain not to be charged on investment in certain bonds.
- (1) Where the capital gain arises from the transfer of a long-term capital asset (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 the long-term specified 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 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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Section 54ED: 26[Capital gain on transfer of certain listed securities or unit not to be charged in certain cases.
- (1) Where the capital gain arises from the transfer 27[before the 1st day of April, 2006,] of a long-term capital asset, being listed securities or unit (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 the whole or any part of the capital gain in acquiring equity shares forming part of an eligible issue of capital (such equity shares being hereafter in this section referred to as the specified equity shares), the said 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 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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Section 54F: 29[Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house.30
- (1) 31[Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or 32[two years] after the date on which the transfer took place purchased, or has within a period of three years after that date 32a[constructed, a residential house] (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 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” .]
- —For the purposes of this section,—
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.
- —39[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]]
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Section 54G: 40[Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area.
- (1) Subject to the provisions of sub-section (2), where the capital gain arises from the transfer of a capital asset, being machinery or plant or building or land or any rights in building or land used for the purposes of the business of an industrial undertaking situate in an urban area, effected in the course of, or in consequence of, the shifting of such industrial undertaking (hereafter in this section referred to as the original asset) to any area (other than an urban area) and the assessee has within a period of one year before or three years after the date on which the transfer took place,—
(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.
- —In this sub-section, “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 area41 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 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.
- —43[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
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Section 54GA: 44[Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area to any Special Economic Zone.
- (1) Notwithstanding anything contained in section 54G, where the capital gain arises from the transfer of a capital asset, being machinery or plant or building or land or any rights in building or land used for the purposes of the business of an industrial undertaking situate in an urban area, effected in the course of, or in consequence of the shifting of such industrial undertaking to any Special Economic Zone, whether developed in any urban area or any other area and the assessee has within a period of one year before or three years after the date on which the transfer took place,—
(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.
- —In this sub-section,—
(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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Section 54GB: 47[Capital gain on transfer of residential property not to be charged in certain cases
- (1) Where,—
(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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Section 54H: 48[Extension of time for acquiring new asset or depositing or investing amount of capital gain.
- Notwithstanding anything contained in sections 54, 54B, 54D 49[***] 50[, 54EC] and 54F, where the transfer of the original asset is by way of compulsory acquisition under any law and the amount of compensation awarded for such acquisition is not received by the assessee on the date of such transfer, the period for acquiring the new asset by the assessee referred to in those sections or, as the case may be, the period available to the assessee under those sections for depositing or investing the amount of capital gain in relation to such compensation as is not received on the date of the transfer, shall be reckoned from the date of receipt of such compensation :
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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Section 55: Meaning of “adjusted”, “cost of improvement” and “cost of acquisition” .
- 51 (1) For the purposes of 52[sections 48 and 49],—
(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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Section 55A: 87[Reference to Valuation Officer.
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.
- —In this section, “Valuation Officer” has the same meaning, as in clause (r) of section 2 of the Wealth-tax Act, 1957 (27 of 1957).]
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Section 56: Income from other sources
Income from other sources.
- 95 (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head “Income from other sources”, if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E.
(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.
- —For the purposes of this clause,—
(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.
- —For the purposes of this clause, “fair market value” of a property, being shares of a company not being a company in which the public are substantially interested, shall have the meaning assigned to it in the Explanation to clause (vii);]
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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Section 57: Deductions.
- 19 The income chargeable under the head “Income from other sources” shall be computed after making the following deductions, namely :—
(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.
- —For the purposes of this clause, “family pension” means a regular monthly amount payable by the employer to a person belonging to the family of an employee in the event of his death ;]
(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[***]
- —[Omitted by the Finance Act, 1988, w.e.f. 1-4-1989.]
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Section 58: Amounts not deductible.
- 32 33[(1)] Notwithstanding anything to the contrary contained in section 57, the following amounts shall not be deductible in computing the income chargeable under the head “Income from other sources”, namely :—
(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.
- —For the purposes of this sub-section, “horse race” means a horse race upon which wagering or betting may be lawfully made.]
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Section 59: Profits chargeable to tax.
- (1) The provisions of sub-section (1) of section 41 shall apply, so far as may be, in computing the income of an assessee under section 56, as they apply in computing the income of an assessee under the head “Profits and gains of business or profession” .
(2) 43[***]
(3) 44[***]
45[***]
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CHAPTER V – INCOME OF OTHER PERSONS, INCLUDED IN ASSESSEE’S TOTAL INCOME
Section 60: Transfer of income where there is no transfer of assets.
- 46 All income arising to any person by virtue of a transfer47 whether revocable or not and whether effected before or after the commencement of this Act shall, where there is no transfer of the assets from which the income arises, be chargeable to income-tax as the income of the transferor and shall be included in his total income.
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Section 61: Revocable transfer of assets.
- All income arising to any person by virtue of a revocable transfer48 of assets shall be chargeable to income-tax as the income of the transferor and shall be included in his total income.
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Section 62: Transfer irrevocable for a specified period.
- 49 (1) The provisions of section 61 shall not apply to any income arising to any person by virtue of a transfer—
(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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Section 62: Transfer irrevocable for a specified period.
- 49 (1) The provisions of section 61 shall not apply to any income arising to any person by virtue of a transfer—
(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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Section 64: Income of individual to include income of spouse, minor child, etc.
- 52 53[54[(1)] In computing the total income of any individual, there shall be included all such income as arises directly or indirectly—
(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.
- —For the purposes of this sub-section, the income of the minor child shall be included,—
(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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Section 65: Liability of person in respect of income included in the income of another person.
- Where, by reason of the provisions contained in this Chapter or in clause (i) of section 27, the income from any asset or from membership in a firm of a person other than the assessee is included in the total income of the assessee, the person in whose name such asset stands or who is a member of the firm shall, notwithstanding anything to the contrary contained in any other law for the time being in force, be liable, on the service of a notice of demand by the 86[Assessing] Officer in this behalf, to pay that portion of the tax levied on the assessee which is attributable to the income so included, and the provisions of Chapter XVII-D shall, so far as may be, apply accordingly :
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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CHAPTER VI – AGGREGATION OF INCOME AND SET OFF OR CARRY FORWARD OF LOSS
Section 66: Total income.
- In computing the total income of an assessee, there shall be included all income on which no income-tax is payable under Chapter VII 87[* * *].
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Section 67: Method of computing a partner’s share in the income of the firm.
- 88[Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]
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Section 67A: 89[Method of computing a member’s share in income of association of persons or body of individuals.
- (1) In computing the total income of an assessee who is a member of an association of persons or a body of individuals wherein the shares of the members are determinate and known [other than a company or a cooperative 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], whether the net result of the computation of the total income of such association or body is a profit or a loss, his share (whether a net profit or net loss) shall be computed as follows, namely :—
(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.
- —In this section, “paid” has the same meaning as is assigned to it in clause (2) of section 43.]
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Section 68: Cash credits.
- 90 91Where any sum is found credited in the books92 of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the 93[Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year :
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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Section 69: Unexplained investments.
- 95 Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the 96[Assessing] Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.
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Section 69A: 97[Unexplained money, etc.
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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Section 69B: 2[Amount of investments, etc., not fully disclosed in books of account.
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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Section 69C: 4[Unexplained expenditure, etc.
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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Section 69D: 8[Amount borrowed or repaid on hundi.
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.
- —For the purposes of this section, the amount repaid shall include the amount of interest paid on the amount borrowed.]
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Section 70: 10[Set off of loss from one source against income from another source under the same head of income.
- (1) Save as otherwise provided in this Act, where the net result for any assessment year in respect of any source falling under any head of income, other than “Capital gains”, is a loss, the assessee shall be entitled to have the amount of such loss set off against his income from any other source under the same head.
(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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Section 71: 11[Set off of loss from one head against income from another.
- 12 (1) 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 no income under the head “Capital gains”, he shall, subject to the provisions of this Chapter, be entitled to13 have the amount of such loss set off against his income, if any, assessable for that assessment year under any other head.
(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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Section 71A: 16[Transitional provisions for set off of loss under the head “Income from house property” .
- Where in respect of the assessment year commencing on the 1st day of April, 1993 or the 1st day of April, 1994, the net result of the computation under the head “Income from house property” is a loss, such loss in so far as it relates to interest on borrowed capital referred to in clause (vi) of sub-section (1) of section 24 and to the extent it has not been set off shall be carried forward and set off in the assessment year commencing on the 1st day of April, 1995, and the balance, if any, in the assessment year commencing on the 1st day of April, 1996, against the income under any head.]
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Section 71B: 17[Carry forward and set off of loss from house property.
- Where for any assessment year the net result of computation under the head “Income from house property” is a loss to the assessee and such loss cannot be or is not wholly set off against income from any other head of income in accordance with the provisions of section 71, so much of the loss as has not been so set-off or where he has no income under any other head, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year and—
(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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Section 72: Carry forward and set off of business losses.
- 18 19[(1) Where for any assessment year, the net result of the computation under the head “Profits and gains of business or profession” is a loss to the assessee, not being a loss sustained in a speculation business, and such loss cannot be or is not wholly set off against income under any head of income in accordance with the provisions of section 71, so much of the loss as has not been so set off or, 20[* * *] where he has no income under any other head, the whole loss 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 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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Section 72A: 24[Provisions relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger, etc.25
- 26[(1) Where there has been an amalgamation of—
(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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Section 72AA: 36[Provisions relating to carry forward and set-off of accumulated loss and unabsorbed depreciation allowance in scheme of amalgamation of banking company in certain cases.
- Notwithstanding anything contained in sub-clauses (i) to (iii) of clause (1B) of section 2 or section 72A, where there has been an amalgamation of a banking company with any other banking institution under a scheme 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)37, the accumulated loss and the unabsorbed depreciation of such banking company shall be deemed to be the loss or, as the case may be, allowance for depreciation of such banking institution for the previous year in which the scheme of amalgamation was brought into force and other provisions of this Act relating to set-off and carry forward of loss and allowance for depreciation shall apply accordingly.
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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Section 72AB: 38[Provisions relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in business reorganisation of co-operative banks.
- (1) The assessee, being a successor co-operative bank, shall, in a case where the amalgamation has taken place during the previous year, be allowed to set off the accumulated loss and the unabsorbed depreciation, if any, of the predecessor co-operative bank as if the amalgamation had not taken place, and all the other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly.
(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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Section 73: Losses in speculation business.
- 39 (1) Any loss, computed in respect of a speculation business carried on40 by the assessee, shall not be set off except against profits and gains, if any, of another speculation business.
(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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Section 73A: 45[Carry forward and set off of losses by specified business.
- (1) Any loss, computed in respect of any specified business referred to in section 35AD shall not be set off except against profits and gains, if any, of any other specified business.
(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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Section 74: 46[Losses under the head “Capital gains” .
- 47[(1) Where in respect of any assessment year, the net result of the computation under the head “Capital gains” is a loss to the assessee, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and—
(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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Section 74A: 49[Losses from certain specified sources falling under the head “Income from other sources”.
- (1) 50[* * *]
(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.
- —For the purposes of this sub-section—
(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.]
Section 75: 56[Losses of firms.
- Where the assessee is a firm, any loss in relation to the assessment year commencing on or before the 1st day of April, 1992, which could not be set off against any other income of the firm and which had been apportioned to a partner of the firm but could not be set off by such partner prior to the assessment year commencing on the 1st day of April, 1993, then, such loss shall be allowed to be set off against the income of the firm subject to the condition that the partner continues in the said firm and to be carried forward for set off under sections 70, 71, 72, 73, 74 and 74A.]
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Section 76: 76. Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.
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Section 77: 77. Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.
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Section 78: Carry forward and set off of losses in case of change in constitution of firm or on succession.
- 57 58[(1) Where a change has occurred in the constitution of a firm, nothing in this Chapter shall entitle the firm to have carried forward and set off so much of the loss proportionate to the share of a retired or deceased partner as exceeds his share of profits, if any, in the firm in respect of the previous year.]
(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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Section 79: Carry forward and set off of losses in the case of certain companies.
- Notwithstanding anything contained in this Chapter, where a change in shareholding has taken place in a previous year in the case of a company, not being a company in which the public are substantially interested, no loss59 incurred in any year prior to the previous year shall be carried forward and set off against the income of the previous year unless—
(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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Section 80: Submission of return for losses.
- Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed 64[in accordance with the provisions of sub-section (3) of section 139], shall be carried forward and set off under sub-section (1) of section 72 or sub-section (2) of section 73 or sub-section (1) 65[or sub-section (3)] of section 74 66[or sub-section (3) of section 74A].
67[CHAPTER VIA: DEDUCTIONS TO BE MADE IN COMPUTING TOTAL INCOME
Section 80A: Deductions to be made in computing total income.
A.—General
- (1) In computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of this Chapter, the deductions specified in sections 80C to 68[80U].
(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.
- —For the purposes of this sub-section, the expression “market value”,—
(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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Section 80AA: Computation of deduction under section 80M.
- 81[Omitted by the Finance Act, 1997, w.e.f. 1-4-1998.]
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Section 80AB: 82[Deductions to be made with reference to the income included in the gross total income.
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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Section 80AC: 85[Deduction not to be allowed unless return furnished.
- Where in computing the total income of an assessee of the previous year relevant to the assessment year commencing on the 1st day of April, 2006 or any subsequent assessment year, any deduction is admissible under section 80-IA or section 80-IAB or section 80-IB or section 80-IC 86[or section 80-ID or section 80-IE], no such deduction shall be allowed to him unless he furnishes a return of his income for such assessment year on or before the due date specified under sub-section (1) of section 139.]
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Section 80B: 87[Definitions.
- In this Chapter—
(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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Section 80C: 98[Deduction in respect of life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc.
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.
- —For the purposes of this clause,—
(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.
- —For the purposes of this clause “eligible issue of capital” means an issue referred to in clause (i) of the Explanation to clause (xix) of sub-section (2);
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.
- —In calculating any such actual capital sum assured, no account shall be taken—
(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.
- —A person shall be treated as having acquired any shares or debentures on the date on which his name is entered in relation to those shares or debentures in the register of members or of debenture-holders, as the case may be, of the public company.
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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Section 80CC: Deduction in respect of investment in certain new shares.
- 32[Omitted by the Finance (No. 2) Act, 1996, w.r.e.f. 1-4-1993.]
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Section 80CCA: 33[Deduction in respect of deposits under National Savings Scheme or payment to a deferred annuity plan.
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.]
