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Proposed Direct Taxes Code 2013.
April, 02nd 2014
                                         THE DIRECT TAXES CODE, 2013
                                                  ----------
                                          ARRANGEMENT OF CLAUSES
                                                  ----------
                                                 CHAPTER I
                                                 PRELIMINARY
CLAUSES
  1. Short title, extent and commencement.
                                                       PART A
                                                     INCOME-TAX
                                                     CHAPTER II
                                                    BASIS OF CHARGE
  2. Liability to pay, and charge of, income-tax.
  3. Scope of total income.
  4. Residence in India.
  5. Income deemed to accrue in India.
  6. Income deemed to be received in the financial year.
  7. Dividend income.
  8. Total income to include income of any other person.
  9. Income of individual to include income of spouse, minor child and others.
 10. Income not included in the total income.
 11. Persons not liable to income-tax.
                                                     CHAPTER III
                                          COMPUTATION OF TOTAL INCOME
                                                      I.--GENERAL
 12. Computation of total income.
 13. Classification of sources of income.
 14. Computation of income from ordinary sources.
 15 Computation of income from special sources.
 16. Apportionment of income between spouses governed by Portuguese Civil Code.
 17. Avoidance of double taxation.
 18. Expenditure not to be allowed as deduction.
 19. Amount not deductible where tax is not deducted at source.


                                                II.--HEADS OF INCOME
                                            A.--Income from employment
 20. Income from employment.
 21. Computation of income from employment.
 22. Scope of gross salary.
 23. Deductions from gross salary.




                                                           1
                                         B.--Income from house property
24. Income from house property.
25. Computation of income from house property.
26. Scope of gross rent.
27. Deductions from gross rent.
28. Advance rent received.
29. Arrears of rent received.
                                               C.--Income from business
30. Income from business.
31. Business when treated distinct and separate.
32. Computation of income from business.
33. Gross earnings.
34. Determination of business expenditure.
35. Determination of operating expenditure.
36. Determination of finance charges.
37. Determination of capital allowances.
38. Determination of depreciation.
39. Determination of initial depreciation.
40. Deduction for terminal allowance.
41. Deduction for scientific research and development allowance.
42. Computation of profit on transfer of a business capital asset.
43. Special provisions relating to business re-organisation.
44. Meaning of actual cost.
45. Meaning of written down value and adjusted value of assets.
                                                  D.--Capital gains
46. Capital gains.
47. Income from certain transfers not to be treated as capital gains.
48. Financial year of taxability.
49. Computation of income from transfer of any investment asset.
50. Full value of consideration.
51. Deduction for cost of acquisition, etc.
52. Indexed cost of acquisition or improvement.
53. Cost of acquisition of an investment asset.
54. Cost of improvement of an investment asset.
55. Relief for rollover of investment asset.
                                        E.--Income from residuary sources
56. Income from residuary sources.
57. Computation of income from residuary sources.
58. Gross residuary income.
59. Deductions from gross residuary income.




                                                          2
                                           III.--AGGREGATION OF INCOME
60. Aggregation of income under a head of income.
61. Aggregation of income from ordinary sources.
62. Aggregation of income from special sources.
63. Determination of total income.
64. Special provisions relating to business re-organisation or conversion.
65. Aggregation of losses in case of change in constitution of unincorporated body.
66. Aggregation of losses in the case of certain companies.
67. Aggregation of loss not to be allowed in the case of filing of return after due date.
                                               IV.--TAX INCENTIVES
68. Deductions from gross total income from ordinary sources.
69. Deduction for savings.
70. Deduction for life insurance.
71. Deduction for health insurance.
72. Deduction for education of children.
73. Limit on deductions under sections 70, 71 and 72.
74.   Deduction of investment made under an equity saving scheme
75. Deduction of interest on loan taken for higher education.
76. Deduction for medical treatment, etc.
77. Deduction to a person with disability.
78. Deduction for medical treatment and maintenance of a dependant person with disability.
79. Deduction of contribution or donation to certain funds or non-profit organisations.
80. Deduction for rent paid.
81. Deduction for political contributions.
82. Deduction of income of Investor Protection Fund.
83. Deduction of royalty income of authors.
84. Deduction of royalty on patents.
85. Deduction of income of co-operative society from banking activities.
86. Deduction of income of primary co-operative societies.
                          V.--MAINTENANCE OF ACCOUNTS AND OTHER RELATED MATTERS
87. Maintenance of accounts.
88. Audit of accounts and reporting of international transaction.
89. Method of accounting.
                                                   CHAPTER IV
                    SPECIAL PROVISIONS RELATING TO THE COMPUTATION OF TOTAL INCOME OF
                                           NON-PROFIT ORGANISATIONS
90. Applicability of this Chapter.
91. Total income of a non-profit organisation.
92. Computation of total income of a non-profit organisation.
93. Gross receipts of a non-profit organisation.
94. Outgoings of a non-profit organisation.


                                                          3
 95. Prohibited forms and modes of investment.
 96. Use or application of funds or assets for the benefit of interested person.
 97. Registration of a non-profit organisation.
 98. Maintenance of accounts and tax audit.
 99. Anonymous donations.
100. Consequences of conversion of a non-profit organisation.
101. Provisions of this Chapter not to apply in certain cases.
102. Interpretations in this chapter.
                                                     CHAPTER V
                                           MINIMUM ALTERNATE TAX
                                          A. COMPUTATION OF BOOK PROFIT
103. Computation of book profit.
104. Preparation of profit and loss account for computing book profit.
105. Tax credit for tax paid on book profit.


                             B. COMPUTATION OF ADJUSTED TOTAL INCOME
106.      Computation of adjusted total income.
107. Tax credit for tax paid on adjusted total income.
                                        C. MISCELLANEOUS
108. Interpretations in this chapter
109. Application of other provisions of this Code.


                                                     CHAPTER VI
               PROVISIONS RELATING TO TAX ON     INCOME RECEIVED FROM VENTURE CAPITAL COMPANY
                                                AND VENTURE CAPITAL FUND
110. Tax on income received from venture capital company and venture capital fund.


                                                     CHAPTER VII
       SPECIAL PROVISIONS RELATING TO CONVERSION OF INDIAN BRANCH OF A FOREIGN BANK INTO A
                                       SUBSIDIARY COMPANY
111. Conversion of an Indian branch of foreign company into subsidiary company.


                                                        PART B
                                            DIVIDEND DISTRIBUTUION TAX
                                                     CHAPTER VIII
             SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED PROFITS OF DOMESTICE COMPANIES
112. Tax on distributed profits of domestic companies.
                                                       PART C
                                            TAX ON DISTRIBUTED INCOME
                                                     CHAPTER IX


                                                           4
                           SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED INCOME
113. Tax on income distributed by mutual fund or life insurer.




                                                       PART D
                                                 BRANCH PROFITS TAX
                                                     CHAPTER X
                                             CHARGE OF BRANCH PROFITS TAX
114. Tax on branch profits.
                                                       PART E
                                                    WEALTH-TAX
                                                    CHAPTER XI
                                                CHARGE OF WEALTH TAX
115. Tax on net wealth.
116. Computation of net wealth.
117. Net wealth to include certain assets.


                                                       PART F
                                        PREVENTION OF ABUSE OF THE CODE
                                                    CHAPTER XII
                                SPECIAL PROVISIONS RELATING TO AVOIDANCE OF TAX

118. Disallowance of expenditure having regard to fair market value.
119. Determination of income from international transaction having regard to arm's length price.
120. Determination of arm's length price.
121. Advance pricing agreement.
122. Avoidance of income-tax by transactions resulting in transfer of income to non-residents.
123. Avoidance of tax by sale and buy-back transaction in security.
124. Avoidance of tax by buy and sale-back transaction in security.
125. Broken period income accruing from a debt instrument.
126. Special measures in respect of transactions with persons located in notified jurisdictional area.
127. Interpretations in this chapter.


                                                    CHAPTER XIII
                                        GENERAL ANTI-AVOIDANCE RULE
128. Applicability of General Anti-Avoidance Rule.
129. Impermissible avoidance arrangement.
130. Arrangement to lack commercial substance.
131. Consequences of impermissible avoidance arrangement.
132. Treatment of connected person and accommodating party.

                                                          5
133. Application of this chapter.
134. Framing of guidelines.
135. Interpretations in this chapter.




                                                      PART G
                                                TAX MANAGEMENT
                                                    CHAPTER XIV
                                          TAX ADMINISTRATION AND PROCEDURE
                                               A.--TAX ADMINISTRATION
136. Income-tax authorities.
137. Appointment and control of income-tax authorities.
138. Power of higher authorities.
139. Powers of Board to issue instructions.
140. Jurisdiction of income-tax authorities.
141. Jurisdiction of Assessing Officers.
142. Power to transfer cases.
143. Change of incumbent.
144. Powers regarding discovery and production of evidence.
145. Search and seizure.
146. Power to requisition material taken into custody.
147. Retention and release of books of account or documents seized or requisitioned.
148. Delivery of material belonging to other persons.
149. Retention and application of seized or requisitioned assets.
150. Power to call for information.
151.     Power to inspect registers of companies.
152. Power of survey.
153. Power to disclose information in respect of assessee.
154. Proceedings before income-tax authorities to be judicial proceedings.
                                              B.--ASSESSMENT PROCEDURE


155. Self-reporting of tax bases.
156. Tax return preparer.
157. Issue of notice to furnish return.
158. Self-assessment tax.
159. Acknowledgment of return.
160. Processing of return.
161. Notice for inquiry before assessment.
162. Special audit.
163. Determination of value of assets.

                                                          6
164. Determination of arm's length price.
165. Assessment.
166. Best judgment assessment.
167. Effect to adavnce pricing agreement.
168. Directions by Joint Commissioner for assessment.
169. Reference to Commissioner in certain cases.
170. Direction by Dispute Resolution Panel for assessment.
171. Reopening of assessment.
172. Approval for search assessment.
173. Rectification of mistake.
174. Notice of demand.
175. Time limits for completion of assessment or re-assessments.


                                 C.--PROCEDURE FOR ASSESSMENT IN SPECIAL CASES
176. Representative assessee.
177. Rights and obligations of a representative assessee.
178. Direct assessment or recovery not barred.
179. Remedy against property in case of representative assessee.
180. Assessment upon business reorgainsation.
181. Assessment after partition of a Hindu undivided family.
182. Assessment of non-resident in respect of occasional shipping business.
183. Assessment of persons leaving India.
184. Assessment of an unincorporated body formed for a particular event or purpose.
185. Assessment of persons likely to transfer property to avoid tax.
186. Discontinued business.
187. Assessment of unincorporated body in case of change in its constitution.
188. Assessment on retirement or death of participant.
189. Assessment of a deductor or collector.
                                              D.-- APPEALS AND REVISION
190. Appeal to Commissioner (Appeals).
191. Form of appeal and limitation.
192. Procedure in appeal.
193. Powers of Commissioner (Appeals).
194. Appellate Tribunal.
195. Appeals to Appellate Tribunal.
196. Stay of demand by Appellate Tribunal.
197. Orders of Appellate Tribunal.
198. Constitution of Benches and procedure of Appellate Tribunal.
199. Appeal to High Court.
200. Case before High Court to be heard by not less than two Judges.
201. Appeal to Supreme Court.
202. Hearing before Supreme Court.

                                                            7
203. Revision of orders prejudicial to revenue.
204. Revision of other orders.
                                       E. SPECIAL PROVISIONS FOR AVOIDING REPETITIVE APPEALS


205. Procedure when assessee claims identical question of law pending before High Court or Supreme Court


                                                F. MISCELLANEOUS

206. Tax to be paid notwithstanding appeal
207. Execution for costs awarded by Supreme Court
208. Amendment of assessment on appeal
209. Exclusion of time taken for copy
210. Filing of appeal by income-tax authority




                                                     CHAPTER XV
                                          COLLECTION AND RECOVERY OF TAX
                                          A.-- DEDUCTION OF TAX AT SOURCE
211. Deduction or collection of tax at source and advance payment.
212. Direct payment.
213. Liability to deduct tax at source.
214. Specified payment and deduction of tax.
215. Certificate for lower or no deduction of tax.
216. Declaration for no deduction of tax.
217. Obligation of deductor.
218. Reporting of payments without deduction of tax.
219. No deduction of tax in certain cases.
220. Credit for tax deducted.
                                          B.--COLLECTION OF TAX AT SOURCE
221. Tax collection at source.
222. Credit for tax collected.
223. Furnishing of statement of tax deducted or collected.
224. Processing of return of tax deduction or collection.
225. Interpretations under Sub-Chapters A and B.
                                                   C.--ADVANCE TAX
226. Liability to pay advance tax.
                           D. -- TAX RELIEF IN RESPECT OF ARREARS OR ADVANCE RECEIPTS
227. Tax relief for arrears or advance receipts.
                                                E.--FOREIGN TAX CREDIT
228. Foreign tax credit.
                                             F.--PAYMENT OF WEALTH-TAX

                                                             8
229. Payment of wealth-tax.
                                  G.--INTEREST PAYABLE TO THE CENTRAL GOVERNMENT
230. Interest for default in furnishing return of tax bases.
231. Interest for default in payment of advance tax.
232. Interest for deferment of advance tax.
233. Interest on excess refund.
234. Interest payable on demand raised.
235. Interest for failure to deduct or collect or pay tax.
                                                      H.--REFUNDS
236. Refunds.
237. Interest on refund.
238. Person entitled to claim refund in certain special cases.


                                        I.- LEVY OF FEE IN CERTAIN CASES
239.Fee for default in furnishing returns


                                                      J.--RECOVERY
240. Recovery by Assessing Officer.
241. Recovery by Tax Recovery Officer.
242. Modes of recovery.
243. Tax Recovery Officer by whom recovery is to be effected.
244. Recovery of tax arrear in respect of non-resident from his assets.
245. Recovery in case of a company in liquidation.
246. Liability of manager of a company.
247. Joint and several liability of participants.
248. Recovery through State Government.
249. Recovery of tax in pursuance of agreements with foreign countries or specified territory.
250. Tax clearance certificate in certain cases.
251. Recovery by suit or under other law not affected.
                                                    CHAPTER XVI
                                                       PENALTIES
252. Penalty for underreporting of tax bases.
253. Penalty where search has been initiated.
254. Penalty for default in payment of tax arrear
255. Penalty for other defaults.
256. Procedure.
257. Bar of limitation for imposing penalty.
                                                    CHAPTER XVII
                                                      PROSECUTION
258. Chapter not in derogation of any other law.
259. Contravention of any restraint order.


                                                               9
260. Failure to comply with the provisions of clause (d) of sub-section (2) of section 145.
261. Removal, concealment, transfer or delivery of property to thwart tax recovery.
262. Failure to comply with the provisions of sub-sections (1) and (3) of section 245.
263. Failure to pay tax deducted or collected at source or to pay dividend or income distribution tax.
264. Wilful attempt to evade tax.
265. Failure to furnish returns of tax bases.
266. Failure to furnish statements,reports, etc.
267. Failure to comply with direction under this Code.
268. False statement in verification.
269. Falsification of books of account or documents.
270. Abetment of false return.
271. Offences by companies, etc.
272. Proof of entries in records or documents.
273. Presumption as to assets and books of account in certain cases.
274. Presumption as to culpable mental state.
275. Prosecution to be at instance of Chief Commissioner or Commissioner.
276. Punishment for second and subsequent offences.
277. Offences to be non-cognizable.
278. Disclosure of information by public servants.
279. Special Courts.
280. Offences traible by Special Courts.
281. Trial of offences as summons case.
282. Application of Code of Criminal Procedure, 1973 to proceedings before Special Court.


                                                   CHAPTER XVIII
                                    ADVANCE RULINGS AND DISPUTE RESOULTION
283. Scope of ruling and dispute resolution.
284. Authority for Advance Rulings and Dispute Resolution.
285. Procedure for advance ruling.
286. Income-tax authority or Appellate Tribunal not to proceed in certain cases.
287. Applicability of advance ruling.
288. Advance Ruling to be void in certain circumstances.
289. Procedure for dispute resolution.
290. Stay of demand by the Authority.
291. Power to rectify a mistake.
292. Powers of Authority.
293. Procedure of Authority.
294. Interpretations in this Chapter.




                                                         10
                                                     PART H
                                                     GENERAL
                                                  CHAPTER XIX
                                             GENERAL PROVISIONS
295. Agreement with foreign countries or specified territories.
296. Permanent account number.
297. Tax account number.
298. Mode of acceptance or repayment of certain loans or deposits.
299. Obligation to furnish annual information return.
300. Submission of statement by a non-resident having liaison office.
301. Certain transfers to be void.
302. Provisional attachment to protect revenue in certain cases.
303. Service of notice generally.
304. Authentications of notices and other documents.
305. Notice deemed to be valid in certain circumstances.
306. Service of notice when family is disrupted or unincorporated body is dissolved.
307. Publication of information respecting assessees in certain cases.
308. Appearance by registered valuer in certain matters.
309. Appearance by authorised representative.
310. Rounding off of tax bases and tax.
311. Indemnity.
312. Power to tender immunity from prosecution.
313. Cognizance of offences.
314. Section 361 of the Code of Criminal Procedure, 1973, and the Probation of Offenders Act, 1958, not to apply.
315. Return of tax bases not to be invalid on certain grounds.
316. Presumption as to material found.
317. Authorisation and assessment in case of search or requistion.
318. Bar of suits in civil courts.
319. Power to rescind.
                                                           PART-I
                                INTERPRETATIONS AND MISCELLANEOUS PROVISIONS
                                                  CHAPTER XX
                                      INTERPRETATIONS AND CONSTRUCTIONS


320. Interpretations in this Code.
321. Construction.
                                                  CHAPTER XXI

                                                           11
                                                 MISCELLANEOUS
322. Power to make rules.
323. Laying of rules, schemes and notifications before Parliament.
324. Repeal and savings.
325. Power to remove difficulties.
THE FIRST SCHEDULE.
THE SECOND SCHEDULE.
THE THIRD SCHEDULE.
THE FOURTH SCHEDULE.
THE FIFTH SCHEDULE.
THE SIXTH SCHEDULE.
THE SEVENTH SCHEDULE.
THE EIGHTH SCHEDULE.
THE NINTH SCHEDULE.
THE TENTH SCHEDULE.
THE ELEVENTH SCHEDULE.
THE TWELFTH SCHEDULE.
THE THIRTEENTH SCHEDULE.
THE FOURTEENTH SCHEDULE.
THE FIFTEENTH SCHEDULE.
THE SIXTEENTH SCHEDULE.
THE SEVENTEENTH SCHEDULE.
THE EIGHTEENTH SCHEDULE.
THE NINETEENTH SCHEDULE.
THE TWENTIETH SCHEDULE.
THE TWENTY-FIRST SCHEDULE.
THE TWENTY-SECOND SCHEDULE.
THE TWENTY-THIRD SCHEDULE.




                                                       12
                                                                   TO BE INTRODUCED IN LOK SABHA




                                                                                   Bill No.   of 2013




                                THE DIRECT TAXES CODE, 2013
                                                    A

                                                BILL
              to consolidate and amend the law relating to income-tax and wealth-tax.
      BE it enacted by Parliament in the Sixty-fourth Year of the Republic of India as follows:--



                                                CHAPTER I
                                               PRELIMINARY
1. (1) This Act may be called the Direct Taxes Code, 2013.                                                Short title,
                                                                                                          extent and
(2) It extends to the whole of India.
                                                                                                          commencement
(3) Save as otherwise provided in this Code, it shall come into force on the 1st day of April, 2015.


                                               PART A
                                            INCOME-TAX
                                            CHAPTER II
                                          BASIS OF CHARGE


2. (1) In accordance with the provisions of this Code, every person shall be liable to pay income-        Liability to pay,
tax in respect of his total income of the financial year.                                                 and charge of,
                                                                                                          income-tax.
   (2) Subject to the provisions of this Code, income-tax, including additional income-tax, shall be
charged in respect of the total income of a financial year of every person.
   (3) Where the income-tax referred to in sub-section (2) is to be charged in respect of the income
of a period other than the financial year, the income-tax for such period shall be charged
accordingly.
  (4) The income-tax referred to in sub-section (2) shall be charged at the rate specified in the First
Schedule in the manner provided therein.
   (5) In respect of the income chargeable under sub-section (2), income tax shall be deducted or


                                               13
                 collected at source or paid in advance in accordance with the provisions of this Code.
                    (6) The chargeability of income-tax on the income of a financial year under the foregoing
                 provisions shall be determined in accordance with the provisions of this Code as they stand on the
                 1st day of April of that financial year.


Scope of total   3. (1) Subject to the provisions of this Code, the total income of any financial year of a person,
income.          who is a resident, shall include all income from whatever source derived which --
                          (a) accrues, or is deemed to accrue, to him in India during the year;
                          (b) accrues to him outside India during the year;
                          (c) is received, or is deemed to be received, by him, or on his behalf, in India during the
                              year; or
                          (d) is received by him, or on his behalf, outside India during the year.
                   (2) Subject to the provisions of this Code, the total income of any financial year of a person,
                 who is a non-resident, shall include all income from whatever source derived which--
                          (a) accrues, or is deemed to accrue, to him in India during the year; or
                          (b) is received, or is deemed to be received, by him, or on his behalf, in India during the
                              year.
                    (3) Any income which accrues to a resident outside India during the year or is received outside
                 India during the year by, or on behalf of, such resident shall be included in the total income of the
                 resident, whether or not such income has been charged to tax outside India.


Residence in     4. (1) An individual shall be resident in India in any financial year, if he is in India--
India.
                          (a) for a period, or periods, amounting in all to one hundred and eighty-two days or more
                              in that year; or
                          (b) for a period, or periods, amounting in all to--
                              (i )   sixty days or more in that year; and
                               (ii) three hundred and sixty-five days or more within the four years immediately
                                    preceding that year.
                    (2) The provisions of clause (b) of sub-section (1) shall not apply in any financial year in respect
                 of an individual who is--
                          (a) a citizen of India and who leaves India in that year as a member of the crew of an
                              Indian ship;
                          (b) a citizen of India and who leaves India in that year for the purposes of employment
                              outside India; or
                          (c) a citizen of India, or a person of Indian origin, living outside India and who visits India
                              in that year if such person is a resident of a country or a specified territory with which
                              India has entered into an agreement under section 295 for the avoidance of double
                              taxation.
                    (3) A company shall be resident in India in any financial year, if--
                          (a) it is an Indian company; or
                          (b) its place of effective management, at any time in that year, is in India.
                   (4) Every other person shall be resident in India in any financial year, if the place of control and
                 management of its affairs, at any time in that year, is situated wholly, or partly, in India.

                                                                  14
5. (1) The income shall be deemed to accrue in India, if it accrues, whether directly or indirectly,        Income deemed
through or from-                                                                                            to accrue in
                                                                                                            India.
         (a) any business connection in India;
         (b) any property in India;
         (c) any asset or source of income in India; or
         (d) the transfer of a capital asset situated in India.
    (2) For the purposes of sub-section (1), an asset or a capital asset, being any share of, or interest
in, a company or entity registered or incorporated outside India shall be deemed to be situated in
India, if the share or interest derives, directly or indirectly, its value substantially from the assets
(whether tangible or intangible) located in India.
   (3) The share or interest, referred to in sub-section (2), shall be deemed to derive its value
substantially from the assets (whether tangible or intangible) located in India, if on the specified
date, the value of such assets,-
             (i) exceeds the amount as may be prescribed; or
             (ii) represent at least twenty per cent. of the fair market value of all the assets owned
                  by the company or entity, as the case may be.
   (4) Without prejudice to the generality of the provisions of sub-section (1), the following income
shall be deemed to accrue in India, namely:--
         (a) income from employment, if it is for ­
              (i) service rendered in India;
             (ii) service rendered outside India by a citizen of India and the income is receivable
                  from the Government; or
             (iii) the rest period, or leave period, which precedes, or succeeds, the period of service
                   rendered in India and forms part of the service contract of employment;
         (b) any dividend paid by a domestic company outside India;
         (c) any insurance premium including re-insurance premium accrued from or payable by
             any resident or non-resident in respect of insurance covering any risk in India;
         (d) interest accrued from or payable by any resident or the Government;
         (e) interest accrued from or payable by any non-resident, if the interest is in respect of any
             debt incurred and used for the purposes of--
             (i) a business carried on by the non-resident in India; or
             (ii) earning any income from any source in India;
         (f) royalty accrued from or payable by any resident or the Government;
         (g) royalty accrued from or payable by a non-resident, if the royalty is for the purposes
             of--
             (i) a business carried on by the non-resident in India; or
             (ii) earning any income from any source in India;
         (h) fees for technical services accrued from or payable by any resident or the Government;
         (i) fees for technical services accrued from or payable by any non-resident, in respect of
             services utilised for the purposes of--


                                                  15
             (i) a business carried on by the non-resident in India; or
             (ii) earning any income from any source in India;
        (j) transportation charges accrued from or payable by any resident or the Government;
        (k) transportation charges accrued from or payable by any non-resident, if the
            transportation charges are in respect of the carriage to, or from, a place in India.
   (5) For the purposes of clause (a) of sub-section (1), in the case of a business of which all the
operations are not carried out in India, the income of the business deemed to accrue in India shall be
only such part of the income as is reasonably attributable to the operations carried out in India.
   (6) The income deemed to accrue in India under sub-section (1) and sub-section (4) shall, in the
case of a non-resident, not include the following, namely:--
        (a) any income accruing through, or from, operations which are confined to the purchase
            of goods in India for the purposes of export out of India;
        (b) interest accrued from or payable by a resident, in respect of any debt incurred and used
            for the purposes of--
             (i) a business carried on by the resident outside India; or
             (ii) earning any income from any source outside India;
        (c) royalty accrued from or payable by a resident for the purposes of--
             (i) a business carried on by the resident outside India; or
             (ii) earning any income from any source outside India;
        (d) royalty consisting of lump sum consideration accrued from, or payable by, a resident
            for the transfer of any rights (including the granting of a licence) in respect of
            computer software supplied by the 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 issued by the
            Government of India;
        (e) fees for technical services accrued from or payable by a resident, in respect of services
            utilised for the purposes of--
             (i) a business carried on by the resident outside India; or
             (ii) earning any income from any source outside India;
        (f) transportation charges for the carriage by aircraft or ship accrued from or payable by
            any resident, if the transportation charges are in respect of the carriage from a place
            outside India to another place outside India, except where the airport or port of origin
            of departure of such carriage is in India;
        (g) income from transfer, outside India, of any share of, or interest in, a company or an
            entity registered or incorporated outside India,-
             (i)    if such company or entity directly owns the assets situated in India and the
                   transferor (whether individually or along with its associated enterprises), at any
                   time in the twelve months preceding the date of transfer,-
                   (A)      does not hold the right of management or control in relation to such
                            company or the entity; and
                   (B)       does not hold voting power or share capital or interest exceeding five per
                            cent. of the total voting power or total share capital or total interest, as
                            the case may be, of such company or entity; or
             (ii) if such company or entity indirectly owns the assets situated in India and the

                                                16
                    transferor (whether individually or along with its associated enterprises), at any
                    time in the twelve months preceding the date of transfer,-
                    (A)      does not hold the right of management or control in relation to such
                             company or the entity;
                    (B)      does not hold any right in, or in relation to, such company or entity which
                             would entitle it to the right of management or control in the company or
                             entity which directly owns the assets situated in India; and
                    (C)      does not hold such percentage of voting power or share capital or interest
                             in such company or entity which results in holding of (either individually
                             or along with associated enterprises) a voting power or share capital or
                             interest exceeding five percent of the total voting power or total share
                             capital or total interest, as the case may be, of the company or entity
                             which directly owns the assets situated in India.
   (7) The provisions of clauses (c) to (k) of sub-section (4) shall be applicable, whether or not,--
        (a) the payment is made in India;
        (b) the services are rendered in India;
        (c) the non-resident has a residence or place of business or any business connection in
            India; or
        (d) the income has accrued in India.
   (8) Where the income of a non-resident, in respect of transfer, outside India, of any share of, or
interest in, a company or an entity registered or incorporated outside India, is deemed to accrue in
India under clause (d) of sub-section (1), it shall be computed in accordance with the following
formula--
            AxB
                C
            where A                    =        Income from the transfer computed in accordance with
                                       provisions of this Code as if the transfer was effected in India;
            B                          =         value of the assets in India, owned, directly or
                                       indirectly, by the company or entity, as on the specified date;
            C                          =        value of all the assets owned by the company or entity,
                                       as on the specified date.
   (9) For the purposes of this section, the expression-
        (a) "through" shall include "by means of" or "in consequence of";
        (b) "accounting period" shall have the meaning assigned to it in paragraph 6 of the Second
            Schedule;
        (c) "value of an asset" means the fair market value of such a sset without reduction of
             liabilities, if any, in respect of the asset;


        (d) "specified date" shall mean the date on which the accounting period of the company or
            entity, as the case may be, ends preceding,-
             (i)    the date of transfer of an asset or a capital asset;
             (ii) the date of accrual of income in relation to any other income referred to sub-
                  section (1).



                                                   17
Income            6. The following income shall be deemed to be received in the financial year, namely:--
deemed to be
                          (a) any contribution made by an employer, in the financial year, to the account of an
received in the
                              employee under a pension fund;
financial year.
                          (b) any contribution made by an employer, in the financial year, to the account of an
                              employee in any other fund;
                          (c) the annual accretion, in the financial year, to the balance at the credit of any employee
                              in a fund referred to in clause (b) to the extent it exceeds the limit as may be
                              prescribed.


Dividend          7. For the purposes of inclusion in the total income of an assessee--
income.
                          (a) any dividend declared, distributed or paid by a company within the meaning of item
                              (a) or item (b) or item (c) or item (d) or item (e) of sub-clause (I) of clause (74) of
                              section 320 shall be deemed to be the income of the financial year in which it is so
                              declared, distributed or paid, as the case may be;
                          (b) any interim dividend shall be deemed to be the income of the financial year in which
                              the amount of such dividend is unconditionally made available by the company to the
                              member who is entitled to it.


Total income      8. (1) The total income of any person, being a transferor, shall include the following, namely: --
to      include
                          (a) any income accruing to any other person, by virtue of a transfer, whether revocable or
income of any
                              not, without transfer of the asset from which the income accrues; or
other person.
                          (b) any income accruing to any other person, by virtue of a revocable transfer of an asset.
                     (2) The provisions of clause (b) of sub-section (1) shall not apply in a case where--
                          (a) any income accrues from an asset transferred to any trust, if the transfer is not
                              revocable during the life time of the beneficiary of the trust; or
                          (b) any income accrues from an asset transferred to any other person, not being a trust, if
                              the transfer is not revocable during the lifetime of such other person.
                     (3) In this section,--
                          (a) a transfer shall be deemed to be revocable if--
                               (i) it contains any provision for the re-transfer, directly or indirectly, of the whole or
                                   any part of the income or asset to the transferor; or
                               (ii) it, in any way, gives the transferor a right to re-assume power, directly or
                                    indirectly, over the whole or any part of the income or asset;
                          (b) a transfer shall include any settlement, trust, covenant, agreement or arrangement.


Income     of     9. (1) The total income of any individual shall include--
individual to
                          (a) all income which accrues, directly or indirectly, --
include
income     of                  (i) to the spouse, by way of salary, commission, fees or any other form of
spouse, minor                       remuneration, whether in cash or in kind, from a concern in which the individual
child     and                       has a substantial interest;
others.
                               (ii) from assets transferred, directly or indirectly, to the spouse by the individual
                                    otherwise than for adequate consideration or in connection with an agreement to
                                    live apart;

                                                                 18
                               (iii) from assets transferred, directly or indirectly, to the son's wife by the individual,
                                     otherwise than for adequate consideration; or
                               (iv) from assets transferred, directly or indirectly, to any other person by the individual
                                    otherwise than for adequate consideration, to the extent to which the income from
                                    such assets is for the immediate or deferred benefit of the spouse or son's wife;
                           (b) all income which accrues to a minor child (other than a minor child being a person with
                               disability or person with severe disability) of the individual, other than income which
                               accrues to the child on account of any--
                               (i) manual work done by the child; or
                               (ii) activity involving application of the skill, talent or specialised knowledge and
                                    experience of the child;
                           (c) all income derived from any converted property or part thereof;
                           (d) all income derived from any converted property which is received by the spouse upon
                               partition of the Hindu undivided family of which the individual is a member.
                     (2) The provisions of sub-clause (i) of clause (a) of sub-section (1) shall not apply in relation to
                  any income accruing to the spouse where the spouse possesses technical or professional
                  qualifications and the income is solely attributable to the application of the technical or professional
                  knowledge and experience of the spouse.
                     (3) The income referred to in sub-clause (i) of clause (a) of sub-section (1) shall,
                  notwithstanding anything contained therein, be included in the total income of the spouse whose
                  total income (excluding the income referred to in that sub-clause) is higher.
                      (4) The Board may prescribe the method for determining the income referred to in sub-clause
                  (ii) and sub-clause (iii) of clause (a) of sub-section (1).
                    (5) The income referred to in clause (b) of sub-section (1) shall be included in the total income
                  of--
                           (a) the parent who is the guardian of the minor child; or
                           (b) the parent whose total income (excluding the income referred to in that clause) is
                               higher, if both the parents are guardians of the child.
                     (6) Where any income referred to in clause (b) of sub-section (1) is once included in the total
                  income of a parent, any such income arising in the succeeding year shall not be included in the total
                  income of the other parent, unless the Assessing Officer considers it necessary to do so after giving
                  an opportunity of being heard to the other parent.
                     (7) In this section, "property" includes any interest in property whether movable or immovable,
                  the sale proceeds of such property in whichever form and where the property is converted into any
                  other form of property by any method, such other property.


Income not        10. Subject to the provisions of this Code, the total income of a financial year of a person shall not
included in the   include the income enumerated in the Third Schedule.
total income.


Persons not       11. The persons enumerated in the Fourth Schedule shall not be liable to income-tax under this
liable to         Code for any financial year subject to the fulfillment of conditions specified in the said Schedule.
income-tax.


                                                                 CHAPTER III

                                                                  19
                                   COMPUTATION OF TOTAL INCOME
                                           I.-- GENERAL
12. Unless otherwise provided in this Code,-                                                               Computation of
                                                                                                           total income.
            (i) the total income of a person shall be computed in accordance with the provisions
                of this Chapter.
            (ii) reference to any accrual, receipt, expenditure, withdrawal, asset or liability shall be
                 construed to be in relation to the financial year in respect of which, and the
                 person in respect of whom, the income is computed.


13. For the purposes of computation of total income of any person for any financial year, income           Classification
from all sources shall be classified as follows:                                                           of sources of
                                                                                                           income.
                 A.-- Income from ordinary sources.
                 B.-- Income from special sources.



14. The income from any source, other than an income from a special source, shall be computed              Computation of
under the class "Income from ordinary sources" and such income shall be classified under the               income    from
following heads of income, namely:--                                                                       ordinary
                                                                                                           sources.
                 A.-- Income from employment.
                 B.-- Income from house property.
                 C.-- Income from business.
                 D.-- Capital gains.
                 E.-- Income from residuary sources.


15. (1) Every income listed in column (3) of the Table in Part III of the First Schedule and sub-          Computation of
section (4) shall be the income from a special source of the person specified in column (2) of the         income      from
said Table.                                                                                                special sources.
   (2) The income from any special source shall be c omputed under the class "Income from special
sources" in accordance with the provisions of the Fifth Schedule.
   (3) Notwithstanding anything in sub-section (1), the income referred to therein, other than the
income referred to in sub-section (4), shall not be considered as income from a special source, if
such income is attributable to the permanent establishment of a non-resident in India.
   (4) The special source income shall include the following, namely: --
        (a) any amount which is found to be credited in the books of account of a person,
            maintained for the financial year, if --
           (i)   the person offers no explanation about the nature and source thereof;
           (ii) the person offers an explanation but fails to substantiate the same; or
           (iii) the explanation offered by him is, in the opinion of the Assessing Officer, not
                 satisfactory;
        (b) the value of any investment made by a person in the financial year to the extent for
            which --
            (i) the person offers no explanation about the nature and source of the investment;

                                               20
                              (ii) the person offers an explanation but fails to substantiate the same; or
                              (iii) the explanation offered by him is, in the opinion of the Assessing Officer, not
                                    satisfactory;
                          (c) the value of bullion, jewellery, other valuable article or money owned by a person to
                              the extent for which --
                              (i) the person offers no explanation about the nature and source of acquisition of the
                                   the value of the bullion, jewellery, other valuable article or money;
                              (ii) the person offers an explanation but fails to substantiate the same; or
                              (iii) the explanation offered by him is, in the opinion of the Assessing Officer, not
                                    satisfactory;
                          (d) the amount of any expenditure incurred by a person in the financial year, if --
                              (i) the person offers no explanation about the source of such expenditure or part
                                   thereof;
                              (ii) the person offers an explanation but fails to substantiate the same; or
                              (iii) the explanation, if any, offered by him is, in the opinion of the Assessing Officer,
                                    not satisfactory;
                          (e) the amount borrowed on a hundi from, or any amount due thereon repaid to, any person
                               in the financial year otherwise than through an account payee cheque drawn on a bank.
                    (5) For the purposes of clause (a) of sub-section (4), the explanation offered by a person, being
                 a closely-held company, in respect of any amount consisting of share application money, share
                 capital, share premium or any such amount by whatever name called, credited in the name of a
                 specified person, shall not be deemed to be satisfactory, unless--
                          (a) the specified person in whose name such credit is recorded also offers an explanation
                              about the nature and source of such amount so credited; and
                          (b) such explanation in the opinion of the Assessing Officer referred to in the said clause
                              (a) of sub-section (4) has been found to be satisfactory.
                    (6) For the purposes of sub-section (5) "specified person" means any person who is a resident but
                 does not include a venture capital fund or a venture capital company.
                    (7) For the purposes of clause (e) of sub-section (4), the amount repaid shall include the amount
                 of interest paid on the amount borrowed.


Apportionment    16. (1) The income of the husband and wife, governed by the communiao dos bens, from ordinary
of      income   sources under each head of income (other than the head "Income from employment") and from
between          special sources shall be apportioned equally between the spouses.
spouses
governed by          (2) The income so apportioned under sub-section (1) shall be included separately in the total
Portuguese       income of the spouses.
Civil Code.          (3) The income under the head "Income from employment" shall be included in the total income
                 of the spouse who has actually earned it.
                    (4) In this section, communiao dos bens refers to the system of community of property under the
                 Portuguese Civil Code of 1860 as in force in the State of Goa and in the Union territories of Dadra
                 and Nagar Haveli and Daman and Diu.


                 17. Unless otherwise provided in this Code, --                                                            Avoidance of
                                                                                                                           double taxation.

                                                                 21
             (i) any income which is included in the total income of a person for any financial year
                 shall not be so included again in the total income of such person for the same or
                 any other financial year;
             (ii) any income which is includible in the total income of any person shall not be
                  included in the total income of any other person,
except where for the purposes of protecting the interests of revenue, it is necessary to do so.


      18. (1) In computing the total income of a person for any financial year, the following shall       Expenditure not
not be allowed as a deduction, namely:--                                                                  to be allowed as
                                                                                                          deduction.
(a) any expenditure, in relation to the income which does not form part of the total income ;
(b) any expenditure attributable to any income from special sources;
(c) any expenditure which has been allowed as a deduction in any other financial year;
(d) any expenditure incurred for an activity which is an offence or which is not permissible by law;
(e) any provision made for any liability, if it remains unascertained by the end of the financial year;
and
(f) any unexplained expenditure referred to in clause (d) of sub-section (4) of section 15.
     (2) The expenditure referred to in clause (a) of sub-section (1) shall be determined in
accordance with such method as may be prescribed , if the Assessing Officer , having regard to the
accounts of the person, is not satisfied with the correctness of the claim of such expenditure.
     (3) The provisions of sub-section (2) shall also apply in a case where the person claims that no
expenditure has been incurred by him in relation to income which is not included in the total income
under the Third Schedule.
     ( 4) Any amount allowed as deduction under a provision of this Code shall not be allowed as
a deduction under any other provision of this Code.
      (5) The provisions of this section shall apply notwithstanding anything in any other
provisions of this Chapter.


19. (1) Any amount on which tax is deductible at source under Chapter XIV during the financial            Amount       not
year shall not be allowed as a deduction in computing the total income, if--                              deductible
                                                                                                          where tax is not
         (a) the tax so deductible has not been deducted during the financial year; or
                                                                                                          deducted      at
         (b) the tax, after such deduction, has not been paid on or before the due date referred to in    source.
             sub-section (1) of section 155.
   (2) A deduction shall be allowed in respect of the amount referred to in sub-section (1) in any
subsequent financial year, if--
         (a) tax has been deducted during the financial year, but paid in such subsequent year after
             the due date referred to in sub-section (1) of section 155; or
         (b) tax has been deducted after the end of the financial year in which the tax was
             deductible and paid in such subsequent financial year.


                                         II. HEADS OF INCOME
                                    A. - Income from employment



                                                22
Income from      20. The income of a person from employment shall be computed under the head "Income from
employment.      employment".


Computation      21. The income computed under the head "Income from employment" shall be the gross salary as
of    income     reduced by the aggregate amount of the deductions referred to in section 23.
from
employment.

Scope of gross   22. The gross salary shall be the amount of salary due, paid, or allowed, whichever is earlier, to a
salary.          person in the financial year by or on behalf of his employer or former employer.


Deductions       23. (1) The deductions from the gross salary for computation of income from employment, to the
from     gross   extent included in the gross salary, shall be the following, namely: --
salary.
                         (a) any sum paid by the employee on account of a tax on employment within the meaning
                             of clause (2) of article 276 of the Constitution;
                         (b) any allowance or benefit granted by an employer for journey by an employee between
                             his residence and office or any other place of work, to such extent as may be
                             prescribed;
                         (c) any allowance or benefit granted by an employer to an employee--
                              (i) to meet expenses wholly, necessarily and exclusively in the performance of the
                                  duties of an office or employment of profit, as may be prescribed, to the extent
                                  such expenses are actually incurred for that purpose;
                              (ii) to meet personal expenses, considering the place of posting or nature of duties or
                                   place of residence, subject to such conditions and limits as may be prescribed;
                              (iii) to meet expenses on travel to any place in India during leave, subject to such
                                    conditions and limits as may be prescribed;
                         (d) any amount of contribution made by an employer, in the financial year, to the account
                             of an employee under an approved pension fund notified by the Central Government,
                             to the extent it does not exceed ten per cent. of the salary of the employee;
                         (e) any amount of contribution made by an employer, in the financial year, to the account
                             of an employee in an approved superannuation fund;
                         (f) any amount of contribution by an employer, in the financial year, to an account of an
                             employee in an approved provident fund, to the extent it does not exceed twelve per
                             cent. of the salary of the employee;
                         (g) any amount of interest credited, in the financial year, on the balance to the credit of an
                             employee in an approved fund to the extent it does not exceed the amount of interest
                             payable at the rate notified by the Central Government;
                         (h) any allowance provided by an employer to meet the expenditure actually incurred on
                             payment of rent in respect of residential accommodation occupied by the employee, to
                             such extent as may be prescribed.
                    (2) For the purposes of clauses (d) and (f) of sub-section (1), salary means basic salary and
                 includes dearness allowance, if the terms of employment so provide.


                                                  B.--Income from house property



                                                               23
                        24. (1) The income from any house property owned by any person shall be computed under                Income     from
                  the head "Income from house property".                                                                      house property.
                         (2) The income from any house property owned by two or more persons having definite and
                  ascertainable shares shall be computed separately for each such person in respect of his share.
                        (3) In a case where the shares of the owners of the house property referred to in sub-section
                  (2) are not definite and ascertainable, such persons shall be assessed as an association of persons in
                  respect of such property.
                       (4) The provisions of this section shall not apply to the house property, or any part of the
                  house property, which is used for business or commercial purposes.


Computation       25. The income from house property shall be the gross rent as reduced by the aggregate amount of
of      income    the deductions referred to in section 27.
from      house
property.


Scope of gross    26. (1) The gross rent in respect of a house property or any part of the house property shall be the
rent.             higher of the amount of contractual rent and presumptive rent, for the financial year.
                      (2) The contractual rent referred to in sub-section (1) shall be the rent received or receivable,
                  directly or indirectly, for the financial year or part thereof, for which such property is let out by the
                  assessee under a contract, whether in writing or otherwise.
                     (3) The presumptive rent referred to in sub-section (1) shall be,-
                           (a) the gross annual value or rental value (by whatever name called) fixed by any local
                               authority under any law for the time being in force for the purposes of property tax in
                               respect of the property without allowing any deductions; or
                           (b) if no such gross annual value or rental value has been fixed by the local authority, the
                               sum for which the property might reasonably be expected to let from year to year.
                     (4) The gross rent shall, regardless of anything to the contrary contained in sub-section (1), be
                  taken to be nil if the property consists of a house or part of a house which is not let out.


                    (5) The provisions of sub-section (4) shall not apply if-
                           (a) the house or part of the house is actually let during any part of the financial year; or
                           (b) any other benefit is derived from it by the owner.
                     (6) The provisions of sub-section (4) shall, in a case where a person owns more than one house,
                  apply only in respect of one house, which the person may specify at his option.
                    (7) The gross rent referred to in sub-section (1) shall not include the amount of rent which the
                  owner cannot realise, subject to the rules as may be prescribed.


                  27. (1) The deductions for the purposes of computation of income from house property shall be the           Deductions
                  following, namely:--                                                                                        from gross rent.
                           (a) the amount of taxes levied by a local authority in respect of such property, to the extent
                               the amount is paid by him during the financial year;
                           (b) a sum equal to twenty per cent. of the gross rent of such property as determined under
                               section 26;


                                                                   24
                           (c) the amount of any interest payable--
                                 (i )    on loan taken for the purposes of acquisition, construction, repair or renovation
                                        of the property; or
                                 (ii) on loan taken for the purposes of repayment of the loan referred to in sub-clause
                                      (i).
                      (2) The interest referred to in clause (c) of sub-section (1) which pertains to the period prior to
                  the financial year in which the house property has been acquired or constructed shall be allowed as
                  deduction in five equal instalments beginning from such financial year.
                     (3) The interest deductible under sub-section (2) shall be reduced by any part thereof which has
                  been allowed as deduction under any other provision of this Code.
                      (4) In respect of one house property, the gross rent of which is taken as nil in terms of sub-
                  sections (4) and (6) of section 26, deduction under this section shall be allowed only in respect of
                  clause (c) of sub-section (1) and such deduction shall not exceed-
                           (a)    one lakh fifty thousand rupees where the loan has been taken for acquisition or
                                 construction of the house property; and
                           (b) fifty thousand rupees, where loan has been taken for repair or renovation of the house
                               property.
                     (5) The deduction referred to in sub-section (4) shall be allowed, if--
                           (a) the acquisition , construction, repair or renovation of the house property is completed
                               within a period of three years from the end of the financial year in which the loan was
                               taken; and
                           (b) the person obtains a certificate from the financial institution or the employer to whom
                               the interest is paid or payable on the loan.


Advance rent      28. The amount of rent received in advance shall be included in the gross rent of the financial year
received          to which the rent relates.


Arrears of rent   29. (1) The amount of rent received in arrears or the amount of rent which is not realised from a
received.         tenant and is realised subsequently shall be deemed to be the income from house property of the
                  financial year in which such rent is received or realised.
                     (2) The arrears of rent or the unrealised rent referred to in sub-section (1) shall be included in the
                  total income of the person under the head "Income from house property", whether the person is the
                  owner of the property in that financial year or not.
                     (3) A sum equal to twenty per cent. of the arrears of rent or the unrealised rent, as the case may
                  be, referred to in sub-section (1) shall be allowed as deduction towards repair and maintenance of
                  the property.



                                                           C.--Income from business


Income from       30. (1) The income from any business carried on by the assessee at any time during a financial year
business          shall be computed under the head "Income from business".
                     (2) The income of distinct and separate business referred to in section 31 shall be computed
                  separately for the purposes of sub-section (1).


                                                                    25
                      (3) Any income from a business after its discontinuance shall be deemed to be the income of the
                   recipient in the year of receipt and shall, accordingly, be computed under the head "Income from
                   business".


Business when      31. (1) A business shall be distinct and separate from another business if there is no interlacing or
treated distinct   inter-dependence or unity embracing the two businesses.
and separate.
                      (2) For the purposes of sub-section (1), a business shall be distinct and separate from another
                   business, if--
                              (a) it is a business in respect of which profits are determined under sub-section (2) of
                                  section 32; or
                             (b) it is a business eligible for deduction in accordance with the provisions of clauses (l),
                                 (m), (n), (o) or (p) of sub-section (2) of section 324.
                      (3) A speculative business shall be deemed to be distinct and separate from any other business
                   including any other speculative business.


                   32. (1) The income computed under the head "Income from business" shall be the profits from the           Computation of
                   business.                                                                                                 income    from
                                                                                                                             business.
                       (2) The profits from the business of the nature specified in column (2) of the Table given below
                   shall be computed in accordance with the provisions contained in the Schedule specified in the
                   corresponding entry in column (3) of the said Table.
                                                                   TABLE
                   Sl.        Nature of Business                                         Schedule
                   No.
                   (1)                (2)                                                       (3)
                   1.    Business of Insurance                                           Sixth Schedule
                   2.    Business of operating a qualifying ship                         Seventh Schedule
                   3.    Business of mineral oil or natural gas                          Eighth Schedule
                   4.    Business specified in Paragraph 1 of the Ninth Schedule         Ninth Schedule
                   5.    Business specified in Paragraph 1 of the Tenth Schedule        Tenth Schedule
                   6     Business listed in column (2) of the Table in theEleventh     EleventhSchedule
                         Schedule where income is determined on presumptive basis


                      (3) The profits from any business not referred to in sub-section (2) shall be the gross earnings
                   from the business as reduced by the amount of business expenditure incurred by the assessee.
                      (4) The Central Government may, if it considers necessary or expedient so to do, by notification,
                   direct that the provisions of the Eighth Schedule, Ninth Schedule, or Tenth Schedule, as the case
                   may be, shall not apply from such date as may be specified therein, to the following, namely:-
                                 (i) any class of undertakings or enterprises; or
                                 (ii) the business of the nature specified at Sl. Nos. 3, 4 or 5 of TABLE given in sub-
                                      section (2) respectively.




                                                                   26
Gross       33. (1) The gross earnings referred to in sub-section (3) of section 32 shall be the aggregate of the
earnings.   following, namely:--
                         (i) the amount of any accrual or receipt from, or in connection with, the business;
                         (ii) the value of any benefit or perquisite, whether convertible into money or not,
                              accrued or received from, or in connection with, the business;
                         (iii) the value of the inventory of the business, as on the close of the financial year;
                         (iv) any amount received from a business after its discontinuance; and
                         (v) the amount of any accrual or receipt from a house property or a part thereof
                              referred to in sub-section (4) of section 24.
                (2) The accruals or receipts referred to in sub-section (1) shall, without prejudice to the generality
            of the provisions of that sub-section, include and deem to include the following, namely: --
                         (i) the amount of any compensation or other payment, accrued or received, for --
                              (a) termination or modification of terms and conditions relating to management of
                                   business, any business agreement or any agency; or
                              (b) vesting of the management of any property or business in another person or
                                  the Government;
                         (ii) any consideration accrued or received under an agreement for non-compete;
                         (iii) any amount or value of any benefit, whether convertible into money or not,
                               accrued to, or received by, a person, being a trade, professional or similar
                               association, in respect of specific services performed for its members;
                         (iv) any consideration on sale of a licence, not being a business capital asset, obtained
                              in connection with the business;
                         (v) any consideration on transfer of a right or benefit (by whatever name called)
                             accrued or received under any scheme framed by the Government, local authority
                             or a corporation established under any law for the time being in force;
                         (vi) the amount of cash assistance, subsidy or grant (by whatever name called),
                              received from any person or the Government for, or in connection with, the
                              business other than to meet any portion of the cost of any business capital asset;
                         (vii) the amount of any remission, drawback or refund of any tax, duty or cess (not
                              being a tax under this Code), received or receivable;
                         (viii) the amount of remuneration (including salary, bonus and commission) or any
                              interest accrued to, or received by, a participant of an unincorporated body from
                              such body;
                         (ix) any sum received under a keyman insurance policy including the sum allocated by
                              way of bonus on such policy;
                         (x) the amount of profit on transfer, demolition, destruction or discarding of any
                              business capital asset (other than a business capital asset used for scientific
                              research and development) computed in accordance with the provisions of section
                              42;
                         (xi) any consideration accrued or received on transfer of carbon credits;
                         (xii) the amount of any benefit accrued to, or received by, the person, or as the case
                              may be, the successor in business, if--
                              (a) it is by way of remission or cessation of any trading liability or statutory
                                  liability or it is in respect of any loss or expenditure,; and


                                                             27
                              (b) the trading liability or statutory liability or loss or expenditure has been
                                  allowed as deduction in any financial year,
             except in a case where such remission or cessation is in terms of sub-clause (b) of clause (204) of
             section 320, the beneficiary is a company which has become a sick industrial company under sub-
1 of 1986    section (1) of section 17 of the Sick Industrial Companies (Special Provisions) Act, 1985;
                          (xiii) the amount of remission or cessation of any liability by way of loan, deposit,
                               advance or credit, except in a case where such remission or cessation is in terms of
                               sub-clause (b) of clause (204) of section 320 and-
                              (a) a suit or arbitration proceeding is pending in any court for recovery of such
                                  liability; or
                              (b) the beneficiary is a company which has become a sick industrial company
                                  under sub-section (1) of section 17 of the Sick Industrial Companies (Special
1 of 1986                         Provisions) Act, 1985;
                          (xiv) the amount recovered from a trade debtor in respect of a bad debt or part of debt
                              which has been allowed as deduction in any financial year under clause (c) or
                              clause (d) or clause (e) of sub-section (3) of section 35;
                          (xv) the amount withdrawn from any special reserve created and maintained under any
43 of 1961                     provision of this Code or the Income-tax Act, 1961, as it stood before the
                               commencement of this Code, for which deduction has been allowed, if the
                               amount is not utilised for the purpose and within the period specified therein;
                          (xvi) the amount accrued to, or received by, the person from his employees as their
                               contribution to any fund for their welfare;
                          (xvii) the amount accrued or received on sale of any business capital asset used for
                               scientific research and development;
                          (xviii) any amount accrued or received on account of the cessation, termination or
                              forfeiture in respect of agreement entered into in the course of the business;
                          (xix) any amount accrued or received, whether as an advance, security deposit or
                               otherwise, from the long term leasing of--
                              (a) the whole or part of any business asset; or
                              (b) any interest in a business asset;
                          (xx) any amount by way of advance, security deposit or of similar nature received and
                              retained on account of negotiations for transfer of-
                              (a) the whole or part of any business asset; or
                              (b) any interest in a business asset;
                          (xxi) any amount received as reimbursement of any expenditure, which has been
                               claimed or allowed as a deduction in any financial year ;
                          (xxii) any interest accrued to, or received by, a person being a financial institution or
                               money lender;
                          (xxiii) any interest incidental to the business, accrued to, or received by, a person;
                          (xxiv) any payment or aggregate of payments made to a person in a day, in respect of a
                              liability incurred and allowed as a deduction in any preceding financial year, --
                              (a) which has been made otherwise than by an account payee cheque drawn on a
                                  bank or by an account payee bank draft;
                              (b) which exceeds--


                                                             28
                                        (i)    a sum of thirty-five thousand rupees if the payment is made to a
                                              transporter for carriage of goods by road; or
                                        (ii) a sum of twenty thousand rupees in any other case; and
                                    (c) which has not been made in such cases and in such circumstances as specified
                                        in sub-section (4) of section 34;
                              (xxv) any amount standing to the credit of the Investor Protection Fund referred to in
                                 section 82, if--
                                    (a) the amount is shared during the relevant financial year, either wholly or in
                                        part, with a recognised stock exchange or recognised commodity exchange or
                                        the depository, as the case may be; and
                                    (b) income-tax has not been paid on such amount in any financial year preceding
                                        the relevant financial year;
                   (3) The gross earnings from business shall not include the following, namely: --
                         (a) any dividend;
                         (b) any interest other than interest,-
                             (i) accrued to, or received by, a person being a financial institution, a money lender
                                 or a participant of an unincorporated body from such body;or
                             (ii) incidental to the business;
                         (c) any income from letting of house property which is included under the head income
                             from house property;
                         (d) any income from the transfer of an investment asset.


Determination   34. (1) The amount of business expenditure referred to in sub-section (3) of section 32 shall be the
of business     aggregate of the following amounts, namely:--
expenditure.
                         (a) the operating expenditure referred to in section 35, incurred by the person for the
                              purposes of the business carried on during the financial year;
                         (b) finance charges referred to in section 36, incurred by the person for the purposes of the
                             business carried on during the financial year;
                         (c) capital allowances referred to in section 37, in respect of the business carried on by the
                             person during the financial year.
                   (2) The provisions for deduction of capital allowances referred to in sections 38, 39 and 40 shall
                apply, whether or not the person has claimed the deduction in computing the total income.
                   (3) The Assessing Officer may restrict the amount of deduction under this section to such
                amount as he considers appropriate having regard to the use of a business asset if such asset is not
                exclusively used for the purposes of the business.
                    (4) The cases and circumstances specified in clause (xxiv) of sub-section (2) of section 33,
                clause (k) of sub-section (4) of section 35, clause (ii) of sub-section (3) of section 58 and sub-clause
                (iii) of clause (c) of sub-section (5) of section 59 shall be the following, namely : --
                         (a) where the payment is made to--
                             (i )   the Reserve Bank of India or any banking company as defined in clause ( c) of          10 of 1949
                                    section 5 of the Banking Regulation Act, 1949;
                             (ii) the State Bank of India or any subsidiary bank as defined in section 2 of the State
                                  Bank of India (Subsidiary Banks) Act, 1959;                                              38 of 1959


                                                                  29
                (iii) any co-operative bank or land mortgage bank;
                (iv) any primary agricultural credit society or any primary credit society as defined    10 of 1949
                     under section 56 of the Banking Regulation Act, 1949;
                                                                                                         31 of 1956
                (v) the Life Insurance Corporation of India established under section 3 of the Life
                    Insurance Corporation Act, 1956;
        (b) where the payment is made to the Government and, under the rules framed by it, such
            payment is required to be made in legal tender;
        (c) where the payment is made by--
                (i) any letter of credit arrangements through a bank;
                (ii) electronic transfer through a bank;
                (iii) a book adjustment from any account in a bank to any other account in that or any
                     other bank;
                (iv) a bill of exchange made payable only to a bank;
                (v) the use of electronic clearing system through a bank account;
                (vi) a credit card;
                (vii) a debit card;
         (d) where the payment is made by way of adjustment against the amount of any liability
             incurred by the payee for any goods supplied or services rendered by the assessee to
             such payee;
        (e )    where the payment is made for the purchase of--
                 (i) agricultural or forest produce; or
                 (ii) the produce of animal husbandry (including livestock, meat, hides and skins) or
                     dairy or poultry farming; or
                 (iii) fish or fish products; or
                 (iv) the products of horticulture or apiculture,
to the cultivator, grower or producer of such articles, produce or products;
         (f )     where the payment is made for the purchase of the products manufactured or
                 processed without the aid of power in a cottage industry, to the producer of such
                 products;
        (g)      where the payment is made in a village or town, which on the date of such payment is
                 not served by any bank, to any person who ordinarily resides, or is carrying on any
                 business, profession or vocation, in any such village or town;
        (h)       where any payment is made to an employee of the assessee or the heir of any such
                 employee, on or in connection with the retirement, retrenchment, resignation,
                 discharge or death of such employee, on account of gratuity, retrenchment
                 compensation or similar terminal benefit and the aggregate of such sums payable to
                 the employee or his heir does not exceed fifty thousand rupees;
        (i )     where the payment is made by an assessee by way of salary to his employee after
                 deducting the income-tax from salary in accordance with the provisions of section
                 213 of the Code, and when such employee--
                 (i) is temporarily posted for a continuous period of fifteen days or more in a place
                    other than his normal place of duty or on a ship; and
                 (ii) does not maintain any account in any bank at such place or ship;

                                                   30
                        (j )    where the payment was required to be made on a day on which the banks were closed
                               either on account of holiday or strike;
                                                                                                                           10 of 1949
                        (k) where the payment is made by any person to his agent who is required to make
                            payment in cash for goods or services on behalf of such person;
                        (l )   where the payment is made by a person, authorised as an authorised dealer or a money
                               changer to deal in foreign currency or foreign exchange under any law for the time
                               being in force, against purchase of foreign currency or travellers cheques in the
                               normal course of his business.
                   (5) For the purposes of clause (c), clause (g) and clause (i) of sub-section (4), the term "bank"
                means any bank, banking company or society referred to in sub-clauses (i) to (iv) of clause (a) of
                sub-section (4) and includes any bank [not being a banking company as defined in clause ( c) of
                section 5 of the Banking Regulation Act, 1949], whether incorporated or not, which is established
                outside India.


Determination   35. (1) The amount of operating expenditure referred to in clause (a) of sub-section (1) of section
of operating    34 shall be the aggregate of--
expenditure.
                        (a) the amount of expenditure specified in sub-section (2), if--
                               (i )    the expenditure is laid out or expended, wholly and exclusively, for the purposes
                                       of the business; and
                               (ii)    it fulfills other conditions, if any, specified therein; and
                        (b) the amount of deductions specified in sub-section (3) subject to the fulfillment of the
                            conditions, if any, specified therein.
                   (2) The expenditure referred to in clause (a) of sub-section (1) shall be on account of,--
                               (i )    purchase of raw material, stores, spares and consumables, or stock-in-trade;
                               (ii)    rent paid for any premises if it is occupied and used by the person;
                               (iii)   current repairs to any building if it is occupied and used by the person;
                               (iv)    land revenue, local rates or municipal taxes in respect of premises occupied and
                                       used by the person;
                               (v )    current repairs of machinery, plant or furniture used by the person;
                               (vi) current maintenance or repairs of computer software or hardware;
                               (vii) salary or wages of employees;
                               (viii) remuneration to any working participant which is in accordance with the
                                      agreement of the unincorporated body and relates to the period falling after the
                                      date of such agreement, limited to the extent as may be prescribed;
                               (ix) any premium paid to effect, or to keep in force, an insurance in respect of,--
                        (a) any premises occupied and used by the person;
                        (b) any machinery, plant or furniture used by the person;
                        (c) stocks or stores belonging to the person;
                        (d) the health of any employee of the person; or
                        (e) any other asset owned and used by the person;
                               (x )    any premium paid by the person, being a federal milk co-operative society, to
                                       effect, or to keep in force, an insurance on the life of the cattle owned by a

                                                                    31
            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;
    (xi)    welfare of workmen and staff;
    (xii)   power and fuel;
    (xiii) freight, clearing and forwarding charges;
    (xiv)    selling expenses in the nature of commission, brokerage, discount, or warranty
            charges;
    (xv)    sales promotion including advertisement and publicity;
    (xvi)   training of employees;
    (xvii) conference;
    (xviii) use of hotel or boarding and lodging facilities;
    (xix)   conveyance, tour or travel;
    (xx)    running or maintenance of motor car or aircraft;
    (xxi)   postage and telecommunications;
    (xxii) audit and such other professional fees;
    (xxiii) legal services;
    (xxiv) entertainment and provision of hospitality;
    (xxv) maintenance of guest-house;
    (xxvi) subscription, including entrance fee, to a club or a trade association or the use of
           their facilities;
    (xxvii) scientific research and development related to the business;
    (xxviii)salary to an employee engaged in, or the purchase of material used in, scientific
            research and development, within a period of three years immediately preceding
            the commencement of the business;
    (xxix) contribution by the person, being an employer, to an approved fund subject to
           such limits and conditions, as may be prescribed;
    (xxx) contribution to any fund, referred to in clause (xvi) of sub-section (2) of section
          33, to the extent the amount has been received from his employees as their
          contribution to the fund;
     (xxxi) any head office expenditure by a non-resident, as is attributable to his business
            in India, not exceeding an amount equal to one-half per cent. of the total sales,
            turnover or gross receipts of business in India;
    (xxxii) cost of acquisition of the asset as in the case of the predecessor and cost of any
            improvement made thereto and expenditure incurred wholly and exclusively in
            connection with the transfer of the asset, by the predecessor, if --
(a) the person is the successor in the business re-organisation;
(b) the asset becomes the property of the person under a scheme of business re-
    organisation; and
(c) the asset is sold by the person as a business trading asset;
    (xxxiii) amount as computed below, where a business trading asset is sold by a person
           being a transferee or a donee and such asset had become the property of such
           person on the total or partial partition of a Hindu undivided family or under a


                                       32
              gift or will or an irrevocable trust, in accordance with the formula ­
      A+B+C
      where
      A = cost of acquisition of such asset to the transferor or the donor, as the case may be;
      B = cost of any improvement made thereto by such transferor or donor;
      C = expenditure incurred wholly and exclusively in connection with the 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, by such transferor or donor, as the case may be;


      (xxxiv) protecting or safeguarding the goodwill of the person, which has necessarily to
             be preserved for the purpose of his business;
      (xxxv) tax (not being a tax under this Code), duty, cess, royalty or fee, by whatever
            name called, under any law for the time being in force, if the amount is actually
            paid;
      (xxxvi) bonus or commission to employees for services rendered, if the amount would
             not have been payable to employees as profits or dividends had it not been paid
             as bonus or commission;
      (xxxvii) encashment of leave to the credit of employees, to the extent the amount is
             actually paid;
      (xxxviii) gratuity to employees on their retirement or on termination of their
             employment;


      (xxxix) the expenditure incurred by a body corporate, if-
(a)    such body corporate is constituted or established under a Central, State or Provincial
      Act;
(b) the expenditure is for objects and purposes authorised by the said Act; and
(c) such body corporate is notified by the Central Government for the purposes of             this
    clause, having regard to the objects and purposes of the said Act;


      (xl)     the amount paid by a public financial institution by way of contribution to a
              credit guarantee fund trust for small industries which is notified by the Central
              Government for the purposes of this clause;
      (xli)    the actual cost of the licence referred to in clause (iv) of sub-section (2) of
              section 33, in the year in which the consideration on account of sale of such
              licence forms part of gross earnings;
      (xlii) the actual cost of the right or benefit referred to in clause (v) of sub-section (2)
             of section 33, in the year in which the consideration for transfer of such right or
             benefit forms part of gross earnings;
      (xliii) the repayment of any advance or security deposit in respect of the long-term
              leasing referred to in clause (xix) of sub-section (2) of section 33, in the year in
              which such repayment is made;
      (xliv) the repayment of any advance or security deposit retained on account of
             negotiations for transfer of a business asset or interest therein, referred to in


                                         33
                      clause (xx) of sub-section (2) of section 33, in the financial year in which such
                      repayment is made;
             (xlv) any other operating expenditure not covered under clause (i) to clause (xliv) .
  (3) The amount of deductions referred to in clause (b) of sub-section (1) shall be the following,
namely:--
        (a) the value of inventory of the business, as at the beginning of the financial year;
        (b) loss of inventory or money on account of ­
             (i) theft, robbery, fraud or embezzlement, occurring in the course of the business; or
             (ii) any disaster, natural or man made,
if the inventory or the money is written off in the books of account;
        (c) any amount credited to the provision for bad and doubtful debts account, not exceeding
            one per cent of the aggregate average advances computed in the prescribed manner
            if,--
             (i )    the person is a financial institution, or a non-banking finance company as may be
                    notified;
             (ii) the amount is charged to the profit and loss account for the financial year in
                  accordance with the prudential norms of the Reserve Bank of India in this regard;
                  and
             (iii) the amount of trade debt or part thereof written off as irrecoverable in the books of
                   the person is debited to the provision for bad and doubtful debts account;
        (d) the debit balance, if any, on the last day of the financial year, in the provision for bad
            and doubtful debts account referred to in clause (c), if the balance has been transferred
            to the profit and loss account of the financial year;
        (e) trade debt or part thereof, if,--
             (i) the person is other than a person referred to in sub-clause (i) of
                 clause (c); and
             (ii) the amount is written off as irrecoverable in the books of the person;
        (f) payment during the financial year in discharge of any remitted or ceased liability which
            has been included in the gross earnings of any preceding financial year under clause
            (xii) or clause (xiii) of sub-section (2) of section 33;
        (g) payment during the financial year in respect of the amount which has been included in
            gross earnings of any preceding financial year on account of cessation, termination or
            forfeiture of agreement referred to in clause (xviii) of sub-section (2) of section 33.
    (4) Notwithstanding anything in sub-section (2) or sub-section (3) the amount of operating
expenditure shall not include the amount of expenditure, being in the nature of, or on account of, --
        (a) personal expenses of the person;
        (b) capital expenditure including expenditure in respect of which capital allowance is
            allowable under section 37;
        (c) finance charges;
        (d) any unascertained liability of the person;
        (e) remuneration payable to any participant other than a working participant of an
            unincorporated body;
        (f) any expenditure incurred by a person on advertisement in any souvenir, brochure, tract,


                                                34
             pamphlet or the like published by a political party;
         (g) any amount of contribution by an employer during the financial year to an approved
              superannuation fund for the benefit of an employee, to the extent it exceeds one lakh
              rupees;
         (h) any tax, interest or penalty payable under this Code or the Income-tax Act, 1961 or the        43 of 1961
             Wealth Tax Act, 1957 as they stood before the commencement of this Code;                       27 of 1957
         (i) any amount paid which is eligible for relief of tax under section 228;
         (j) any dividend declared or distributed or paid;
         (k) any payment or aggregate of payments made to a person in a day, in respect of an
             expenditure incurred during the financial year --
             (a) which has been made otherwise than by an account payee cheque drawn on a bank
                 or by an account payee bank draft;
             (b) which exceeds--
                  (i )    a sum of thirty-five thousand rupees if the payment is made to a transporter
                         for carriage of goods by road; or
                  (ii) a sum of twenty thousand rupees in any other case; and
             (c) which has not been made in such cases and in such circumstances as specified in
                 sub-section (4) of section 34; and
         (l) royalty, licence fee, service fee, privilege fee, service charge or any other fee or charge,
             by whatever name called, levied exclusively on, or appropriated directly or indirectly
             from, a State Government undertaking by the State Government.
   (5) Any amount of expenditure or deduction referred to in sub-section (1) or sub-section (2) or
under section 36 or under section 37,which is not allowable by reason of the fact that the
expenditure is in violation of the condition, if any, or is in excess of the amount, if any, specified
therein, shall not be allowed as deduction under clause (xlv) of sub-section (2) only on the ground
that it is laid out or expended, wholly and exclusively, for the purposes of the business.
   (6) The deduction in respect of the amount referred to in clause ( iv) and clauses (xxxv) to
(xxxviii) of sub-section (2) shall, notwithstanding anything in sub-section (1), be allowed in the
financial year in which the liability has arisen, if it is actually paid in such financial year or by the
due date of filing of the return of tax bases for that financial year.
   (7) If any deduction is not allowed on account of the provisions of sub-section (6), it shall be
allowed in the financial year in which the amount is actually paid.
  (8) The deduction in respect of amount referred to in clauses (xxix) and (xxx) of sub-section (2)
shall be allowed, in the financial year in which the liability has arisen and has actually been paid.
   (9) Notwithstanding anything in sub-section (8), the amount referred to in clauses (xxix) and
(xxx) of sub-section (2) for which the liability has arisen in the month of March of the financial year,
shall be allowed in the said financial year, if such amount has actually been paid on or before the
due date by which the employer is required to credit the contribution in the relevant fund under any
Act, rule, order or notification issued thereunder or under any standing order, award, contract of
service or otherwise.
   (10) In this section, 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


                                                 35
                  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.


36. (1) The amount of finance charges referred to in clause (b) of sub-section (1) of section 34 shall      Determination
be--                                                                                                        of       finance
                                                                                                            charges.
         (a) the amount of interest paid on any capital borrowed or debt incurred;
         (b) the amount of interest paid to trade creditors;
         (c) the amount of interest paid to any participant, which is in accordance with the
             agreement of formation of unincorporated body and relates to the period falling after
             the date of such agreement, limited to the extent as may be prescribed;
         (d) the amount of any incidental financial charges;
         (e) the proportionate amount of discount or premium payable on any bond or debenture
             issued by the person, calculated in the manner as may be prescribed.
   (2) The amount of finance charges referred to in sub-section (1) shall not include--
         (a) any amount paid in respect of capital borrowed or debt incurred for acquisition of a
             capital asset (whether capitalised in the books of account or not) for any period --
             (i) in the case of a new business, prior to the date of commencement of such business;
                 and
             (ii) in any other case, prior to the date on which such asset was first put to use;
         (b) any amount of incidental financial charges for issue of convertible debentures or bonds
             or share capital; and
         (c) any amount of interest referred to in section 23 of the Micro, Small and Medium
             Enterprises Development Act, 2006 .                                                            27 of 2006
   (3) The amount of interest on any capital borrowed or debt incurred, which is payable to any
financial institution, shall be allowed as a deduction, notwithstanding anything in sub-section (1), in
the financial year in which the liability has arisen, if it is actually paid in such financial year or by
the due date of filing of the return of tax bases for that financial year.
   (4) If any deduction is not allowed on account of the provisions of sub-section (3), it shall be
allowed in the financial year in which the amount is actually paid.
   (5) Any interest referred to in sub-section (3) which has been converted into a loan or borrowing
shall not be deemed to have been actually paid for the purposes of that sub-section.
   (6) In this section, "capital borrowed" shall include recurring subscriptions received periodically
from shareholders, or subscribers, in a mutual benefit finance company, which fulfils such
conditions as may be prescribed.


37. (1) The amount of capital allowances referred to in clause (c) of sub-section (1) of section 34         Determination
shall be the aggregate of the amount in respect of, --                                                      of       capital
                                                                                                            allowances

                                                36
                         (a) depreciation of business capital asset;
                         (b) initial depreciation of business capital asset;
                         (c) terminal allowance;
                         (d) scientific research and development allowance;
                         (e) deferred revenue expenditure allowance.
                   (2) The depreciation, initial depreciation or terminal allowance, referred to in sub-section (1),
                shall be allowed in respect of any business capital asset if the asset is, --
                         (a) owned, wholly or partly, by the person; and
                         (b) used for the purposes of the business of the person.
                   (3) The condition referred to in clause (a) of sub-section (2) shall not apply in respect of any
                business capital asset, being capital expenditure on a building which is held by the person under a
                lease or other right of occupancy.
                   (4) A business capital asset shall be deemed to be owned by the person if he is a lessee in terms
                of a financial lease.
                   (5) The amount of deferred revenue expenditure allowance referred to in clause ( e) of sub-
                section (1) shall be such amount as computed in accordance with the Twelfth Schedule.


Determination   38. (1) The amount of depreciation in respect of a business capital asset referred to in section 37
of              shall be the aggregate of the following, namely:--
depreciation.
                         (a) such percentage of the adjusted value of any block of assets as specified in the
                             Thirteenth Schedule, in respect of all the business capital assets forming part of the
                             relevant block of assets specified therein; and
                         (b) nil, in respect of any other business capital asset not forming part of any block of assets
                             specified in the Thirteenth Schedule.
                   (2) The depreciation allowance on assets referred to in section 37 shall, notwithstanding the fact
                that all business capital assets in any block of assets have ceased to exist by reason of being
                demolished, destroyed, discarded or transferred, be allowed to the person in respect of the block of
                assets, if the adjusted value of the block of assets is greater than zero.
                   (3) The deduction under this section in respect of an asset shall be restricted to fifty per cent. of
                the sum referred to in sub-section (1), if --
                         (a) the asset is acquired by the person during the financial year; and
                         (b) is used for the purposes of business for a period of less than one hundred and eighty
                             days in the relevant financial year.
                   (4) The depreciation in respect of any business capital asset, notwithstanding anything contained
                in any other provision of this Code, shall not be allowed if, --
                         (a) the asset does not form part of any block of assets specified in the Thirteenth Schedule;
                             or
                         (b) the expenditure incurred for acquiring the asset has been allowed as a deduction under
                             any provision of this Code.
                39. (1) A person shall be allowed, in addition to depreciation, an initial depreciation in respect of a    Determination
                business capital asset, if--                                                                               of initial
                                                                                                                           depreciation.
                         (a) the person is engaged in the business of manufacture or production of any article or
                             thing;

                                                                 37
                         (b) the asset is a new asset forming part of the class of assets "Machinery and Plant"
                              specified in the Thirteenth Schedule;
                         (c) the asset was not used either within or outside India by any other person before its
                             installation by the person;
                         (d) the asset is not installed in any office premises or any residential accommodation,
                             including accommodation in the nature of a guest-house;
                         (e) the asset is not in the nature of any office appliance; and
                         (f) the whole of the actual cost of the asset is not allowed as a deduction (whether by way of
                               depreciation or otherwise) in computing the income under the head "Income from
                               business" of any financial year.
                   (2) The initial depreciation referred to in sub-section (1),--
                         (a) shall be an amount equal to twenty per cent. of the actual cost of the asset; and
                         (b) shall be allowed in the financial year in which the asset is used for the first time for the
                             purposes of the business of the person.
                    (3) The deduction under this section in respect of such asset shall be restricted to fifty per cent.
                of the sum referred to in sub-section (2), if the asset is used for the purposes of business for a period
                of less than one hundred and eighty days in the relevant financial year.


                40. (1) A person shall be allowed a terminal allowance in respect of a block of assets, if--                 Deduction   for
                                                                                                                             terminal
                         (a) the block of assets has ceased to exist by reason of being demolished, destroyed,
                                                                                                                             allowance
                             discarded or transferred during the financial year; and
                         (b)    the percentage specified in the Thirteenth                 Schedule     for   computing
                               depreciation in respect of the block of assets is zero.
                   (2) The terminal allowance referred to in sub-section (1) shall be computed in accordance with
                the formula--
                A+B-C
                where-
                A = the written down value of the block of assets at the beginning of the financial year;
                B = the actual cost of any asset falling within that block, acquired during the financial year; and
                C = the amount accrued or received in respect of the assets which are
                demolished, destroyed, discarded or transferred during the financial year together with the value of
                the carcass or the scrap, if any.
                    (3) The terminal allowance referred to in sub-section (1) shall be treated as "nil", if the net result
                of the computation thereunder is negative.


Deduction for   41. (1) A company shall be allowed a deduction equal to one hundred and fifty per cent. of the
scientific      expenditure (not being expenditure in the nature of cost of any land or building) incurred on --
research and
                         (a) creating and maintaining an in-house facility for scientific research and development;
development
                             and
allowance
                         (b) carrying out scientific research and development in the in-house facility.
                   (2) The deduction under sub-section (1) shall not be allowed, unless --
                         (a) the company is engaged in the business of biotechnology or in business of manufacture

                                                                 38
                             or production of any article or thing, not being an article or thing specified in
                             Fourteenth Schedule;
                         (b) the company creates and maintains an in-house facility for carrying out scientific
                              research and development;
                         (c) the research facility is approved by the Central Government on the basis of the
                              recommendation of such authority as may be notified;
                         (d) the company enters into an agreement with such authority,-
                             (i) for cooperation in the research and development facility; and
                             (ii) for audit of the accounts maintained for such facility.
                    (3) The approval granted to a predecessor shall be deemed to have been granted to the successor
                if the research facility is transferred to the successor as a result of a business re-organisation.
                    (4) The deduction under this section shall not be allowed to a company in respect of the
                expenditure referred to in sub-section (1), if the expenditure is incurred in the course of its business
                in the nature of scientific research and development.
                  (5) The Board may, for the purposes of this section, prescribe such conditions and manner as
                may be considered necessary for grant of approval.


Computation     42. (1) The amount of profit, where a business capital asset, which forms part of a block of assets
of profit on    specified in the Thirteenth Schedule, is transferred, discarded, destroyed or demolished shall be
transfer of a   computed in accordancewith the formula-
business
                            A-(B+C)
capital asset
                            where-
                            A=        the amount accrued or received in respect of such asset, which is transferred,
                                      discarded, destroyed or demolished during the financial year together with the
                                      amount of scrap value, if any;
                            B=        the amount of written down value of such block of assets at the beginning of
                                      the financial year;
                            C=        the actual cost of any asset falling within that block of assets, acquired during
                                      the financial year;
                  (2) The profit referred to in sub-section (1) shall be treated as `nil', if the net result of the
                computation thereunder is negative.
                   (3) The amount of profit, where a business capital asset other than that referred to in sub-section
                (1) is transferred, discarded, destroyed or demolished, shall be computed in accordance with the
                formula-
                            A-B
                            where-
                            A=        amount accrued or received in respect of the asset which is transferred,
                                      discarded, destroyed or demolished during the financial year together with the
                                      amount of scrap value, if any;
                            B=        the actual cost of the asset.


                43. (1) The deduction for any capital allowance referred to in section 37 shall, in a case where           Special
                business re-organisation has taken place during the financial year, be allowed in accordance with the      provisions
                provisions of this section.                                                                                relating     to

                                                                 39
                                                                                                                        business      re-
                 (2) The amount of deduction allowable to the predecessor shall be determined in accordance
                                                                                                                        organisation.
              with the formula-
                          AxB
                              C
                         where-
                         A=         the amount of deduction allowable as if the business re-organisation had not
                                    taken place;
                         B=         the number of days comprised in the period beginning with the first day of
                                    the financial year and ending on the day immediately preceding the date of
                                    business re-organisation;
                         C=          the total number of days in the financial year in which the business re-
                                    organisation has taken place.
                 (3) The amount of deduction to the successor shall be determined in accordance with the
              formula --
                          AxB
                              C
                         where-
                         A=         the amount of deduction allowable as if the business re-organisation had not
                                    taken place;
                         B=         the number of days comprised in the period beginning with the date of
                                    business re-organisation 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 re-
                                    organisation has taken place.


Meaning of    44. (1) The actual cost of a business capital asset to the person shall be computed in accordance
actual cost   with the formula­
                         A-[B+(C x A)]
                                     D
                         where -
                         A=         cost of the business capital asset to the person including the interest paid on
                                    the capital borrowed for acquiring the asset if such interest is relatable to the
                                    period before the asset is put to use;
                         B=         the amount of additional duty leviable under section 3 of the Customs Tariff
                                    Act, 1975 or the amount of duty of excise, in respect of which a claim of
                                    credit has been made and allowed under the Central Excise Rules, 1944;
                         C=         the amount of subsidy, grant or reimbursement (by whatever name called)
                                    received by the assessee, directly or indirectly, from the Central
                                    Government,                              a                               State
                                    Government, any authority established under any law for the time being in
                                    force or from any other person in respect of, or with reference to, any assets
                                    including the relevant asset;
                         D=         cost of all the assets in respect of, or with reference to, which the amount `C'
                                    is so received.


                                                            40
   (2) The Assessing Officer may, notwithstanding anything in sub-section (1), determine, with the
prior approval of the Joint Commissioner, the actual cost, if -
         (a) the asset was a business asset at any time before the date of acquisition by the person;
             and
         (b) the Assessing Officer is satisfied that the main purpose of the transfer of the asset,
             directly or indirectly to the person, was reduction of the liability to income-tax (by
             claiming depreciation with reference to an enhanced cost).
   (3) The actual cost of the business capital asset to the person shall be the deemed written down
value, if --
         (a) the asset is acquired by the person by way of gift or inheritance;
         (b) the asset is converted by the person into a business capital asset in any financial year;
             or
         (c) the person is a transferee holding company or a transferee subsidiary company in
              respect of the transfer of the asset by the subsidiary company or the holding company
              respectively.
   (4) The actual cost of a business capital asset to the person shall, in a case of sale and buy back
transaction of the asset, be the lower of the following, namely: --
         (a) the actual price for which the asset is re-acquired by him; or
         (b) the deemed written down value.
    (5) Where a business capital asset is acquired by the person and subsequently it is transferred
back to the transferor by way of lease, hire or otherwise, the actual cost of the asset in the hands of
the person shall be the written down value of the asset in the hands of the transferor at the beginning
of the financial year in which the acquisition of the asset by the person has taken place.
    (6) Where the person is a non-resident and a business capital asset,having been acquired by him
outside India, is brought by him to India, the actual cost of the asset for the person shall be the cost
of acquisition of the asset by him, as reduced by an amount equal to the amount of depreciation
which would have been allowable, had the asset been used in India for the purpose of the business
of the person since the date of such acquisition.
   (7) The actual cost of an asset shall be treated as nil, if--
         (a) deduction in respect of the cost of the asset has been allowed or is allowable to the
             person under the Eighth Schedule or the Ninth Schedule or the Tenth Schedule; or
         (b) deduction in respect of the cost of the asset has been allowed or is allowable under any
             of the aforesaid Schedules to any other person and the person has acquired or received
             the asset by any of the special modes of acquisition.
   (8) The Board may, for the purposes of determining the actual cost of a business capital asset,
prescribe--
         (a) any other cost which may be included in determining the actual cost; and
         (b) the method of determining the actual cost in the circumstances which are not provided
             for in this section.
    (9) In this section, deemed written down value of a business capital asset shall be the actual cost
to the person or the previous owner, as the case may be, when he first acquired the asset as reduced
by the aggregate amount of depreciation that would have been allowable to the person or the
previous owner, as the case may be, upto the preceding financial year as if the asset was the only
asset in the relevant block of assets.



                                                 41
45. (1) The written down value of any block of assets at the beginning of the financial year shall be      Meaning       of
the written down value of the block of assets at the close of the immediately preceding financial          written    down
year.                                                                                                      value        and
                                                                                                           adjusted value
   (2) The written down value of the block of assets at the close of the immediately preceding
                                                                                                           of assets.
financial year shall be the adjusted value of the block of assets in the immediately preceding
financial year as reduced by--
         (a) the amount of capital allowance, if any, allowed under section 37 during that year; and
         (b) any expenditure incurred for acquiring the asset to the extent allowed as a deduction in
             the financial year under any provision of this Code.
   (3) The adjusted value of any block of assets for any financial year shall be computed in
accordance with the formula--
            (A+B) - (C+D+E)
            where-
            A=         the written down value of the block of assets at the beginning of the financial
                        year;
            B=         actual cost of any asset falling within the block, acquired during the financial
                       year;
            C=          moneys receivable in respect of any asset falling within the block, which is
                        sold or discarded or destroyed or demolished during the financial year;
            D=         amount of the scrap value, if any;
            E=          the aggregate of the deemed written down value of the assets transferred by
                        any of the modes referred to in sub-section (3) of section 44.
  (4) The adjusted value of any block of assets under sub-section (3) shall be ni" if the amount
(C+D+E) exceeds the amount (A+B).
   (5) The adjusted value of the block of assets, acquired by a successor in a business re-
organisation, for the financial year in which the business re-organisation has taken place shall be the
amount which would have been taken as the adjusted value of the block of assets as if the business
re-organisation had not taken place.
   (6) The written down value of the block of assets, acquired by a successor in a business
reorganization, on the last day of the financial year in which the business re-organisation has taken
place shall be determined in accordance with the formula --
            A - (B + C)
            where -
            A=         the adjusted value determined under sub-section (5);
            B=           the amount of deduction allowed to the predecessor under sub-section (2) of
                        section 43 in respect of the block of assets;
            C=           the amount of deduction allowed to the successor under sub-section (3) of
                        section 43 in respect of the block of assets.
   (7) Where a block of assets comprises of any asset acquired in any financial year from a country
outside India for the purposes of business and there is variation in liability in respect of acquisition
of the asset after the date of such acquisition, the adjusted value of the block of assets shall be
computed in accordance with the formula--
            A+(B-C)-D
            where -

                                                42
            A=         the adjusted value of such block of assets determined in accordance with sub-
                        section (3);
            B=         the amount of liability of the person, expressed in Indian rupees at the time of
                        making actual payment towards--
                      (a) the whole or a part of the cost of the asset; or
                      (b) repayment of the whole or part of the moneys borrowed by him from
                          any person in any foreign currency specifically for the purpose of
                          acquiring the asset;
            C =        the amount of liability corresponding to actual payment referred to in B,
                       expressed in Indian rupees, existing at the time of acquisition of the asset;
            D=         the whole or any part of the liability met, directly or indirectly, by any other
                       person or authority.
   (8) The amount of liability of the person, expressed in Indian rupees at the time of making
payment as referred to in sub-section (7), shall, in a case where the person has entered into a forward
contract, be computed with reference to the rate of exchange specified in such forward contract.
   (9) The Board may prescribe-
        (a) the method of determining the allocation of the written down value or the adjusted
             written down value of the assets between the different businesses carried on by the
             person; and
        (b) the method of determining the written down value or the adjusted written down value
            of the block of assets in the circumstances which are not provided for in this section.
   (10) In this section, the deemed written down value shall have the meaning assigned to it in sub-
section (9) of section 44.


                                          D. ­ Capital gains


46. (1) The income or deemed income from the transfer of any investment asset shall be computed           Capital gains.
under the head "Capital gains".
   (2) The income under the head "Capital gains" shall, without prejudice to the generality of the
foregoing provisions, include the following, namely: --
        (a) income from the transfer referred to in clause (d) or clause (e) of sub-section (1) of
            section 47, if, before the expiry of a period of eight years from the date of transfer of
            the investment asset,--
             (i) the parent company, or its nominee, ceases to hold the whole of the share capital of
                   the subsidiary company; or
             (ii) the investment asset is converted by the transferee into, or treated by it as, its
                    business trading asset;
        (b) the income from the transfer referred to in clause (f) of sub-section (1) of section 47, if
            any of the conditions laid down in clause (15) or clause (67) of section 320, as the case
            may be, is not complied with;
         (c) the income from the transfer referred to in clause (m)or clause ( n) or clause (o) or
             clause (p) of sub-section (1) of section 47, as the case may be, if any of the conditions
             laid down in the said clauses is not complied with;
  (3) For the purposes of sub-section (1), the following amounts shall be the deemed income of the

                                               43
                   transferor-
                            (a) the amount of withdrawal referred to in sub-section (4) of section 55 to the extent
                                deduction has been allowed under sub-section (2) thereof, if the condition laid down
                                in the said sub-section (4) is not complied with;
                            (b) the amount of deposit referred to in sub-section (5) of section 55 to the
                                extent deduction has been allowed under sub-section (2) thereof, if the condition laid
                                down in the said sub-section (5) is not complied with;
                            (c) the amount of deduction allowed under sub-section (1) of section 55, if any of the
                                conditions specified in sub-section (6) of the said section is not complied with.


Income from        47. (1) The income from the following transfers shall not be included in the computation of income
certain            under the head "Capital gains" , namely:--
transfers not to
                            (a) distribution of any investment asset on the total or partial partition of a
be treated as
                                Hindu undivided family;
capital gains
                            (b) gift, or transfer under an irrevocable trust, of any investment asset, other than sweat
                                equity share;
                            (c ) transfer of any investment asset under a will;
                            (d) transfer of any investment asset by a company to its subsidiary company, if-
                                   (i) the parent company or its nominees hold the whole of the share capital of the
                                       subsidiary company,
                                   (ii) the subsidiary company is an Indian company; and
                                   (iii) the subsidiary company treats the asset as an investment asset;
                            (e) transfer of any investment asset by a subsidiary company to the holding company, if--
                                   (i )    the whole of the share capital of the subsidiary company is held by the holding
                                          company or its nominees,
                                   (ii) the holding company is an Indian company, and
                                   (iii) the holding company treats the asset as an investment asset;
                            (f )   transfer of any investment asset by a predecessor to a successor in a scheme under a
                                   business re-organisation if the successor is an Indian company;
                            (g) transfer of any investment asset, being shares held in an Indian company, by an
                                amalgamating foreign company to the amalgamated foreign company, if--
                                   (i) the transfer is effected under a scheme of amalgamation;
                                   (ii) the shareholders holding not less than three-fourths in value of the shares of the
                                        amalgamating foreign company continue to remain shareholders of the
                                        amalgamated foreign company; and
                                   (iii) the transfer does not attract tax on capital gains in the country, in which such
                                         amalgamating company is incorporated;
                            (h) transfer of any investment asset, being shares held in an Indian company, by a
                                demerged      foreign   company      to   the    resulting  foreign   company,
                                if--
                                   (i) the transfer is effected under a scheme of demerger;
                                   (ii) 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


                                                                      44
           foreign company; and
       (iii) the transfer does not attract tax on capital gains in the country, in which such
             demerged company is incorporated;
(i )    transfer of any investment asset, by a banking company to a banking institution, if the
       transfer is effected under a scheme of amalgamation, sanctioned and brought into
       force by the Central Government under sub-section (7) of section 45 of the Banking
       Regulation Act, 1949;
 (j) transfer of shares of an amalgamating company by a shareholder under a scheme of
      business re-organisation, if--
       (i) the transfer is made in consideration of the allotment to the shareholder of shares
           in the successor amalgamated company except where the shareholder itself is the
           amalgamated company; and
       (ii) the successor is neither a non-resident nor a foreign company;
(k) transfer of shares of a predecessor co-operative bank by a shareholder under a scheme
    of business re-organisation, if the transfer is made in consideration of the allotment to
    the shareholder of shares in the successor co-operative bank;
(l) transfer of shares by the resulting company, in a scheme of demerger, to
    the shareholders of the demerged company, if the transfer is made in consideration of
    demerger of the undertaking;
(m) transfer of any investment asset by a sole proprietary concern to a company, if --
       (i) the sole proprietary concern is succeeded by the company in the business carried
           on by it;
       (ii) all the assets and liabilities of the said concern relating to the business immediately
            before the succession become the assets and liabilities of the company;
       (iii) 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 continues to remain the same
             for a period of five years from the date of succession; and
       (iv) the sole proprietor does not receive any consideration or benefit, directly or
            indirectly, other than by way of allotment of shares in the company;
(n) transfer of any investment asset by a private company or unlisted public company to a
    limited liability partnership or any transfer of a share 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, if--
       (i) all the assets and liabilities of the company immediately before the conversion
           become the assets and liabilities of the limited liability partnership;
       (ii) 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;
       (iii) 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;
       (iv) the aggregate of capital contribution by the shareholders of the company in the
            limited liability partnership shall not be less than fifty per cent. of the total capital
            of the limited liability partnership at any time during the period of five years from
            the date of conversion;

                                           45
      (v) the total sales, turnover or gross receipts in business of the company in any of the
          three financial years preceding the financial year in which the conversion takes
          place do not exceed sixty lakh rupees; and
      (vi) no amount is paid, either directly or indirectly, to any partner out of the
           accumulated profits of the company on the date of conversion, for a period of
           three years from the said date;
(o) transfer of any investment 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, if--
      (i)    all the assets and liabilities of the firm immediately before the succession become
            the assets and liabilities of the company;
      (ii) 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;
      (iii) 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
      (iv) the aggregate of the shareholding in the company of the partners of the firm shall
           not be less than fifty per cent. of the total voting power in the company at any
           time during the period of five years from the date of succession;
(p) transfer of any investment asset by a firm to a limited liability partnership as a result of
    conversion of the firm into a limited liability partnership in accordance with the
    provisions of section 55 of the Limited Liability Partnership Act, 2008, if--                     6 of 2009

      (i) all the assets and liabilities of the firm immediately before the conversion become
          the assets and liabilities of the limited liability partnership;
      (ii) all the partners of the firm 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 capital
           account stood in the the books of the firm on the date of conversion;
      (iii) 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 share in profit and capital
            contribution in the limited liability partnership;
      (iv) the aggregate of capital contribution by the partners of the firm in the limited
           liability partnership shall not be less than fifty per cent. of the total capital of the
           limited liability partnership at any time during the period of five years from the
           date of conversion; and
      (v) the total sales, turnover or gross receipts in business of the firm in any of the three
          financial years preceding the financial year in which the conversion takes place do
          not exceed sixty lakh rupees;
(q) transfer of any bond or global depository receipt by a non-resident to another non-
    resident, if the transfer is made outside India;
(r)    transfer of any work of art, archaeological, scientific or art collection, book,
      manuscript, drawing, painting, photograph or print, to the Government or a University
      or any public museum or institution of national importance or of renown throughout
      any State or States and notified by the Central Government;
(s) transfer by way of conversion of any bonds or debentures, debenture-stock or deposit
    certificates in any form, of a company into shares or debentures of that company;
(t) transfer by way of conversion of foreign currency convertible bond or foreign currency

                                         46
                                exchangeable bond of a company into shares or debentures of that company;
                          (u) transfer of any securities, if--
                                (i) the transfer is effected under a scheme for lending of any securities; and
                                (ii) the scheme is framed in accordance with the guidelines issued by the Securities
                                     and Exchange Board of India or the Reserve Bank of India;
                          (v) transfer of any investment asset, if--
                                (i) the transferor is a company; and
                                (ii) the asset of the company is distributed to its shareholders on its liquidation;
                          (w) transfer of an investment asset, being land of a sick industrial company made under a
                              scheme sanctioned under section 18 of the Sick Industrial Companies (Special
                              Provisions) Act, 1985 where such company is being managed by its worker co-
1 of 1986                     operative;
                          (x) transfer of any investment asset in a transaction of reverse mortgage under a scheme
                               notified by the Central Government;
                          (y) transfer of any beneficial interest in a security by a depository.
                    (2) The provisions of sections 391 to 394 of the Companies Act, 1956 or sections 230 to 234 of        1 of 1956
                 the Companies Act, 2013 shall not apply in case of demergers referred to in clause ( h) of sub-          18 of 2013
                 section (1).
                    (3) The provisions of clause (w) of sub-section (1) shall be applicable in a case where the
                 transfer is made during the period commencing from the financial year in which the said company
                 has become a sick industrial company under sub-section (1) of section 17 of the Sick Industrial
                 Companies (Special Provisions) Act, 1985 and ending with the financial year during which the             1 of 1986
                 entire net worth of such company becomes equal to or exceeds the accumulated losses.
                    (4) In clause (i) of sub-section (1), the expressions--"banking company" and "banking
                 institution" shall have the meaning respectively assigned to them in clause ( c) of section 5 and sub-
                 section (15) of section 45 of the Banking Regulation Act, 1949;                                          10 of 1949

                   (5) In clause (n) of sub-section (1), the expressions "private company" and " unlisted public
                 company" shall have the meaning respectively assigned to them in the Limited Liability Partnership
                 Act, 2008.                                                                                               6 of 2009
                   (6) In clause(y) of sub-section (1), the expressions "depository" and "security" shall have the
                 meaning respectively assigned to them in clauses (e) and (l) of sub-section (1) of section 2 of the
                 Depositories Act, 1996.                                                                                  22 of 1996


Financial year   48. (1) The income from the transfer of an investment asset specified in column ( 2) of the Table
of taxability.   given below shall be the income of the transferor in the financial year specified in column (3) of the
                 said Table:
                                                                   TABLE
                                                      FINANCIAL YEAR OF TAXABILITY
                 Serial   Nature of transfer                               Financial year
                 number

                 (1)      (2)                                                 (3)
                 1.       Transfer referred to in clause                  (a) in a case where the investment
                          (d) or clause (e) of sub-section (1)            asset is converted by the transferee into,


                                                                   47
       of section 47                                    or is treated by it as, business trading
                                                        asset, the financial year in which the
                                                        investment asset is converted or
                                                        treated as a business trading asset;
                                                        (b) in a case where the the parent
                                                        company, or its nominees, cease to hold
                                                        the whole of the share capital of the subsid-
                                                        iary company, the financial year
                                                        in which the parent company or its nominees
                                                        so cease to hold the whole of the share capital
                                                        of the subsidiary company.
2.     Transfer referred to in clause                   The financial year in which any of the
       (f) of sub-section (1) of section 47             conditions referred to in clause (15) or
                                                        clause (67), as the case may be, of
                                                        section 320 is not complied with.


3.     Transfer referred to in clause                   The financial year in which any of the
       (m) or clause (n) or clause (o)                  conditions specified in the said clauses
       or clause (p) of sub-section                      is not complied with.
       (1) of section 47
4.     Transfer--                                       The financial year in which the compen-
(i )   by way of compulsory                              sation, or consideration, as the case may
       acquisition under any law for the                be, or such compensation or considera-
       time being in force, or                          tion enhanced or further enhanced by
(ii)   the consideration for which                      any court, tribunal or other authority, is
       was determined or approved by                     received.
       the Central Government or the
       Reserve Bank of India


5.     Transfer by way of conversion of                   The financial year in which such asset,
       an investment asset into, or its treatment         so converted or treated, is sold or
       as, business trading asset                         otherwise transferred.


6.     Transfer by way of--                                The financial year in which the asset is
       (i )     contribution of the asset, whether         transferred or distributed.
                by way of capital or otherwise, to an
                unincorporated body, in which the
                transferor is, or becomes, a partici-

                                              48
                        pant; or
           (ii)         distribution of the asset
                        on account of dissolution of an
                        unincorporated body.


(1)               (2)                                                      (3)
7.         Transfer by way of distribution                The financial year in which the money
           of money or asset to a participant in             or the asset is distributed.
           an unincorporated body on account of
           his retirement from the body
8.         Transfer by way of part performance            The financial year in which the posses-
           of a contract, referred to in sub-clause (i)    sion of the immovable property is
           of clause (253) of section 320                    allowed to be taken or retained.
9.         Transfer by way of any                          The financial year in which the enjoy-
           transaction enabling the enjoyment                 ment of the property is enabled.
           of any immovable property referred
           to in sub-clause (j) of clause (253)
           of section 320
10.        Transfer by way of slump sale,                 The financial year in which the trans-
           referred to in sub-clause (l) of clause            fer took place.
           (253) of section 320
11.        Transfer by any mode other than                The financial year in which the trans-
           the modes referred to in serial                  fer took place.
           numbers 1 to 10.
      (2) Notwithstanding anything in sub-section (1),--
           (a) any money or asset received under an insurance from an insurer on account of damage
               or destruction of an insured asset referred to in sub-clause (m) of clause (253) of
               section 320 shall be deemed to be the income of the recipient of the financial year in
               which the money or asset is received;
           (b) any money or asset received by the participant on account of his retirement from an
               unincorporated body referred to in sub-clause (o) of clause (253) of section 320 shall
               be deemed to be the income of the recipient of the financial year in which the money
               or asset is received;
           (c ) any money or asset received by the shareholder on account of liquidation or
               dissolution of a company referred to in sub-clause (h) of clause (253) of section 320 as
               reduced by the amount assessed as dividend within the meaning of sub-clause (c) of
               clause (74) of section 320, shall be deemed to be the income of the recipient of the
               financial year in which the money or asset is received;
           (d) any consideration from transfer made by the depository or participant of any beneficial
               interest in a security shall be deemed to be the income of the beneficial owner of the
               financial year in which such transfer took place;

                                                     49
         (e) the amount referred to in clause (a) of sub-section (3) of section 46 shall be the income
             of the financial year in which such amount is withdrawn;
         (f) the amount referred to in clause (b) of sub-section (3) of section 46 shall be the income
             of the third financial year immediately following the financial year in which the
             transfer of the original asset is effected.
         (g) the amount referred to in clause (c) of sub-section (3) of section 46 shall be the income
             of the financial year in which any condition referred to in sub-section (6) of section 55
             is not complied with.
   (3) In the cases referred to in items 1, 2 and 3 of the TABLE in sub-section (1), the income from
transfer of an investment asset shall be deemed to be the income of the successor, if the predecessor
ceases to exist in the financial year in which such transfer is taxable in terms of provisions of this
section.
   (4) In clause (d) of sub-section (2), "beneficial owner" shall have the meaning assigned to it in
clause (a) of sub-section (1) of section 2 of the Depositories Act, 1996.                                   22 of 1996


49. (1) The income from the transfer of any investment asset during the financial year shall be the         Computation of
full value of the consideration accrued or received as a result of the transfer, as reduced by the          income     from
aggregate amount of the deductions referred to in section 51.                                               transfer of any
                                                                                                            investment
   (2) The income arising to a non-resident from the transfer of an investment asset, being a
                                                                                                            asset.
security and purchased in foreign currency, shall be computed ­
                   (i) by converting the cost of acquisition, the amount of expenditure incurred
                       wholly and exclusively in connection with such transfer and the full value of
                       consideration received or accruing as a result of the transfer of the asset, into
                       the same foreign currency in which such asset was purchased; and
                   (ii) the income so computed in such foreign currency shall be reconverted into
                        Indian currency.
   (3) For the purposes of sub-section (2), the conversion of Indian currency into foreign currency
and the re-conversion of foreign currency into Indian currency shall be at the rate of exchange to be
determined in such manner as may be prescribed.
   (4) For the purpose of computation of income from the transfer of an investment asset, being any
beneficial interest in respect of securities referred to in clause (d) of sub-section (2) of section 48,
the cost of acquisition and the period of holding of such securities shall be determined on the basis
of first-in-first-out method.


50. (1) The full value of the consideration shall be the amount received by, or accruing to, the            Full value of
transferor, or a person referred to in sub-section (2) of section 48, as the case may be, directly or       consideration
indirectly, as a result of the transfer of the investment asset.
   (2) Notwithstanding anything in sub-section (1), the full value of the consideration, in the
following circumstances, shall be---
         (a)     the amount of compensation awarded in the first instance or the consideration
               determined or approved in the first instance by the Central Government or the Reserve
               Bank of India or the amount by which such compensation or consideration is enhanced
               or further enhanced by any court, tribunal or other authority, as the case may be, if the
               transfer of the investment asset is by the mode specified in sub-clause (c) of clause
               (253) of section 320;
         (b) the fair market value of the asset as on the date of the transfer, if the transfer is by the
             mode specified in sub-clause (d) of clause (253) of section 320;

                                                 50
                           (c )    the amount recorded in the books of account of the company or an unincorporated
                                  body as the value of the investment asset, if the transfer of the investment asset is by
                                  the mode specified in sub-clause (f) of clause (253) of section 320;
                           (d) the fair market value of the asset as on the date of the transfer, if such transfer is by the
                               mode specified in sub-clause (g) of clause (253) of section 320;
                           (e) the amount of money, or the fair market value of the asset as on the date of distribution
                               of such asset, received by a shareholder from a company under liquidation or
                               dissolution, as reduced by the amount of dividend within the meaning of sub-clause (c)
                               of clause (74) of section 320, if the transfer is by the mode specified in sub-clause (h)
                               of clause (253) of section 320;
                           (f) the amount of money, or the fair market value of the asset as on the date of the receipt
                               of such asset, received under an insurance from an insurer, if the transfer is by the
                               mode specified in sub-clause (m) of clause (253) of section 320;
                           (g) the amount of money, or the fair market value of the asset as on the date of distribution
                               of such asset, received by the participant, if the transfer is by the mode specified in
                               sub-clause (o) of clause (253) of section 320 ;
                           (h) the higher of the stamp duty value or the amount as referred to in sub-section (1), of
                               the asset, being land or building.
                      (3) Where the amount of compensation or consideration referred to in clause ( a) of sub-section
                   (2) is subsequently reduced by any court, tribunal or other authority, the compensation or
                   consideration as so reduced shall be taken to be the full value of consideration.
                      (4) Where the enhanced compensation or consideration referred to in clause ( a) of sub-section
                   (2) is received by any person other than the transferor, the said amount shall be deemed to be the
                   income of such other person and the provisions of sections 46 to 55 (both inclusive) shall
                   accordingly apply.
                      (5) Where the full value of consideration of an investment asset referred to in sub-section (1) is
                   not ascertainable or cannot be determined, then the fair market value of the said investment asset on
                   the date of transfer shall be deemed to be the full value of consideration.


Deduction for      51. (1) The deductions for the purposes of computation of income from the transfer of an
cost          of   investment asset shall be the following, namely: --
acquisition etc.
                                  (i )   the cost of acquisition, if any, of the asset;
                                  (ii) the cost of improvement, if any, of the asset; and
                                  (iii) the amount of expenditure, if any, incurred wholly and exclusively in connection
                                        with the transfer of the asset.
                      (2) In the case of transfer of an investment asset, being an equity share in a company or a unit of
                   an equity oriented fund and such transfer is chargeable to securities transaction tax under Chapter
23 of 2004         VII of the Finance (No.2) Act, 2004,--
                           (a) where the asset is held for a period of more than twelve months immediately preceding
                               the date of its transfer,
                                  (i) if the income computed after giving effect to sub-section (1) is a
                                      positive income, a deduction amounting to hundred per cent. of the income so
                                      arrived at shall be allowed;
                                  (ii) if the income computed after giving effect to sub-section (1) is a negative income,
                                       the income from transfer of such asset shall be treated as nil;
                           (b) where the asset is held for a period of less than twelve months immediately preceding

                                                                        51
              the date of its transfer,-
              (i )    if the income computed after giving effect to sub-section (1) is a positive income,
                     a deduction amounting to fifty per cent. of the income so arrived at shall be
                     allowed;
              (ii) if the income computed after giving effect to sub-section (1) is a negative income,
                   the income from transfer of such asset shall be fifty per cent. of the income so
                   arrived at.
   (3) If an investment asset, other than that referred to in sub-section (2) of this section or sub-
section (5) of section 53, is transferred at any time after one year from the end of the financial year
in which the asset is acquired by the person, the deductions for the purposes of computation of
income from the transfer of such asset shall be the following, namely: --
              (i) the indexed cost of acquisition, if any, of the asset;
              (ii) the indexed cost of improvement, if any, of the asset;
              (iii) the amount of expenditure, if any, incurred wholly and exclusively in connection
                    with the transfer of the asset; and
              (iv) the amount of relief for rollover of the asset, as determined under section 55.
52. (1) The indexed cost of acquisition of an investment asset referred to in clause (i) of sub-            Indexed cost of
section (3) of section 51 shall be the amount determined in accordance with the formula--                   acquisition or
                                                                                                            improvement
            Ax        B
                      C
            where-
            A = the cost of acquisition of the asset;
            B = the Cost Inflation Index for the financial year in which the asset is transferred;
            C = the Cost Inflation Index for the financial year, -
              (i) in which the asset was acquired by the person;
              (ii) in which the asset was acquired by the previous owner, where the asset was
                   acquired by the person by any of the special modes of acquisition; or
              (iii) beginning on the 1st day of April 2000, whichever is later.
   (2) The indexed cost of improvement of an investment asset referred to in clause (ii) of sub-
section (3) of section 51 shall be the amount determined in accordance with the formula --
         Ax     B
                 C
              where-
              A = the cost of improvement of the asset;
              B = the Cost Inflation Index for the financial year in which the asset is transferred;
              C = the Cost Inflation Index for the financial year,-
              (i) in which the asset was acquired by the person;
              (ii) in which the asset was acquired by the previous owner, where the asset was
                   acquired by the person by any of the special modes of acquisition; or
              (iii) beginning on the 1st day of April, 2000, whichever is later.



                                                  52
Cost        of   53. (1) Unless otherwise provided, the cost of acquisition of an investment asset, shall be-
acquisition of
                           (a) the purchase price of the asset; or
an investment
asset                      (b) at the option of the person, the fair market value of the asset on the 1st day of April,
                               2000, if the asset was acquired by the person before such date.
                    (2) The cost of acquisition of an investment asset specified in column (2) of the Fifteenth
                 Schedule, acquired by the mode specified in column (3) of the said Schedule, shall be the cost
                 specified in column (4) thereof.
                   (3) The cost of acquisition of an investment asset acquired by a person by any of the special
                 modes of acquisition, shall be--
                           (a) the cost at which the asset was acquired by the previous owner;
                           (b) at the option of the person, the fair market value of the asset on the 1st day of April,
                               2000, if the asset was acquired by the previous owner before such date; or
                           (c) the fair market value or the stamp duty value, as the case may be, on the date of
                               distribution of the asset, if the asset was acquired by the modes referred to in item (v)
                               or item (vi) of sub-clause (b) of clause (226) of section 320.
                     (4) The cost of acquisition of an investment asset referred to in clause ( h) or clause (i) or clause
                 (j) of sub-section (2) of section 58 shall be the fair market value or the stamp duty value, as the case
                 may be, which has been taken into account for the purposes of the said clauses.
                    (5) The cost of acquisition of an investment asset being an undertaking or division of a business
                 transferred by way of a slump sale referred to in sub-clause (l) of clause (253) of section 320 shall
                 be the net worth of such undertaking or division.
                    (6) The cost of acquisition of an investment asset forming part of a bundle of investment assets
                 acquired by any participant, on distribution of the asset to him on account of his retirement from any
                 unincorporated body, shall be the amount determined in accordance with the formula --
                       A ­ (B + C)
                       where,-
                      A=                 the amount payable to the participant as appearing in the books of account of
                                        the unincorporated body on the date of distribution;
                      B=                any amount attributable to the change in the value of the bundle of investment
                                        asset on account of revaluation of the bundle, if any, up to the date of
                                        distribution; and
                      C=                 the cost of acquisition of any other asset, forming part of the bundle acquired
                                        by the participant, on distribution of the asset to him on account of his
                                        retirement from any unincorporated body if the cost of acquisition has been
                                        allowed as a deduction under section 51 in any earlier financial year.
                     (7) The cost of acquisition of an investment asset referred to in clause (d) or clause (e) or clause
                 (f) or clause (m) or clause (n) or clause (o) or clause (p) of sub-section (1) of section 47 shall be the
                 full value of consideration for which the asset was acquired by the transferee company or the
                 limited liability partnership, as the case may be.
                    (8) The cost of acquisition of an investment asset shall be nil, in relation to--
                           (a) an investment asset which is self-generated;
                           (b) the asset which is acquired by way of compulsory acquisition and the compensation or
                               consideration for such acquisition is enhanced or further enhanced by a court, Tribunal
                               or any other authority; or
                           (c) the asset where the cost of acquisition to the person or the previous owner, if any,

                                                                 53
                              cannot be determined or ascertained, for any reason.
                 (9) For the purposes of this section, the purchase price shall include such expenses incidental to
              purchase, if borne by the person, as may be prescribed.


              54. (1) The cost of improvement of an investment asset shall be any expenditure of a capital nature       Cost        of
              incurred in making any additions or alterations to the asset --                                           improvement of
                                                                                                                        an investment
                        (a) by the person; or
                                                                                                                        asset
                        (b) by the previous owner, if the asset is acquired by any special mode of acquisition.
                 (2) The cost of improvement of the investment asset, notwithstanding anything in sub-section
              (1), where the asset became the property of the person or the previous owner before the 1st day of
              April, 2000, shall be any capital expenditure incurred for any addition or alteration to such asset on
              or after the 1st day of April, 2000.
                 (3) The cost of improvement of an investment asset shall, notwithstanding anything in sub-
              section (1), be nil in relation to--
                        (a) an investment asset which is self generated;
                        (b)    an investment asset being an undertaking or division transferred by way of a slump
                              sale referred to in sub-clause (l) of clause (253) of section 320; or
                        (c) any investment asset if the cost of improvement cannot be determined or ascertained,
                            for any reason.
                 (4) Any expenditure deductible in computing the income under any other head of income shall
              not be taken into account while computing the cost of improvement.
                 (5) For the purposes of section 52, section 53 and this section, "previous owner" in relation to
              any investment asset owned by a person means the last previous owner of the investment asset, who
              acquired it by a mode of acquisition other than those referred to in clause (226) of section 320.


Relief for    55. (1) An individual or a Hindu undivided family shall be allowed a deduction, in respect of
rollover of   rollover of any original investment asset referred to in sub-section (3) of section 51, from the
investment    capital gain arising from the transfer of the asset in accordance with the provisions of this section.
asset
                 (2) The deduction referred to in sub-section (1) shall be computed in accordance with the
              formula--
                   (B+C+D)
              A   x --------
                    E
              where-
                        A =         the amount of capital gains arising from the transfer of the original investment
                                  asset;
                        B =         the amount invested for purchase or construction of the new asset referred to in
                                  sub-section (6) within a period of one year before the date of transfer of original
                                  investment asset;
                        C=         the amount invested for purchase or construction of the new asset referred to in
                                  sub-section (6) by the end of the financial year in which the transfer of the
                                  original investment asset is effected or six months from the date of transfer,
                                  whichever is later;
                        D=        the amount deposited in an account in any bank by the end of the financial year in

                                                               54
                 which the transfer of original investment asset is effected or six months from the
                 date of transfer, whichever is later, in accordance with the Capital Gains Deposit
                 Scheme framed by the Central Government in this behalf;
        E=        the net consideration received as a result of the transfer of the original investment
                 asset.
   (3) The deduction computed under sub-section (2) shall not exceed the amount of capital gains
arising from the transfer of the investment asset.
    (4) Any amount withdrawn from an account under the Capital Gains Deposit Scheme shall be
utilised within a period of one month from the end of the month in which the amount is withdrawn,
for the purposes of purchase or construction of the new asset.
    (5) The amount deposited in the account under the Capital Gains Deposit Scheme shall be
utilised for the purposes of purchase or construction of the new asset within a period of three years
from the end of the financial year in which the transfer of the original asset is effected.
    (6) The deduction under this section in respect of capital gain arising from the transfer of an
investment asset, specified in column (2) of the Table given below, shall be allowed with reference
to the corresponding new investment asset referred to in column (3) of the said Table, subject to the
fulfilment of conditions specified in column (4) thereof:
                                             TABLE
                                         ROLLOVER RELIEF
Serial Description of the original Description of the new       Conditions
number investment asset            investment asset
(1)       (2)                          (3)                        (4)
1.       Agricultural land          One or more pieces of      (1) The original investment
                                    agricultural land.         asset was--
                                                                   (i) an agricultural land during two
                                                                 years immediately preceding the
                                                                 financial year in which the asset is
                                                                 transferred;
                                                                   (ii) acquired at least one year
                                                                 before the beginning of the
                                                                 financial year in which the transfer
                                                                 of the asset took place;and
                                                             (2) the new asset shall not be
                                                                transferred within one year from the
                                                                end of the financial year in which
                                                                the new asset is acquired.


2.       Any investment asset       one residential house        (1) the assessee does not own more
                                                                 than one residential house, other
                                                                 than the new investment asset, on
                                                                 the date of transfer of the original
                                                                 investment asset;
                                                                   (2) the original investment asset
                                                                 was acquired at least three years
                                                                 before the beginning of the
                                                                 financial year in which the transfer
                                                                 of the asset took place;and


                                               55
                                                                                      (3) the new asset shall not be
                                                                                      transferred within three years from
                                                                                      the end of the financial year in
                                                                                      which the new asset is acquired or
                                                                                      constructed.
                    (7) For the purposes of this section, 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 person on the date of such transfer, the period for acquiring the
                 new asset or the period for depositing the amount in the account under the Capital Gains Deposit
                 Scheme, as the case may be, shall be reckoned from the date of receipt of such compensation.
                    (8) In this section, "net consideration" means the full value of consideration received or accruing
                 as a result of the transfer of an investment asset as reduced by any expenditure incurred wholly or
                 exclusively in connection with such transfer.


                                                    E. -- Income from residuary sources


Income from      56. The income of every kind falling under the class `Income from ordinary sources', shall be
rediduary        computed under the head "Income from residuary sources", if it is not required to be included in
sources          computing the income under any of the heads of income specified in items A to D of section 14.


Computation      57. The income computed under the head "Income from residuary sources" shall be the gross
of      income   residuary income as reduced by the amount of deductions referred to in section 59.
from residuary
sources


Gross            58. (1) The gross residuary income shall include all accruals, or receipts, in the nature of income or
residuary        deemed income, which do not form part of --
income
                         (a)     income from special sources;
                         (b)     income under any of the heads of income specified in items A to D of section 14.
                   (2) The gross residuary income shall, in particular and without prejudice to the generality of the
                 provisions of sub-section (1), include the following, namely:--
                         (a)     dividends,;
                         (b)     interest, other than interest-
                                (i)    accrued to, or received by, a financial institution, a money lender, a participant of
                                      an unincorporated body from such body;or
                                (ii) incidental to the business;
                         (c )    interest received on compensation or on enhanced compensation;
                         (d)      income from the activity of owning and maintaining horses for the purpose of horse
                                 race;
                         (e )     any amount received from employees as contributions to any fund set up for their
                                 welfare, if the income is not in cluded under the head "Income from business";
                         (f )     income from machinery, plant or furniture belonging to the person and let on hire, if
                                 the income is not included under the head "Income from business";


                                                                    56
        (g)      any amount received under a keyman insurance policy including the sum allocated by
                way of bonus on such policy, if such income is not included under the heads "Income
                from employment" or "Income from business";
        (h)     the aggregate of any moneys and the value of any specified property, not being an
                immovable property, received for inadequate consideration or without consideration,
                by an individual or a Hindu undivided family;
        (i )      the value of any specified property, being an immovable property received without
                consideration or for inadequate consideration by an individual or a Hindu undivided
                family;
        (j )     the value of any property being shares of a closely-held company received for
                inadequate consideration or without consideration, by a firm or a company;
        (k)      the amount by which the aggregate value of consideration for issue of shares,
                received by a closely held company from a resident, exceeds the fair market value of
                such shares;
        (l)     the amount of voluntary contribution received by a person, other than an individual or
                a Hindu undivided family or a non-profit organisation, from any other person;
        (m) any amount received, or retained, on account of settlement or breach of any contract,
            if not included under the head "Income from business";
        ( n) any amount deemed to be the income under sub-section (5) of section 78;
         ( o) any consideration accrued, or received, in respect of transfer of any business asset,
              which is self-generated, if the consideration is not included under the head ``Income
              from business'';
        ( p) any amount accrued, or received, on account of the cessation, termination or forfeiture
             in respect of any agreement entered into by the person, if the amount is not included
             under the head "Income from business";
         (q) any income of a resident, attributable to a Controlled Foreign Company, computed in
             accordance with the Second Schedule;
        ( r)     any amount received, as advance, security deposit or otherwise, from the long-term
                leasing, of whole or part of, or any interest in, any investment asset;
        (s)      any amount by way of advance, security deposit or of similar nature received and
                retained on account of negotiations for transfer of whole or part of,or any interest in,
                any investment asset;
        (t )     amount of any benefit accrued to, or received by, the person, if the amount is not
                included under the head "Income from business" and if--
               (i )    it is by way of remission or cessation of any liability including statutory liability
                      or in respect of any loss or expenditure; and
               (ii)    such liability or loss or expenditure has been allowed as a deduction in any
                      financial year;
        ( u) any sum received as family pension;
   (3) For the purposes of sub-section(1), any payment or aggregate of payments made to a person
in a day , in respect of a liability incurred and allowed as a deduction in any preceding financial
year, otherwise than by an account payee cheque drawn on a bank or account payee bank draft shall
be the deemed income of the person , if ­
               (i) such payment or aggregate of payments exceeds a sum of twenty thousand rupees;
                   and


                                                   57
               (ii) the expenditure or liability has not been incurred in such cases and circumstances
                    as specified in sub-section (4) of section 34.
  (4) The amount referred to in clause (h) or clause (i) of sub-section (2) shall not include any
amount received--
        (a)     from any relative;
        (b)     on the occasion of the marriage of the individual;
        (c )    under a will or by way of inheritance;
        (d)     in contemplation of death of the payer;
        (e )    from any local authority; or
        (f )   from any non-profit organisation.
   (5) In this section,--
         (a) ``relative" shall not include any person referred to in sub-clause (g) of clause (203) of
              section 320;


          (b) ``specified property"means--
               (i) immovable property being land or building or both;
               (ii) shares and securities;
               (iii) jewellery;
               (iv) bullion;
               (v) archaeological collections;
               (vi) drawings;
               (vii) paintings;
               (viii) sculptures; or
               (ix) any work of art;
        (c )     value of any property referred to in clause (h) or clause (i) or clause (j) of sub-section
                (2), as the case may be, shall be--
               (i )    the stamp duty value in the case of an immovable property as reduced by the
                      amount of consideration, if any, paid by the person; and
               (ii) the fair market value in the case of any other property as reduced by the amount
                    of consideration, if any, paid by the person;
        (d)      for the puposes of determination of value of any property in sub-clause (i) of clause
                (c) above, 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
                value shall be taken as on the date of the agreement if a part of the consideration is
                paid by a mode other than cash.
    (6) The provisions of clause (j) of sub-section (2) shall not apply to any property received by
way of a transaction not regarded as a transfer under clause (f) or clause ( g) or clause (h) or clause
(j) or clause (k) or clause (l) of sub-section (1) of section 47.
   (7) The provisions of clause (k) of sub-section (2) shall not apply to any consideration for issue
of shares received-
               (i)    by a venture capital undertaking from a venture capital company or a venture

                                                  58
                                     capital fund; or
                                 (ii) by a company from a class or classes of persons as may be notified by the Central
                                      Government.


Deduction         59. (1) The deductions for the purposes of computation of income from residuary sources shall be
from      gross   the aggregate of--
residuary
                          (a) the amount of expenditure specified in sub-section (2), if--
income
                                 (i) the expenditure (not being in the nature of capital expenditure) is laid out or
                                     expended, wholly and exclusively, for the purposes of making or earning the gross
                                     residuary income; and
                                 (ii) it fulfills all other conditions, if any, specified therein; and
                          (b) the amount of deductions specified in sub-section (3) subject to the fulfilment of the
                              conditions, if any, specified therein; and
                          (c)     any amount received during the financial year as dividend from a controlled foreign
                                 company as referred to in clause (q) of sub-section (2) of section 58, to the extent such
                                 amount has been included in the total income of the assessee in any preceding financial
                                 year in accordance with the provisions of the said clause.
                    (2) The amount of expenditure referred to in clause (a) of sub-section (1) shall be the following,
                  namely:--
                          (a)     any reasonable sum paid by way of remuneration or commission for the purpose of
                                 realising the income referred to in clause (a) or clause (b) of sub-section (2) of section
                                 58;
                          (b) the amount determined, so far as may be, in accordance with the provisions of clause
                              (v) of sub-section (2) of section 35 in respect of the income of the nature referred to in
                              clause (f) of sub-section (2) of section 58 ;
                          (c) the amount determined, so far as may be, in accordance with the provisions of clause
                              (xxx) of sub-section (2) of section 35 in respect of income of the nature referred to in
                              clause (e) of sub-section (2) of section 58;
                          (d) the amount determined, so far as may be, in accordance with the provisions of section
                              37 and subject to the provisions of sub-section (3) of section 34 in respect of income
                              of the nature referred to in clause (f) of sub-section (2) of section 58.
                          (e) any other expenditure not covered under clause (a) to (d).
                    (3) The amount of deduction referred to in clause (b) of sub-section (1) shall be the following,
                  namely:--
                          (a) the amount equal to thirty-three and one-third per cent. of income or fifteen thousand
                              rupees, whichever is less, in respect of family pension;
                          (b) the aggregate amount referred to in clause (h) or clause (i) or clause (j) of sub-section
                              (2) of section 58 to the extent the aggregate does not exceed fifty thousand rupees; and
                          (c )    the repayment of advance or security deposit from long-term leasing referred to in
                                 clause (r) of sub-section (2) of section 58, in the financial year in which such
                                 repayment is made;
                          (d) the repayment of any advance or security deposit retained on account of negotiations
                              for transfer of an investment asset or interest therein, referred to in clause (s) of sub-
                              section (2) of section 58, in the financial year in which such repayment is made.
                     (4) In the case of the income referred to in clause (c) of sub-section (2) of section 58, the amount


                                                                     59
                 of deduction shall be a sum equal to fifty per cent. of such income and no deduction shall be
                 allowed under any other provision of this section.
                    (5) The following amounts shall not be allowed as a deduction, namely:--
                         (a) any amount relating to personal expenses of the person;
                         (b)    any amount of tax, interest or penalty paid under this Code or the Income-tax Act,         43 of 1961
                               1961 or the Wealth- tax Act, 1957, as they stood before the commencement of this            27 of 1957
                               Code; or
                         (c) any 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, if--
                               (i) the payment or aggregate of payments is in respect of any expenditure referred to
                                   in clause (a) of sub-section (1);
                               (ii) the payment or aggregate of payments exceeds a sum of twenty thousand rupees;
                                    and
                               (iii) it has not been incurred in such cases and under such circumstances, as specified
                                     in sub-section (4) of section 34.
                    (6) In this Chapter, "capital sum assured" in relation to a life insurance policy means the
                 minimum amount assured under the policy on the 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 assured, which
                                    is to be received or may be received by any person under the policy.
                                    Deductions from gross residuary income.
                                                        III. --AGGREGATION OF INCOME


Aggregation of   60. (1) The income from each source falling under a head of income for a financial year shall be
income under     aggregated and the income so aggregated shall be the current income under that head for the
a head of        financial year.
income.
                    (2) The income from the transfer of each investment asset during the financial year, as computed
                 under section 49, shall be aggregated and the net result of such aggregation shall be the current
                 capital gains income, for the financial year.
                   (3) The current capital gains income referred to in sub-section (2) shall be aggregated with the
                 unabsorbed brought forward capital loss, if any, and where the net result of such aggregation is -
                               (i)   positive or nil, it shall be the income under the head "Capital gains";
                               (ii) negative, the income under the head "Capital gains" shall be treated as nil and
                                    such loss shall be carried forward and set off against the income from capital gains
                                    in the following financial year upto seven financial years immediately succeeding
                                    the current financial year.
                    (4) Notwithstanding anything in sub-section (1), the income from each business other than
                 speculative business referred to in sub-section (3) of section 31 shall be aggregated and the income
                 so aggregated shall be the current non-speculative business income, for the financial year.
                    (5) Notwithstanding anything in sub-section (1), the income from each speculative business shall
                 be aggregated and the income so aggregated shall be the current speculative business income, for
                 the financial year.
                    (6) The current speculative business income referred to in sub-section (5) shall be aggregated
                 with the unabsorbed brought forward speculative loss, if any, and where the net result of such
                 aggregation is -

                                                                  60
              (i) positive or nil, it shall be the speculative business income;
              (ii) negative, the speculative business income shall be treated as nil and such loss shall
                   be carried forward and set off against the speculative business income in the
                   following financial year upto seven financial years immediately succeeding the
                   current financial year.
   (7) The aggregate of the current non-speculative business income computed in accordance with
sub-section (4) and the speculative business income computed in accordance with sub-section (6)
shall be the income under the head "Income from business".
   (8) Notwithstanding anything in sub-section (1), the income from the activity of owning and
maintaining horses for the purpose of horse race, for the financial year, shall be aggregated with
unabsorbed brought forward loss from the activity of owning and maintaining horses for the purpose
of horse race, and where the net result of such aggregation is -
              (i) positive or nil, it shall be the income from the activity of owning and maintaining
                  horses for the purpose of horse race;
              (ii) negative, the income from the activity of owning and maintaining horses for the
                   purpose of horse race shall be treated as nil and such loss shall be carried forward
                   and set off against the income from such activity in the following financial year
                   upto seven financial years immediately succeeding the current financial year.
   (9) The income of every kind referred to in section 58, other than income from the activity of
owning and maintaining horses for the purpose of horse race, shall be aggregated with income from
the activity of owning and maintaining horses for the purpose of horse race as computed in
accordance with sub-section (8) and the income so aggregated shall be the income under the head
"Income from residuary sources".
   (10) For the purposes of this section-
        (a) "loss from the activity of owning and maintaining horses for the purpose of horse race"
            means-
              (i)     in a case where the assessee has no income by way of stake money, the amount
                     of expenditure other than capital expenditure laid out or expended 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 (other than capital
                     expenditure) laid out or expended by the assessee wholly and exclusively for the
                     purposes of maintaining race horses;
        (b) "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;
        (c) "unabsorbed brought forward capital loss" for a financial year shall be the loss allowed
            to be carried forward under sub-section (3) and which is not absorbed in the preceding
            financial years;
        (d)    "unabsorbed brought forward speculative loss" for a financial year shall be the loss
              allowed to be carried forward under sub-section (6) and which is not absorbed in the
              preceding financial years;
        (e) "unabsorbed brought forward loss from the activity of owning and maintaining hors es
            for the purpose of horse race" for a financial year shall be the loss allowed to be
            carried forward under sub-section (8) and which is not absorbed in the preceding
            financial years.


                                                61
61. (1) Subject to the provisions of sub-section (2), the current Income from ordinary sources shall       Aggregation of
be the aggregate of--                                                                                      income    from
                                                                                                           ordinary
         (a)    income under the head `Income from employment' as determined under sub-section
                                                                                                           sources.
               (1) of section 60;
         (b) income under the head `Income from house property' as determined under sub-section
             (1) of section 60;
         (c) income under the head `Income from business' as referred to in sub-section (7) of
             section 60;
         (d) income under the head `Capital gains' as referred to in sub-section (3) of section 60;
             and
         (e) income under the head `Income from residuary sources' as referred to in sub-section
             (9) of section 60.
   (2) The loss under the head `Income from business', if any, shall not be allowed to be set -off
against income under the head `Income from employment'.
   (3) The current income from ordinary sources referred to in sub-section (1) shall be aggregated
with the unabsorbed preceding year loss from the ordinary sources, if any, subject to the provisions
of sub-section (4).
   (4) The unabsorbed preceding year loss from ordinary sources shall be allowed to be set-off
against the current income from ordinary sources, subject to the following conditions, namely:-
         (a) so much of the unabsorbed preceding year loss from ordinary sources as it pertains to
             the head `Income from business', shall be allowed to be set -off against income from
             any head referred to in sub-section (1), other than income under the head `Income from
             employment';
         (b) so much of the unabsorbed preceding year loss from ordinary sources as it pertains to
             the head `Income from house property' in respect of one house property mentioned in
             sub-section (6) of section 26, shall be allowed to be set-off against income from any
             head referred to in sub-section (1);
         (c) so much of the unabsorbed preceding year loss from ordinary sources as it pertains to
             the head `Income from house property', other than loss in respect of one house
             property mentioned in sub-section (6) of section 26, shall be allowed to be set-off only
             against income under the head "Income from house property" ;
         (d) so much of the unabsorbed preceding year loss from ordinary sources as it pertains to
             the head `Income from residuary sources', shall be allowed to be set -off against
             income from any head referred to in sub-section (1).
   (5) If the net result of aggregation under sub-section (3) is positive or nil, it shall be the gross
total income from ordinary sources, for the financial year.
   (6) If the net result of aggregation under sub-section (3) is negative, the absolute value of the net
result shall be the unabsorbed current loss from ordinary sources, for the financial year.
   (7) For the purposes of this section, unabsorbed preceding year loss from ordinary sources for a
financial year shall be the unabsorbed current loss from ordinary sources as determined under sub-
section (6), for the immediately preceding financial year.


62. (1) The income from a special source referred to in Part III of the First Schedule shall be the        Aggregation of
current income from the special source for the financial year.                                             income      from
                                                                                                           special sources.

                                                62
                     (2) The current income from special source in respect of each special source computed under
                  sub-section (1) shall be aggregated and the net result of the aggregation shall be the total income
                  from special sources for the financial year.
                  63. The total income of a person for any financial year shall be computed in accordance with the              Determination
                  formula--                                                                                                     of total income.
                        (A - B) + C
                  where-
                  A = the gross total income from ordinary sources for the financial year;
                  B = the aggregate amount of deductions allowed under sub-chapter IV; and
                  C = the total income from special sources for the financial year.


Special           64. (1) In a business re-organisation of residents, or on conversion of a sole proprietary concern to
provisions        a company as referred to in clause (m) of sub-section (1) of section 47, a company or a firm into a
relating     to   limited liability partnership as referred to in clause (n) or clause (p) of sub-section (1) of section 47
business    re-   or a firm into a company as referred to in clause (o) of sub-section (1) of section 47,the unabsorbed
organisation or   current loss from ordinary sources of the predecessor in respect of the financial year in which
conversion        business re-organisation or such conversion has taken place shall be deemed to be the unabsorbed
                  preceding year loss from ordinary sources of the successor in respect of the financial year and the
                  provisions of section 61 shall apply accordingly.
                     (2) The provisions of sub-section (1) shall not apply in the case of a business re-organisation, if,-
                           (a) the predecessor has not been engaged in the business, in which the accumulated loss
                               occurred, for three or more years prior to the financial year in which such business re-
                               organisation took place;
                           (b) the successor in a business re-organisation does not satisfy the test of continuity of
                               business.
                     (3) In the case of conversion, the provisions of sub-section (1) shall not apply, if,-
                           (a)    the predecessor is a sole proprietary concern or a firm, the shareholding of the sole
                                 proprietor or the participant, as the case may be, ceases to be less than fifty per cent. of
                                 the total value of the shares of the successor company at any time during the period of
                                 five years immediately succeeding the financial year in which the business re-
                                 organisation takes place;
                           (b) any of the conditions, specified in clause (m), clause (n), clause (o) or clause (p), as the
                               case may be, of sub-section (1) of section 47 are not fulfilled.
                     (4) Where the business re-organisation is in the nature of a demerger, the unabsorbed current
                  loss from ordinary sources of the predecessor shall be deemed to be the unabsorbed preceding year
                  loss from ordinary sources of the successor to the extent of,-
                           (a) the entire loss where it is directly relatable to the undertakings transferred to the
                               successor;
                           (b) the loss which is in the same proportion in which the assets of the undertakings have
                               been retained by the predecessor and transferred to the successor.
                     (5) The total income of the financial year in which, the business re-organisation or the
                  conversion referred to in sub-section (1) took place, and of all the subsequent financial years shall,
                  notwithstanding anything in this Code, be rectified as if the provisions of this section had never been
                  given effect to in those financial years, if conditions specified in sub-section (2) of this section or
                  clause (m), clause (n), clause (o) or clause (p), as the case may be, of sub-section (1) of section 47
                  are not fulfilled at any time during five financial years immediately succeeding the financial year in

                                                                    63
which re-organisation or conversion took place.
   (6) For the purposes of this section,-
        (a) "banking institution" shall have the meaning assigned to it in sub-section (15) of
                                                                                                          10 of 1949
            section 45 of the Banking Regulation Act, 1949;


        (b) "business re-organisation" involving amalgamation means amalgamation of -
              (i)    a company engaged in manufacture or production of any article or thing with
                    another company;
              (ii) a banking company referred to in clause (c) of section 5 of the Banking Regulation
                   Act, 1949 with a specified bank or any other banking institution under a scheme        10 of 1949
                   sanctioned and brought into force by the Central Government under sub-section
                   (7) of section 45 of the Banking Regulation Act, 1949; or                              10 of 1949
              (iii) a co-operative bank with another co-operative bank;
        (c) "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
        (d)    "specified bank" means the State Bank of India constituted under the State Bank of
              India Act, 1955 or a subsidiary bank as defined in the State Bank of India (Subsidiary      23 of 1955
              Banks) Act, 1959 or a corresponding new bank constituted under section 3 of the             38 of 1959
              Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 or under
                                                                                                          5    of    1970
              section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act,
                                                                                                          40 of 1980
              1980.


65. (1) The amount of unabsorbed current loss from ordinary sources referred to in sub-section (6)        Aggregation of
of section 61, for the financial year ending on the date of the retirement, or death, of a participant,   losses in case of
shall be reduced by the amount in proportion of the share of the retired, or deceased, participant.       change         in
                                                                                                          constitution of
   (2) The amount so reduced under sub-section (1) shall be the unabsorbed preceding year loss
                                                                                                          unincorporated
from ordinary sources, for the financial year beginning on the date immediately following the date
                                                                                                          body.
of retirement, or death, of a participant for the purposes of sub-section (7) of section 61.
   (3) The provisions of this section shall apply notwithstanding anything in any other provision of
this Code.
    (4) In this Code, any reference to the unabsorbed preceding year loss from ordinary sources in
respect of an unincorporated body where a change has occurred in its constitution due to death, or
retirement, of its participant, shall be construed as a reference to the amount so reduced under sub-
section (1).


66. (1) Notwithstanding anything in this Chapter a closely-held company shall not be allowed to           Aggregation of
aggregate any unabsorbed preceding year loss from ordinary sources with the income of the                 losses in the
financial year unless it satisfies the test of continuity of ownership.                                   case of certain
                                                                                                          companies.
   (2) The closely held company shall satisfy the test of continuity of ownership referred to in sub-
section (1), if the shares of the company beneficially held by persons, carrying not less than fifty-
one per cent. of the voting power on the last day of the financial year or years in which the loss was
incurred , are held by the same persons on the last day of the financial year in which such loss is
claimed to be aggregated with the income of that year.
   (3) For the purposes of calculating the percentage of voting power under sub-section (2),--
        (a) any change in the voting power in the relevant financial year due to the death of a
            shareholder or on account of transfer of shares by way of gift to any relative of the

                                               64
                               donor shareholder shall be ignored;
                          (b) 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, shall
                              be ignored, if 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.


Aggregation of    67. Notwithstanding anything in this Code, if the return of tax bases for a financial year is not
loss not to be    furnished by the due date, the amount of current loss from ordinary sources as computed under sub-
allowed      in   section (1) of section 61, current capital loss as computed under sub-section (2) of section 60,
case of filing    current speculative business loss as computed under sub-section (5) of section 60, loss from the
of return after   activity of owning and maintaining horses for the purpose of horse races for the current financial
due date.         year, shall not be carried forward and set-off under sections 60 and 61 in any subsequent financial
                  years.



                                                             IV - TAX INCENTIVES


Deductions        68. (1) A person shall be allowed the deductions specified in this Sub-chapter from his gross total
from     gross    income from ordinary sources for the financial year.
total income
                     (2) The aggregate amount of the deductions under this Sub-chapter shall not exceed the gross
from ordinary
                  total income from ordinary sources for the financial year.
sources.
                     (3) Any sum, which qualifies for a deduction under this Sub-chapter in any financial year, shall
                  not qualify for deduction --
                          (a) under any other provision of this Code for the same or any other financial year; or
                          (b) in the case of any other person.
                     (4) The provisions of sub-section (3) shall apply whether full deduction of the sum referred to
                  therein has been allowed or not.


Deduction for     69. (1) A person, being an individual, shall be allowed a deduction for savings in respect of the
savings.          aggregate of the sum referred to in sub-section (2) to the extent of one lakh rupees.
                     (2) The sum referred to in sub-section (1) shall be the amount paid or deposited by the person in
                  a financial year to his account or in account of his spouse or child, as the case may be, as his
                  contribution to any approved fund.

Deduction for     70. (1) A person, being an individual or a Hindu undivided family, shall be allowed a deduction in
life insurance.   respect of any sum paid or deposited to effect or keep in force an insurance on the life of persons
                  specified in sub-section (3).
                     (2) The insurance referred to in sub-section (1) shall be an insurance where the premium payable
                  for any of the years during the term of the policy-

                          (a) does not exceed fifteen per cent. of the capital sum assured where such policy is for
                              the life insurance of a person, who is a person with disability or a person with severe
                              disability; or

                          (b) does not exceed ten per cent. of the capital sum assured in the case of any other person.
                     (3) The person referred to in sub-section (1) shall be--

                                                                 65
                        (a) the individual,spouse or any child of such individual; and
                        (b) in case of a Hindu undivided family, any member of such family.


                71. (1) A person, being an individual or a Hindu undivided family, shall be allowed a deduction in        Deduction    for
                respect of any sum paid during the financial year to effect, or to keep in force, an insurance on the     health
                health of persons specified in sub-section (2) and in addition, in the case of an individual, any         insurance.
                contribution made to the Central Government Health Scheme or such other scheme as may be
                notified by the Central Government.
                   (2) The person referred to in sub-section (1) shall be--
                        (a) the individual, spouse, or any dependant child or parents of such individual; and
                        (b) in case of a Hindu undivided family, any member of such family.
                  (3) The insurance under this section refers to a health insurance scheme framed by any insurer
                which is approved by the Insurance Regulatory and Development Authority.


                72. (1) A person, being an individual or a Hindu undivided family, shall be allowed a deduction in        Deduction    for
                respect of any sum paid during the financial year, if the sum is paid--                                   education     of
                                                                                                                          children.
                        (a) as tuition fee to any school, college, university or other educational institution situated
                            within India; and
                        (b) for the purpose of full time education of any two children of such individual or of any
                            member of the Hindu undivided family.
                   (2) In this section--
                        (a) tuition fee shall not include any payment towards any development fee or donation or
                            any payment of similar nature;
                        (b) full time education shall include education in play school or pre-school.


                73. The aggregate amount of deductions under sections 70, 71 and 72 shall not exceed fifty                Limit         on
                thousand rupees.                                                                                          deductions
                                                                                                                          under sections
                                                                                                                          70, 71 and 72.


Deduction of    74. (1) A person, being a resident, shall be allowed a deduction of fifty per cent. of the amount
investment      invested in listed equity shares or listed units of an equity oriented fund in accordance with a
made under an   scheme notified by the Central Government .
equity saving
                   (2) The deduction under sub-section (1) shall not exceed twenty-five thousand rupees.
scheme
                   (3) The deduction under sub-section (1) shall be allowed for three consecutive financial years
                beginning with the financial year in which the listed equity shares or listed units of equity oriented
                fund were first acquired.
                   (4) The deduction under sub-section (1) shall be subject to the following conditions, namely: --
                             (i)     the gross total income from ordinary sources of the assessee for the relevant
                                    financial year does not exceed twelve lakh rupees;
                             (ii)    the assessee is a new retail investor as may be specified under the
                                    scheme referred to in sub-section (1);
                             (iii) the investment is made in such listed equity shares or listed units of equity

                                                               66
                   oriented fund as may be specified under the scheme referred to in sub-section (1);
             (iv) the investment is locked-in for a period of three years from the date of acquisition
                  in accordance with the scheme referred to in sub-section (1); and
             (v)   such other condition as may be prescribed.
   (5) If the assessee, in any financial year, fails to comply with any condition specified in sub-
section (4), the deduction originally allowed shall be deemed to be the income of the assessee of
such financial year and shall be liable to tax for the financial year.


75. (1) A person, being an individual, shall be allowed a deduction in respect of any amount paid        Deductin      of
by him in the financial year by way of interest on loan taken by him from any financial institution      interest on loan
for the purpose of--                                                                                     taken for higher
                                                                                                         education
        (a) pursuing his higher education; or
        (b) higher education of his relatives.
    (2) The deduction specified in sub-section (1) shall be allowed in the initial financial year and
seven financial years immediately succeeding the initial financial year or until the interest referred
to in sub-section (1) is paid by the person in full, whichever is earlier.
  (3) In this section-
        (a) "financial institution" means a banking company or any other financial institution
            which the Central Government may, by notification, specify in this behalf;
        (b) "higher education" means any course of study pursued after passing the senior
            secondary examination, or its equivalent, conducted by any board or university
            recognised by the Central Government or the State Government or any authority
            authorised by the Government to do so;
        (c) "initial financial year" means the financial year in which the person begins to pay the
            interest on the loan;
        (d) "relative" means-
             (i) spouse of the individual;
             (ii) child of the individual; or
             (iii) a student for whom the individual is the legal guardian.


76. (1) A person, being resident individual or Hindu undivided family, shall be allowed a                Deduction for
deduction in respect of any amount paid during the financial year for medical treatment of the           Medical
prescribed disease or ailment of any specified person.                                                   treatment, etc.
   (2) The amount of deduction under sub-section (1) shall not exceed--
        (a) sixty thousand rupees, if the amount is paid in respect of any specified person, who is a
            senior citizen; and
        (b) forty thousand rupees, in any other case.
   (3) The deduction under this section shall be reduced by the amount received, if any, under an
insurance from an insurer, or reimbursed by an employer, for the medical treatment of the specified
person.
   (4) The deduction under this section shall not be allowed unless the person obtains a certificate
in such form as may be prescribed from a specialist working in a Government hospital.
   (5) In this section,--

                                                 67
                           (a) "specified person" means--
                                (i )     the individual;
                                (ii) spouse of the individual;
                                (iii) any dependant child of the individual;
                                (iv) dependant parents of the individual; and
                                (v) any member of the Hindu undivided family;
                           (b) "Government hospital" includes--
                                 (i )    a dispensary established and run by a department of the Government for the
                                         medical treatment of government employees and members of their family;
                                 (ii) a hospital maintained by a local authority; and
                                 (iii)    any other hospital with which an agreement has been entered into by the
                                         Government for the treatment of its employees.


Deduction to a     77. (1) A person, being resident individual, shall be allowed a deduction of an amount specified in
person with        sub-section (2), subject to the conditions specified in sub-section (3).
disability
                      (2) The amount of deduction under sub-section (1) shall be --
                           (a) one lakh rupees, if he is a person with severe disability;
                           (b) fifty thousand rupees, if he is a person with disability.
                      (3) The deduction under sub-section (1) shall be allowed if the person obtains a certificate from
                   a medical authority in such form and manner as may be prescribed and the certificate remains valid
                   during the relevant financial year or part thereof.


Deduction for      78. (1) A person, being resident individual or Hindu undivided family, shall be allowed a
medical            deduction in respect of --
treatment and
                           (a) any expenditure incurred during the financial year for the medical treatment, nursing
maintenance
                               or training and rehabilitation of a dependant person with disability; or
of a dependant
person      with           (b) any amount paid or deposited during the financial year under a scheme framed by any
disability.                    insurer and approved by the Board in this behalf, for the maintenance of a dependant
                               person with disability.
                      (2) The amount of deduction under sub-section (1) shall be -
                           (a) one lakh rupees, if the dependant is a person with severe disability; or
                           (b) fifty thousand rupees, if the dependant is a person with disability.
                      (3) The deduction in respect of the amount referred to in clause ( b) of sub-section (1) shall be
                   allowed, if the scheme referred to therein provides for payment of annuity or lump sum amount for
                   the benefit of a dependant person with disability, in the event of the death of the individual or the
                   member of the Hindu undivided family in whose name subscription to the scheme has been made.
                      (4) The deduction under this section shall be allowed if the person, claiming a deduction under
                   this section, obtains a certificate from a medical authority in such form and manner as may be
                   prescribed and the certificate remains valid during the relevant financial year or part thereof.
                       (5) The amount received by the person under the scheme referred to in clause ( b) of sub-section
                   (1), upon the dependant person with disability predeceasing him, shall be deemed to be the income
                   of the person for the financial year in which the amount is received by him.

                                                                  68
                   (6) In this section, "dependant" means spouse, any child, brothers, sisters or parents of the
                individual, or any member of the Hindu undivided family, if--
                               (i )    he is mainly dependant on such individual, or Hindu undivided family, for his
                                      support and maintenance; and
                               (ii) his income in the financial year is less than one lakh twenty thousand rupees.


                79. (1) A person shall be allowed a deduction of--                                                       Deduction      of
                                                                                                                         contribution or
                        (a)       one hundred and twenty-five per cent. of the amount of money paid by him in the
                                                                                                                         donation       to
                                financial year as contribution or donation to any person specified in Part I of the
                                                                                                                         certain funds or
                                Sixteenth Schedule;
                                                                                                                         non-profit
                         (b)     one hundred per cent. of the amount of money paid by him in the financial year as       organisations.
                                donation to any person specified in Part II of the Sixteenth Schedule;
                        (c)      fifty per cent. of the aggregate of the amount of money paid by him in the financial
                                year as donation to any person specified in Part III of the Sixteenth Schedule.
                   (2) The aggregate of the amount of money referred to in clause (c) of sub-section (1) shall be
                limited to ten per cent. of the gross total income from ordinary sources, if the aggregate exceeds ten
                per cent. of the gross total income from ordinary sources.
                   (3) The deduction under this section shall not be allowed in respect of any amount of money paid
                to any person referred to in sub-section (1), if the amount paid in cash exceeds ten thousand rupees.
                   (4) The donation to any person specified in paragraphs 5 to 8 of Part III of the Sixteenth
                Schedule shall be eligible for deduction under sub-section (1), if the donee obtains the approval of
                the prescribed authority in accordance with the procedure and subject to such conditions, as may be
                prescribed.
                   (5) The deduction under sub-section (1) shall not be denied to a donor merely on the
                consideration that, subsequent to the donation, the donee, being a non-profit organisation, has
                ceased to be so.


Deduction for   80. (1) A person, being an individual and not in receipt of any house rent allowance, shall be
rent paid       allowed a deduction of any expenditure incurred by him in excess of ten per cent. of his gross total
                income from ordinary sources towards payment of rent in respect of any furnished or unfurnished
                accommodation occupied by him for his own residence.
                   (2) The deduction referred to in sub-section (1) shall be allowed up to a maximum of five
                thousand rupees per month and shall be subject to such other conditions as may be prescribed
                having regard to the area or place in which the accommodation is situated.
                   (3) The provisions of this section shall not apply to a person if any residential accommodation is
                owned by him or by his spouse or minor child in the place where he ordinarily resides or performs
                duties of his office or employment or carries on his business.


Deduction for   81. (1) A person shall be allowed a deduction in respect of any contribution made by him in the
political       financial year to a political party or electoral trust.
contributions
                   (2) The deduction under sub-section (1) shall not exceed five per cent. of-
                        (a)      the average of the net profit determined in accordance with the provisions of section
                                198 of the Companies Act, 2013 during the three immediately preceding financial
                                years, in the case of a company; and                                                     18 of 2013
                        (b)     the gross total income from ordinary sources, in any other case.

                                                                 69
                    (3) In this section, the word "contribution", with its grammatical variation, shall have the same
                  meaning as assigned to it under section 182 of the Companies Act, 2013.                                  18 of 2013
                     (4) No deduction shall be allowed under this section in respect of any sum contributed by way of
                  cash.


Deduction    of   82. (1) An investor protection fund shall be allowed a deduction of the amount received as con-
income       of   tribution from any recognised stock exchange, or recognised commodity exchange, and the
Investor          members thereof or a depository.
Protection
                     (2) The deduction under sub-section (1) shall be allowed, if the Investor Protection Fund has
Fund
                  been set up by,-
                          (a)    recognised stock exchanges or recognised commodity exchanges either jointly or
                                 separately; or
                          (b)    a depository in accordance with the regulations made under the Securities and
                                 Exchange Board of India Act, 1992 and the Depositories Act, 1996, and                     15 of 1992
                                                                                                                           22 of 1996
                  such Investor Protection Fund is notified by the Central Government.
                     (3) For the purposes of this section , "depository" shall have the same meaning as assigned to it
                                                                                                                           22 of 1996
                  in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996;




                  83. (1) A person, being resident individual, shall be allowed a deduction of an amount specified in      Deduction    of
                  sub-section (4) in respect of any income referred to in sub-section (3), if such income is included in   royalty income
                  his gross total income from ordinary sources.                                                            of authors
                     (2) The deduction under sub-section (1) shall be allowed to a person, if he is an author of any
                  book which is a work of literary, artistic or scientific nature.
                    (3) The income referred to in sub-section (1) shall be any income derived by the author by way
                  of--
                          (a)    lumpsum consideration for the assignment or grant of any of his interest in the
                                copyright of the book referred to in sub-section (2); or
                          (b) royalty or copyright fees (whether receivable in lumpsum or otherwise) in respect of
                              the book referred to in sub-section (2).
                     (4) The amount of deduction under sub-section (1) shall be the amount of income referred to in
                  sub-section (3) to the extent it does not exceed three lakh rupees.
                     (5) In this section, ``books" shall not include brochures, commentaries, diaries, guides, journals,
                  magazines, newspapers, pamphlets, tracts and other publications of similar nature by whatever name
                  called.


                  84. (1) A person, being resident individual and a patentee, shall be allowed a deduction of an           Deduction    of
                  amount specified in sub-section (3) in respect of any income referred to in sub-section (2), if such     royalty      on
                  income is included in his gross total income from ordinary sources.                                      patents
                     (2) The income referred to in sub-section (1) shall be any income received by the person by way
                  of royalty in respect of a patent registered on or after the 1st day of April, 2003 under the Patents
39 of 1970        Act, 1970.
                     (3) The amount of deduction under sub-section (1) shall be the amount of income referred to in
                  sub-section (2) to the extent it does not exceed the amount of royalty allowable under the terms and

                                                                 70
39 of 1970      conditions of a licence settled by the Controller under the Patents Act, 1970, if a compulsory licence
                is granted in respect of any patent under that Act or three lakh rupees, whichever is lower.
                   (4) In this section,--
                        (a) "patent" means a patent (including a patent of addition) granted under the Patents Act,
39 of 1970                  1970;
                        (b) "patentee" means the person, being the true and first inventor of the invention, whose
                            name is entered on the patent register as the patentee, in accordance with the Patents
39 of 1970                  Act, 1970, and includes every such person, being the true and first inventor of the
                            invention, where more than one person is registered as patentee under that Act in
                            respect of that patent;
                        (c) "patent of addition" shall have the same meaning as assigned to it in clause ( q) of sub-
39 of 1970                  section (1) of section 2 of the Patents Act, 1970;
                        (d) "patented article" and "patented process" shall have the meanings respectively assigned
39 of 1970                  to them in clause (o) of sub-section (1) of section 2 of the Patents Act, 1970;
                        (e )    "royalty", in respect of a patent, 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" or consideration for sale of product
                               manufactured with the use of patented process or of the patented article for commercial
                               use) for--
                                      (i )   the transfer of all or any rights (including the granting of a licence) in respect
                                             of a patent;
                                      (ii) the imparting of any information concerning the working of, or the use of, a
                                           patent; or
                                      (iii) the use of any patent;
                         (f) "true and first inventor" shall have the same meaning as assigned to it in clause ( y) of
39 of 1970                   sub-section (1) of section 2 of the Patents Act, 1970.


Deduction of    85. (1) A person, being a primary co-operative society, shall be allowed a deduction to the extent of
income of co-   profits derived from the business of providing banking, or credit, facility to its members.
operative
                   (2) In this section, "primary co-operative society" means--
society from
banking                 (a) a "primary agricultural credit society" within the meaning of Part V of the Banking
activities                                                                                                                        11 of 1949
                            Regulation Act, 1949; or
                        (b) a "primary co-operative agricultural and rural development bank", which-
                               (i )    has its area of operation confined to a taluk; and
                               (ii)    is mainly engaged in providing long-term credit for agricultural and rural
                                       development activities.


Deduction of    86. (1) A person, being a primary co-operative society, shall be allowed a deduction in respect of
income     of   the aggregate of the amounts referred to in sub-section (2).
primary   co-
                   (2) The amount referred to in sub-section (1) shall be--
operative
societies               (a) the amount of profits derived from agriculture or agriculture-related activities;
                        (b) the amount of profits derived from weaving without the aid of power; and
                        (c) the amount of income derived from any other activity, to the extent it does not exceed
                            one lakh rupees.

                                                                      71
   (3) In this section,--
        (a) "agriculture-related activities" means the following activities, namely:--
              (i )    purchase of agricultural implements, seeds, livestock or other articles
                     intended for agriculture for the purpose of supplying them to its members;
              (ii) the collective disposal of--
                     (A) agricultural produce grown by its members; or
                     (B) dairy or poultry produce produced by its members; and
              (iii) fishing or allied activities, that is to say, the catching, curing, processing,
                    preserving, storing or marketing of fish or the purchase of material and
                    equipment in connection therewith for the purpose of supplying them to its
                    members;
        (b)     "primary co-operative society" means a co-operative society whose rules and bye-
               laws restrict the voting rights to individuals engaged in agriculture or agriculture-
               related activities.


                        V. - MAINTENANCE OF ACCOUNTS AND OTHER RELATED MATTERS
87. (1) Every person shall keep and maintain such books of account and other documents as may               Maintenance of
enable the Assessing Officer to compute his total income in accordance with the provisions of this          accounts.
Code.
   (2) Every person who has entered into an international transaction or specified domestic
transaction shall keep and maintain such information and documents in respect thereof, as may be
prescribed.
   (3) The person referred to in sub-section (1) shall be the following, namely:--
        (a) any person carrying on legal, medical, engineering, architectural profession or
            profession of accountancy, technical consultancy, interior decoration or any other
            profession as is notified by the Board;
        (b) any other person carrying on business, if--
              (i )   his income from the business exceeds two lakh rupees;
              (ii)    his total turnover or gross receipts, as the case may be, in the business exceeds
                     twenty lakh rupees in any one of the three financial years immediately preceding
                     the relevant financial year; or
              (iii) the business is newly set-up in any financial year, his income from the business is
                    likely to exceed two lakh rupees or his total turnover or gross receipts, as the case
                    may be, in the business is likely to exceed twenty lakh rupees, during such
                    financial year.
   (4) The books of account referred to in sub-section (1) shall be the following, namely:--
        (a) cash book;
        (b) journal, if the accounts are maintained according to the mercantile system of
            accounting;
        (c) ledger;
        (d) register of daily inventory of business trading asset;
   (5) The Board may, having regard to the nature of the business carried on by any class of
persons, prescribe--

                                                  72
                           (a) any other books of account and documents to be kept and maintained;
                           (b) the particulars to be contained in the books of account and documents; and
                           (c )    the form and the manner in, and the place at, which the books of account and other
                                  documents shall be kept and maintained.
                      (6) The Board may prescribe the period for which the books of account and other documents
                   required to be kept and maintained under this section shall be retained.
                      (7) The provisions of this section shall not apply to the business where the income therefrom is
                   determined under paragraph 1 or paragraph 2 of the Eleventh Schedule.
                     (8) The expression "international transaction" referred to in sub-section (2) shall have the
                   meaning assigned to it in clause (11) of section 127.


Audit         of   88. (1) Every person, who is required to keep and maintain books of account under section 87 shall
accounts and       get his accounts for the financial year audited--
reporting     of
                           (a)    where the person is carrying on one or more professions , the aggregate gross receipts
international
                                  of such profession or professions exceed twenty-five lakh rupees in the financial
transaction
                                  year;
                           (b)      where the person is carrying on one or more businesses , the aggregate total turnover
                                   or gross receipts, as the case may be, of such business or businesses exceed one crore
                                   rupees in the financial year.
                      (2) The audit of the accounts referred to in sub-section (1) shall be carried out by an accountant
                   and the report of audit be obtained in the prescribed form duly signed and verified by such
                   accountant and setting forth such particulars as may be prescribed.
                      (3) The person referred to in sub-section (1) shall furnish the report of audit referred to in sub-
                   section (2) to the assessing officer on or before the due date, in the manner as may be prescribed.
                       (4) The provisions of sub-section (1) shall not apply to the business where the income therefrom
                   is determined under paragraph 1 of the Eleventh Schedule.
                      (5) A person shall be deemed to have complied with the provisions of sub-section (1), if the
                   person--
                           (a)      gets the accounts of his business audited as required by, or under, any other law for
                                   the time being in force, before the due date; and
                           (b)      obtains by the due date the report of the audit as required under such other law and a
                                   further report by an accountant in the form prescribed under sub-section (2).
                      (6) A person referred to in sub-section (2) of section 87 shall furnish a report of the
                   international transaction or the specified domestic transaction entered into during the financial
                   year to the Transfer Pricing Officer and the Assessing Officer on or before the due date, in the
                   manner as may be prescribed.
                      (7) The report referred in sub-section (6) shall be obtained from an accountant in such form duly
                   signed and verified in such manner, as may be prescribed.


                   89. (1) The income chargeable under the head "Income from business" or "Income from residuary             Method       of
                   sources" shall, except as otherwise provided in this section, be computed in accordance with either       accounting
                   cash or mercantile system of accounting regularly employed by the person.
                      (2) The Central Government may from time to time notify accounting standards to be followed
                   by any class of persons or in respect of any class of income.


                                                                   73
                     (3) The valuation of purchase of goods and inventory for the purposes of determining the
                  income chargeable under the head "Income from business" shall be--
                           (a) in accordance with the method of accounting regularly employed by the person; and
                           (b) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name
                               called) actually paid or incurred by the person to bring the goods to the place of its
                               location and condition as on the date of its valuation.
                     (4) The value of sale of goods for the purposes of determining the income chargeable under the
                  head "Income from business" shall be determined--
                           (a) in accordance with the method of accounting regularly employed by the person; and
                           (b) further adjusted to include the amount of any tax, duty, cess or fee (by whatever name
                               called) leviable on the sale of the goods.
                     (5) The interest on bad or doubtful debts of any financial institution shall be included in the total
                  income of the financial year in which the interest is credited to the profit and loss account of, or is
                  actually received by, the financial institution, whichever is earlier.
                     (6) The interest received by a person on compensation or enhanced compensation shall be
                  included in the total income of the financial year in which it is received.
                     (7) In this section,--
                           (a)   any tax, duty, cess or fee (by whatever name called) under any law for the time being
                                 in force shall include all such payment notwithstanding any right arising as a
                                 consequence to such payment;
                           (b)    "bad or doubtful debts" shall be such categories of debts as may be prescribed,
                                 having regard to the guidelines issued by the Reserve Bank of India or the National
                                 Housing Bank, as the case may be, in relation to such debts.
                                                              CHAPTER IV
                        SPECIAL PROVISIONS RELATING TO THE COMPUTATION OF TOTAL INCOME OF NON-PROFIT
                                                              ORGANISATIONS



Applicability     90. (1) The provisions of this Chapter shall be applicable to a non-profit organisation, other than
of this Chapter   any organisation of public importance specified in the Fourth Schedule.
                     (2) The Central Government may, subject to such conditions as may be prescribed, notify a
                  person as a non-profit organisation of public importance for the purpose of the Fourth Schedule.


Total income      91. The total income of a non-profit organisation shall be computed in accordance with the
of a non-profit   provisions of this Chapter.
 organisation.


Computation       92. (1) Subject to the provisions of section 8, the total income of any non-profit organisation in
of total income   relation to any charitable activity, during the financial year, shall be the gross receipts as reduced by
of a non-proft    the amount of outgoings, computed in accordance with either cash or mercantile system of
organisation.     accounting regularly employed by the non-profit organisation.
                     (2) The total income of a non-profit organisation shall be treated as nil if the total income
                  determined under sub-section (1) is negative.




                                                                  74
                 93. (1) The gross receipts from any charitable activity shall be the aggregate of the following,           Gross receipts
                 namely:--                                                                                                  of a non-profit
                                                                                                                            organisation.
                         (a) the amount of voluntary contributions received;
                         (b)     any rent received in respect of a property held by the                        non-profit
                                organisation consisting of any buildings or lands appurtenant thereto;
                         (c) the amount of gross earnings from any business carried on by the non-profit
                             organisation, if the business is incidental to any charitable activity so carried on;
                         (d) full value of consideration on transfer of any capital asset;
                         (e) the amount of income received from the investment of its funds or assets;
                         (f)     the amount of any incoming, realisation, proceeds, or subscription received from any
                                source; and
                         (h) the amount of deemed income, if any.
                    (2) The amount of outgoing claimed or allowed, as the case may be, under section 94 in respect
                 of any capital asset in any financial year shall be deemed to be the income of the non-profit
                 organization if such asset is not used for the purposes of any charitable activity or any business
                 incidental to such charitable activity and it shall be included in the income of the financial year in
                 which the default takes place.
                    (3) The gross receipts referred to in sub-section (1) shall not include--
                         (a) any loan taken during the financial year; and
                         (b) voluntary contributions received with a specific direction that they shall form part of
                             the corpus of the non-profit organisation.


                 94. (1) The amount of outgoings during the financial year for the purpose of computation of the            Outgoings of a
                 total income shall be the aggregate of--                                                                   non-profit
                                                                                                                            organisation.
                         (a)      the amount paid for any expenditure, not being capital expenditure, incurred wholly
                                 and exclusively for earning or obtaining any receipts referred to in sub-section (1) of
                                 section 93;
                         (b)      the amount paid for any expenditure, incurred for the purposes of carrying out any
                                 charitable activity;
                         (c )     the amount paid for any capital expenditure for the purposes of any business, if the
                                 business is incidental to any charitable activity carried on by the non-profit
                                 organisation; and
                         (d)     any amount applied outside India, if--
                                (i )   the amount is applied for an activity which tends to promote international welfare
                                       in which India is interested; and
                                (ii)   the non-profit organisation is notified by the Central Government in this behalf.
                    (2) The outgoings referred to in sub-section (1) shall not include any repayment of loan made
                 during the financial year.


Prohibited       95. (1) The funds or the assets of the non-profit organisation shall not be invested or held, at any
forms      and   time during the financial year, in any of the following forms or modes, namely:-
modes       of
                         (a) investment in the capital or equity, as the case may be, of an associated concern;

                                                                  75
investment.
                           (b)     investment in any bond, debenture or any other debt instrument issued by an
                                  associated concern;
                           (c)    deposit with an associated concern; and
                           (d)    any other form or modes of investment as may be prescribed.
                     (2) The provisions of sub-section (1) shall not apply to-
                           (a)     any assets forming part of the corpus of the non-profit organisation as on the 1st day
                                  of June, 1973;
                           (b)    any accretion by way of bonus shares to the shares forming part of the corpus
                                  mentioned in clause (a).


                  96. (1) The funds or the assets of the non-profit organisation shall not be used or applied, directly or     Use            or
                  indirectly, for the benefit of an interested person.                                                         application of
                                                                                                                               funds or assets
                     (2) Without prejudice to sub-section (1), the funds or the assets of the non-profit organisation
                                                                                                                               for the benefit
                  shall be deemed to have been used or applied for the benefit of an interested person, if--
                                                                                                                               of     interested
                           (a)    the funds or the assets of the non-profit organisation are, or continue to be, lent to any   person
                                  interested person, for any period during the financial year, without either adequate
                                  security or adequate interest or both;
                           (b)     the land, building or other asset of the non-profit organisation is, or continues to be,
                                  made available for the use of any interested person, for any period during the
                                  financial year, without charging adequate rent or other compensation;
                           (c )    any amount is paid by way of salary, allowance or otherwise during the financial year
                                  to any interested person, out of the resources of the non-profit organisation for
                                  services rendered by that person to such organisation and the amount so paid is in
                                  excess of what may be reasonably paid for such services;
                           (d)    the services of the non-profit organisation are made available to any interested person,
                                  during the financial year, without adequate remuneration or other compensation;
                           (e )    any share, security or other property is purchased by or on behalf of the non-profit
                                  organisation from any interested person, during the financial year, for consideration
                                  which is more than adequate;
                           (f )    any share, security or other property is sold by or on behalf of the non-profit
                                  organisation to any interested person, during the financial year, for consideration
                                  which is less than adequate;
                           (g)    any fund or asset of the non-profit organisation is diverted during the financial year in
                                  favour of any interested person where the fund or the value of the asset, as the case
                                  may be, or the aggregate of the funds and the value of the assets so diverted exceeds
                                  one thousand rupees; or
                           (h)    any funds of the non-profit organisation are, or continue to remain, invested for any
                                  period during the financial year in any concern in which any interested person has a
                                  substantial interest and such investment exceeds five per cent. of the capital of that
                                  concern.


Registration of   97. (1) A non-profit organisation shall make an application to the Commissioner for its registration
a    non-profit   in such form and manner, as may be prescribed.
organisation
                     (2) The provisions of sub-section (1) shall not apply to any non-profit organization which has
                  been granted approval or registration under the Income -tax Act, 1961, as it stood before the


                                                                   76
                 commencement of this Code, if the organisation fulfils such conditions as may be prescribed.
                    (3) The Commissioner, on receipt of the application for registration of a non-profit organisation
                 made under sub-section (1), shall call for such documents or information as he considers necessary
                 in order to satisfy himself about the objects and genuineness of its activities and may make such
                 further inquiries as may be required.
                    (4) The Commissioner shall, within a period of six months from the end of the month in which
                 the application under sub-section (1) was received, pass an order in writing--
                         (a) registering the non-profit organisation if he is satisfied about its objects and the
                             genuineness of its activities; or
                         (b) refusing to register the non-profit organisation if he is not so satisfied, after giving the
                             organisation an opportunity of being heard.
                    (5) A non-profit organisation which has been granted approval or registration under the Income-
43 of 1961       tax Act, 1961, as it stood before the commencement of this Code shall be deemed to be registered
                 for the purposes of clause (a) of sub-section (4) if it fulfills the conditions prescribed under sub-
                 section (2).
                    (6) The registration granted under sub-section (4) shall be valid from the financial year in which
                 the application under sub-section (1) was made.
                    (7) Where the Commissioner is satisfied that the activities of the non-profit organisation are--
                              (i) not genuine; or
                              (ii) not being carried out in accordance with its objects; or
                              (iii) not being carried out in accordance with any other law which is applicable to it or
                                    under which it is registered or approved,
                 he shall pass an order in writing cancelling the registration or withdrawing the approval, as the case
                 may be, granted under this section or the Income- tax Act, 1961, as it stood before the
                 commencement of this Code, after giving the organisation an opportunity of being heard.


Maintenance      98. (1) The non-profit organisation shall keep and maintain such books of account in the manner, as
of    accounts   may be prescribed.
and tax audit
                    (2) The non-profit organisation shall maintain separate books of account in respect of business
                 incidental to charitable activity.
                    (3) The non-profit organisation shall obtain a report of audit in such form as may be prescribed,
                 from an accountant before the due date of filing of the return of tax bases, if the gross receipts
                 referred to in section 93 in any financial year exceed five lakh rupees.
                    (4) The report referred to in sub-section (3) shall be furnished to the Assessing Officer on or
                 before the due date, in such manner as may be prescribed.


                 99. (1) Where the total income of a non-profit organisation includes any anonymous donation, the           Anonymous
                 income-tax payable shall be the aggregate of--                                                             donations
                         (a) the amount of income-tax calculated at the rate of thirty per cent. on the aggregate of
                             anonymous donations received in excess of the higher of the following, namely: --
                              (i )   five per cent. of the total donations received by the non-profit organisation; or
                              (ii) one lakh rupees; and
                          (b) the amount of income-tax with which the non-profit organisation would have been
                              chargeable had its total income been reduced by the amount of anonymous donations


                                                                  77
                                referred to in clause (a).
                      (2) The provisions of sub-section (1) shall apply notwithstanding that the anonymous donation
                   has been made with a specific direction that it shall form part of the corpus of the non-profit
                   organisation.
                      (3) No outgoings shall be allowed in respect of any anonymous donation received.
                      (4) In this section, "anonymous donation" means any voluntary contribution, where a person
                   receiving such contribution does not maintain a record of the identity indicating the name and
                   address of the person making such contribution and such other particulars as may be prescribed.


                   100. (1) A non-profit organisation shall be liable to income-tax at the rate of thirty per cent. in       Consequences
                   respect of its net worth, if--                                                                            of conversion of
                                                                                                                             a     non-profit
                           (a) it converts into any form of organisation which does not qualify as a non-profit
                                                                                                                             organisation
                               organisation;
                            (b) it merges with any form of organisation which does not qualify as a non-profit
                                organisation;
                            (c) it fails to transfer upon dissolution all its assets to any other non-profit organisation,
                                within a period of three months from the end of the month in which the dissolution
                                takes place.
                      (2) In this section--
                           (a) net worth of the non-profit organisation shall be computed as on--
                                (i )   the date of conversion or merger, as the case may be, in a case falling under
                                       clause (a) or clause (b) of sub-section (1); and
                                (ii) the date of dissolution in a case falling under clause ( c) of sub-section (1);
                           (b) "net worth" of the non -profit organisation means the aggregate value of the total assets
                               of the non-profit organisation as reduced by the liabilities of such organisation
                               computed in accordance with such rules of valuation as may be prescribed.


                   101. (1) The provisions of this Chapter shall not apply to any person who--                               Provisions of
                                                                                                                             this Chapter not
                           (a) holds any business under trust, notwithstanding any specific direction that--
                                                                                                                             to apply in
                                (i) the business shall form part of the corpus of such person; or                            certain cases.
                                (ii) the income from the business shall be applied only for charitable activity;
                           (b) fails to comply with the conditions specified in section 96;
                           (c) ceases to be a non-profit organisation at any time during the financial year, irrespective
                               of registration granted under sub-section (4) of section 97;
                           (d) carries on any business if it is not a business incidental to charitable activity.
                      (2) Without prejudice to sub-section (1), the non-profit organisation which ceases to be so due to
                   conversion, merger or dissolution as referred to in sub-section (1) of section 100 shall be liable to
                   income-tax in respect of its net worth in accordance with that section.
                      (3) The total income of any person falling under clauses (a), (b), (c) or clause (d) of sub-section
                   (1) shall be computed in accordance with the other provisions of this Code.


Interpretations    102. In this Chapter, unless the context otherwise requires,--
in          this

                                                                   78
Chapter.
                   (a)      "associated concern" shall have the meaning assigned to `associated enterprises' in
                          clause (3) of section 127, with the modification that for the word `enterprise' with all
                          its grammatical variation, the word `concern' with its grammatical variation shall be
                          substituted;
                   (b)    "business incidental to charitable activity" means a business carried on in the course
                          of the actual carrying out of any charitable activity;
                   (c)    "charitable activity" means the following activities carried out in India, namely:--
                          (i) relief of the poor;
                          (ii) advancement of education;
                          (iii) medical relief;
                          (iv) preservation of environment (including watersheds, forests and wildlife);
                          (v) preservation of monuments or places or objects of artistic or historic interest; or
                          (vi) advancement of any other object of general public utility subject to the condition
                               that if it involves the carrying on of any activity in the nature of trade, commerce
                               or business or any activity of rendering any service in relation thereto, for a cess,
                               fee or any other consideration (irrespective of nature of use, application or
                               retention of the income from such activity), the aggregate value of the gross
                               receipts during the financial year from such activity does not exceed twenty-five
                               lakh rupees,
           and includes an activity referred to in clause (d) of sub-section (1) of section 94 in respect of an
           organisation notified in this behalf;
                   (d)     "general public" means the body of people at large sufficiently defined by some
                          common quality of public or impersonal nature;
                   (e)    "interested person" in relation to a non -profit organisation means--
                          (i )   the founder of the organisation or the settlor of the trust;
                          (ii) any person whose total contribution to the organisation during        the financial
                               year exceeds fifty thousand rupees;
                          (iii) a member of the Hindu undivided family if the settlor, founder or the person
                               referred to in sub-clause (ii) is a Hindu undivided family;
                          (iv) any manager, by whatever name called, of the organisation or trustee of the trust;
                          (v) any relative of the settlor, founder, member, trustee or manager; or
                          (vi) any concern in which any of the persons referred to in clauses ( i) to (v) has a
                               substantial interest;
                    (f)   "trust" includes legal obligation.


                                                          CHAPTER V
                                                MINIMUM ALTERNATE TAX
                                               A. COMPUTATION OF BOOK PROFIT


           103. (1) Notwithstanding anything in this Code, where the regular income-tax payable for a                  Computation of
           financial year by a company is less than the tax on book profit, the book profit shall be deemed to be      book profit.


                                                              79
the total income of the company for such financial year and it shall be liable to income-tax on such
total income at the rate specified in Paragraph A of the Seventeenth Schedule.
   (2) Subject to the provisions of this Chapter, the book profit referred to in sub-section (1) shall
be computed in accordance with the formula--
            A+B +C -(D+E)             Where
            where-
            A=          the net profit, as shown in the profit and loss account for the financial year
                      prepared in accordance with the provisions of section 104;
            B =       the aggregate of the following amounts, if debited to the profit and
                      loss account:
                      (a) the amount of any tax paid or payable under this Code, and the provision
                          therefor;
                      (b) the amount carried to any reserves, by whatever name called;
                      (c) the amount set aside as provision for meeting unascertained liabilities;
                      (d) the amount by way of provision for losses of subsidiary companies;
                      (e) the amount of dividends paid or proposed;
                       (f) the amount of depreciation;
                      (g) the amount of deferred tax and the provision therefor;
                      (h) the amount set aside as provision for diminution in the value of any asset;
                      (i) the amount of any expenditure referred to in clause (a) of sub-section (1)
                          of section 18;
            C=           the amount standing in revaluation reserve relating to revalued asset on its
                      disposal or retirement , if not credited to the profit and loss account,
            D=       the aggregate of the following amounts:
                      (a) the amount of depreciation debited to the profit and loss account
                          (excluding the depreciation on account of revaluation of assets);
                      (b )    the amount withdrawn from the revaluation reserve and credited to the
                             profit and loss account, to the extent it does not exceed the amount of
                             depreciation on account of revaluation of assets referred to in clause (a);
                      (c) the amount withdrawn from any reserve or provision if any such amount
                          is credited to the profit and loss account and such amount has been taken
                          into account for computation of the book profit of any preceding financial
                          year;
                      (d) the amount of profits of a sick industrial company for any financial year
                          comprised in the period commencing from the financial year in which the
                          said company has become a sick industrial company under sub-section
                          (1) of section 17 of the Sick Industrial Companies (Special Provisions)
                          Act, 1985 and ending with the financial year during which the entire net
                          worth of such company becomes equal to or exceeds the accumulated
                          losses;
                      (e )    the amount of any income referred to in section 10 read with the Third
                             Schedule, if credited to the profit and loss account;
                      (f )   the amount of deferred tax, if any such amount is credited to the profit
                             and loss account;


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                           E=        the amount of loss brought forward.
                (3) In sub-section (2), the loss brought forward shall be--
                           (i )    nil, if such loss brought forward (excluding depreciation) or unabsorbed
                                  depreciation as per books of account, as the case may be, is nil; or
                           (ii) the amount of loss brought forward (excluding depreciation) or unabsorbed
                                depreciation as per books of account, whichever is less, in any other case.
                (4) In sub-section (2), the amount of tax shall include--
                     (a) any interest charged or chargeable under this Code;
                     (b) any tax on distributed profits under section 112 ;
                     (c ) any tax on distributed income under section 113;
                     (d)    any tax paid on branch profits under section 114; and
                     (e) any tax on wealth under section 115.
                (5) Every company to which this section applies shall obtain a report in such form as may be
             prescribed from an accountant certifying that the book profit has been computed in accordance with
             the provisions of this section and furnish such report on or before the due date, in such manner as
             may be prescribed.
                (6) The provisions of this section shall not apply to any income accruing or arising to a company
             from life insurance business.


             104. (1) Every assessee,--                                                                               Preparation of
                                                                                                                      profit and loss
                     (a) being a company, other than a company referred to in clause (b), shall, for the purposes
                                                                                                                      account     for
18 of 2013               of section 103, prepare its profit and loss account for the relevant financial year in
                                                                                                                      computing book
                         accordance with the provisions of Part II of Schedule III to the Companies Act,
                                                                                                                      profit.
                         2013;or
                     (b) being a company, to which the second and third provisos to sub-section (1) of section
18 of 2013               129 of the Companies Act, 2013 are applicable, shall, for the purposes of section 103,
                         prepare its profit and loss account for the relevant financial year in accordance with the
                         provisions of the Act governing such company.
                (2) In this section, the accounting policies, the accounting standards adopted for preparing such
             accounts including profit and loss account and the method and rates adopted for calculating the
             depreciation shall, in the case of a company, be the same as have been adopted for the purpose of
             preparing such accounts including profit and loss account laid by the company at its annual general
18 of 2013   meeting in accordance with the provisions of section 129 of the Companies Act, 2013 or the statute
             under which it is constituted.

18 of 2013      (3) Where the company has adopted or adopts the financial year under the Companies Act, 2013
             or the statute under which it is constituted, which is different from the financial year under this
             Code--
                           (i )   the accounting policies;
                           (ii)     the accounting standards adopted for preparing such accounts including profit
                                   and loss account;
                           (iii) the method and rates adopted for calculating the depreciation,
             shall correspond to the accounting policies, accounting standards and the
             method and rates for calculating the depreciation which have been adopted for preparing such
             accounts including profit and loss account for such financial year or part of such financial year


                                                             81
                   falling within the relevant financial year.


Tax credit for     105. (1) The credit for tax paid by a company under section 103 shall be allowed to it in
tax paid on        accordance with the provisions of this section.
book profit.
                         (2) The tax credit of a financial year to be allowed under sub-section (1) shall be the excess of
                   tax on book profit over the normal income-tax.
                         (3) No interest shall be payable on tax credit allowed under sub-section (1).
                         (4) The amount of tax credit determined under sub-section (2) shall be carried forward and
                   allowed in accordance with the provisions of sub-sections (5) and (6) but such carry forward shall
                   not be allowed beyond the tenth financial year immediately succeeding the financial year for which
                   tax credit becomes allowable under sub-section (1).
                         (5) The tax credit shall be allowed for a financial year in which the regular income-tax
                   exceeds the tax on book profit and the credit shall be allowed to the extent of the excess of the
                   regular income-tax over the tax on book profit, balance of the tax credit, if any, shall be carried
                   forward.
                          (6) If the amount of regular income-tax or the tax on book profit is reduced or increased as a
                   result of any order passed under this Code, the amount of tax credit allowed under this section shall
                   also be varied accordingly.
                          (7) In the case of conversion of a private company or unlisted public company into a limited
                   liability partnership under the Limited Liability Partnership Act, 2008, the provisions of this section
                   shall not apply to the successor limited liability partnership.
                         (8) In this section, the expressions "private company" and "unlisted public company" shall
                   have the meaning respectively assigned to them in the Limited Liability Partnership Act, 2008.


                                                      B. Computation of Adjusted Total Income


Computation        106. (1) Notwithstanding anything in this Code, where the regular income-tax payable for a
of      adjusted   financial year by a firm is less than the tax on the adjusted total income, the adjusted total income
total income       shall be deemed to be the total income of the firm for such financial year and it shall be liable to
                   income-tax on such total income at the rate specified in Paragraph B of the Seventeenth Schedule.
                      (2) The adjusted total income referred to in sub-section (1) shall be computed in accordance with
                   the formula--
                            A+B-C
                            where
                            A=       the total income before giving effect to the provisions of this sub-chapter;
                            B=       the aggregate of the following, namely:-
                                     (i)    deduction claimed, if any, under clause (a) of sub-section (1) of section 79;
                                     (ii)    deduction claimed, if any, in accordance with the provisions of clauses (l),
                                            (m), (n),(o) or (p) of sub-section (2) of section 323; and
                                     (iii) deduction claimed, if any, under sub-paragraph (d) of paragraph 3 of the
                                            Eighth Schedule, sub-paragraph (d) of paragraph 4 of the Ninth Schedule
                                            or sub-paragraph (d) of paragraph 5 of the Tenth Schedule;
                            C=       the aggregate of the following, namely:-
                                     (i)      one hundred per cent. of the amount of money paid during the financial
                                            year as contribution or donation to any person specified in Part I of the


                                                                   82
                                           Sixteenth Schedule;
                                    (ii)    capital allowances referred to in clause (a) and clause (b) of sub-section (1)
                                           of section 37 in respect of business capital asset for which deduction
                                           claimed under sub-paragraph (d) of paragraph 3 of the Eighth Schedule,
                                           sub-paragraph (d) of paragraph 4 of the Ninth Schedule or sub-paragraph
                                           (d) of paragraph 5 of the Tenth Schedule.
                     (3) Every firm shall obtain a report, in such form as may be prescribed, from an accountant
                  certifying that the adjusted total income and tax thereon have been computed in accordance with the
                  provisions of this Chapter and furnish the report on or before the due date, in such manner, as may
                  be prescribed.


                  107. (1) The credit for tax paid by a firm under section 106 shall be allowed to it in accordance with     Tax credit for
                  the provisions of this section.                                                                            tax paid on
                                                                                                                             adjusted total
                     (2) The tax credit of a financial year to be allowed under sub-section (1) shall be the excess of
                                                                                                                             income
                  tax on adjusted total income paid over the regular income-tax.
                     (3) No interest shall be payable on tax credit allowed under sub-section (1).
                     (4) The amount of tax credit determined under sub-section (2) shall be carried forward and set
                  off in accordance with the provisions of sub-sections (5) and (6) but such carry forward shall not be
                  allowed beyond the tenth financial year immediately succeeding the financial year for which tax
                  credit becomes allowable under sub-section (1).
                     (5) In any financial year in which the regular income-tax exceeds the tax on adjusted total
                  income, the tax credit shall be allowed to be set-off to the extent of the excess of regular income-tax
                  over the tax on adjusted total income and the balance of the tax credit, if any, shall be carried
                  forward.
                     (6) If the amount of regular income-tax or the tax on adjusted total income is reduced or
                  increased as a result of any order passed under this Code, the amount of tax credit allowed under
                  this section shall also be varied accordingly.


                                                            C. Miscellaneous


Interpretations   108. In this Chapter, unless the context otherwise requires,--
in this Chapter            (a) "regular income-tax" means the income-tax payable for a financial year by a company
                                or a firm, as the case may be, on its total income in accordance with the provisions of
                                this Code other than the provisions of this Chapter;
                           (b) "tax on adjusted total income" means the amount of tax computed on adjusted total
                                income at a rate specified in Paragraph B of the Seventeenth Schedule;
                           (c) "tax on book profit" means the amount of tax computed on book profit at a rate
                                specified in Paragraph A of the Seventeenth Schedule.


Application of    109. Save as otherwise provided in this Chapter, all other provisions of this Code shall apply to a
other             company or a firm, as the case may be, referred to in this Chapter.
provisions of
this Code.


                                                              CHAPTER VI
                         PROVISIONS RELATING TO TAX ON INCOME RECEIVED FROM VENTURE CAPITAL COMPANY AND


                                                                  83
                                      VENTURE CAPITAL FUND



110. (1) Notwithstanding anything in this Code, any income accrued to or received by a person out       Tax on income
of investments made in a venture capital company or venture capital fund shall be chargeable to         received from
income-tax in the same manner as if it were the income accrued to or received by such person had        venture capital
he made investments directly in the venture capital undertaking.                                        company and
                                                                                                        venture capital
   (2) The venture capital company, the venture capital fund or the person responsible for crediting
                                                                                                        fund.
or making payment of the income on behalf of such company or fund shall furnish, within such time
as may be prescribed, to the person who is liable to tax in respect of such income and to the
prescribed income-tax authority, a statement in the prescribed form and manner, giving details of
the nature of the income paid during the financial year and such other relevant details as may be
prescribed.
   (3) The income paid or credited by the venture capital company and the venture capital fund shall
be deemed to be of the same nature and in the same proportion in the hands of the person referred to
in sub-section (1) as it had been received by, or had accrued to, the venture capital company or the
venture capital fund, as the case may be, during the financial year.
  (4) The provisions of Part B or Part C of this Code shall not apply to the income paid by a
venture capital company or venture capital fund under this section.
    (5) The income accruing to or received by the venture capital company or venture capital fund,
during a financial year, from investments made in venture capital undertaking if not paid or credited
to the person referred to in sub-section (1), shall be deemed to have been credited to the account of
the said person on the last day of the financial year in the same proportion in which such person
would have been entitled to receive the income had it been paid in the financial year.
   (6) Any income which has been included in total income of the person referred to in sub-section
(1) in a financial year, on account of it having accrued in the said financial year, shall not be
included in the total income of such person in the financial year in which such income is actually
paid to him by the venture capital company or the venture capital fund.


                                          CHAPTER VII
     SPECIAL PROVISIONS RELATING TO CONVERSION OF INDIAN BRANCH OF A
                 FOREIGN BANK INTO A SUBSIDIARY COMPANY


111. (1) If a foreign company is engaged in the business of banking in India through its branch         Conversion of
situate in India and that branch is converted into a subsidiary company thereof, being an Indian        an        Indian
company (hereafter referred to as an Indian subsidiary company) in accordance with the scheme           branch        of
framed by the Reserve Bank of India, then, notwithstanding anything in this Code and subject to the     foreign
conditions as may be notified by the Central Government in this behalf,-                                company into
                                                                                                        subsidiary
        (a) the capital gains arising from such coversion shall not be chargeable to tax in the
                                                                                                        Indian
            financial year in which the conversion takes place;
                                                                                                        company.
        (b) the provisions of this Code relating to aggregation of income, tax credit for tax paid on
            book profit and the computation of income in the case of the foreign company and
            Indian subsidiary company shall apply with such exceptions, modifications and
            adaptations as may be specified in that notification.
   (2) In case of failure to comply with any of the conditions specified in the scheme or in the
notification issued under sub-section (1), all the provisions of this Code shall apply to the foreign
company and the Indian subsidiary company without any benefit, exemption or relief under sub-
section (1).


                                              84
   (3) Where, in a financial year, any benfit, exemption or relief has been granted to the foreign
company or the Indian subsidiary company in accordance with the provisions of sub-section (1) and,
subsequently, there is failure to comply with any of the conditions specified in the scheme or in the
notification issued under said sub-section, then, -
         (a) such benefit, exemption or relief shall be deemed to have been erroneously allowed;
         (b) the Assessing Officer may, notwithstanding anything in this Code, re-compute the total
             income of the assessee for the said financial year and make the necessary amendment;
             and
         (c) the provisions of section 173 shall, so far as may be, apply thereto and the period of
             four years specified in sub-section (2) of that section being reckoned from the end of
             the financial year in which the failure to comply with the condition referred to in sub-
             section (1) takes place.


                                               PART B
                                    DIVIDEND DISTRIBUTION TAX
                                           CHAPTER VIII
        SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED PROFITS OF DOMESTIC COMPANIES


112. (1) Every domestic company shall, in addition to income-tax payable, be liable to pay tax on           Tax           on
any amount of dividend declared, distributed or paid (whether interim or otherwise) to its                  distributed
shareholders, whether out of current or accumulated profits.                                                profits       of
                                                                                                            domestic
   (2) The tax on the dividend, being additional income-tax, shall be charged at the rate specified in
                                                                                                            companies
Paragraph C of the Seventeenth Schedule, on the amount referred to in sub-section (1).
   (3) The amount referred to in sub-section (1) shall be reduced by the amount of dividend, if any,
received by the domestic company during the financial year, if ­
             (i) such dividend is received from its subsidiary; and
             (ii) the subsidiary has paid tax under this section on such dividend.
    (4) The domestic company or the principal officer of such company responsible for making
payment of the dividend, as the case may be, shall be liable to pay the tax on dividend to the credit
of the Central Government within a period of fourteen days from the date of declaration, distribution
or payment of such dividend, whichever is earliest.
  (5) No deduction under any other provision of this Code shall be allowed to the domestic
company or a shareholder in respect of the dividend charged to tax or the tax thereon.
   (6) The tax on dividend so paid by the domestic company shall be treated as the final payment of
tax in respect of the dividend declared, distributed or paid and no further credit shall be claimed by
the domestic company or by any other person in respect of the tax so paid.
   (7) If the domestic company or, as the case may be, the principal officer of such company
responsible for making payment of the dividend does not pay the tax in accordance with the
provisions of this section, then, it or he shall be deemed to be an assessee in default in respect of the
tax payable by it or him and the provisions of this Code relating to the collection and recovery of tax
shall apply.
   (8) If the domestic company or, as the case may be, the principal officer of such company fails
to pay the whole or any part of the tax on dividend referred to in sub-section (2), within the time
allowed under sub-section (4), then, it or he shall be liable to pay simple interest at the rate of one
per cent. for every month on the amount of such tax for the period beginning on the date

                                                85
immediately after the last date on which such tax was payable and ending with the date on which the
tax is actually paid.
   (9) Notwithstanding that no income-tax is payable by a domestic company on its total income
computed in accordance with the provisions of Part A of this Code, the tax on dividend declared,
distributed or paid under sub-section (1) shall be payable by such company.
   (10) In this section, --
         (a) a company shall be a subsidiary of another company if such other company holds more
             than fifty per cent. of nominal value of the equity share capital of the company;
         (b) "dividend" shall not include any payment referred to in item (e) of sub-clause (I) of
             clause (74) of section 320.


                                               PART C
                                    TAX ON DISTRIBUTED INCOME
                                            CHAPTER IX
                   SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED INCOME




       113. (1) Every person specified in column (2) of the Table given in Paragraph D of the              Tax on income
Seventeenth Schedule, shall, in addition to income-tax payable, be liable to pay tax, being additional     distributed by
income-tax, on any amount of income distributed or paid as specified in column (3) of the Table at         mutual fund or
the rate specified in column (4) thereof.                                                                  life insurer.
  (2) For the purposes of sub-section (1), the income distributed or paid by a life insurer shall be
computed in such manner as may be prescribed.
   (3) The tax on the distributed income, being additional income-tax, shall be charged at the rate
specified in column (4) of the Table given in Paragraph D of the Seventeenth Schedule, on the
amount specified in column (3) of the said Table.
   (4) The mutual fund, the life insurer, the domestic company, the securitisation trust or the person
responsible for making payment of the distributed income on its behalf, as the case may be, shall be
liable to pay tax to the credit of the Central Government within a period of fourteen days from the
date of distribution or payment of such income, whichever is earlier.
   (5) No deduction under any other provision of this Code shall be allowed to the mutual fund or
the life insurer, the domestic company or the securitization trust, as the case may be, in respect of
the distributed income charged to tax or the tax thereon.
    (6) The tax on distributed income so paid by the mutual fund, the life insurer, the domestic
company or the securitisation trust, as the case may be, shall be treated as the final payment of tax in
respect of income distributed or paid and no further credit shall be claimed by the mutual fund, the
life insurer, the domestic company, the securitisation trust or by any other person in respect of the
tax so paid.
   (7) If the mutual fund, the life insurer, the domestic company, the securitisation trust or the
person responsible for making payment of the distributed income on its behalf, as the case may be,
does not pay the tax in accordance with the provisions of this section, then, it or he shall be deemed
to be an assessee in default in respect of the tax payable by it or him and the provisions of this Code
relating to the collection and recovery of tax shall apply.
   (8) If the mutual fund, the life insurer, the domestic company, the securitisation trust or the
person responsible for making payment of distributed income on its behalf, as the case may be, fails

                                                86
to pay the whole or any part of the tax on distributed income referred to in sub-section (3), within
the time allowed under sub-section (4), then it or he shall be liable to pay simple interest at the rate
of one per cent. for every month on the amount of such tax for the period beginning on the date
immediately after the last date on which such tax was payable and ending with the date on which the
tax is actually paid.
   (9) For the purposes of this section and Paragraph D of the Seventeenth Schedule, --


         (a) "approved equity oriented life insurance scheme" means--
              (i) a life insurance scheme where more than sixty-five per cent. of the total premia
                  received under such scheme are invested by way of equity shares in domestic
                  companies; and
              (ii)    such scheme is approved by the Board in accordance with such guidelines as
                     may be prescribed;
         (b) "buy-back" means purchase by a company of its own shares in accordance with the
             provisions of section 68 of the Companies Act, 2013;                                           18 of 2013


         (c) "distributed income in relation to buy-back of shares" means the consideration paid by
             the company on buy-back of shares as reduced by the amount which was received by
             the company for issue of such shares;
         (d) "investor" means a person who is holder of any securitised debt instrument or
             securities issued by the securitisation trust;
         (e) "securities" means debt securities issued by a Special Purpose Vehicle as referred to in
             the guidelines on securitisation of standard assets issued by the Reserve Bank of India;
         (f) "securitised debt instrument" shall have the same meaning as assigned to it in clause
             (s) of sub-regulation (1) of regulation 2 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 and the Securities                  15    of 1992
             Contracts (Regulation) Act, 1956;                                                              42   of 1956
         (g) "securitisation trust" means a trust, being a--
              (i)     "special purpose distinct entity" as defined in clause (u) of sub-regulation (1) of
                     regulation 2 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 and the Securities Contracts          15    of     1992
                     (Regulation) Act, 1956, and regulated under the said regulations; or                   42   of      1956
              (ii) "Special Purpose Vehicle" as defined in, and regulated by, the guidelines on
                   securitisation of standard assets issued by the Reserve Bank of India, and
which fulfils such conditions, as may be prescribed:
         (h) the percentage of equity share holding of the mutual fund or the life insurance scheme,
             as the case may be, shall be computed with reference to the annual average of the
             monthly averages of the opening and closing figures.


                                                PART D
                                          BRANCH PROFITS TAX
                                              CHAPTER X


                                                 87
                                   CHARGE OF BRANCH PROFITS TAX


114. (1) Subject to the provisions of this Code, every foreign company shall, in addition to income-      Tax on branch
tax payable, be liable to branch profits tax in respect of branch profits of a financial year.            profits.
      (2) The branch profits tax shall be charged in respect of the branch profits of a financial year
of every foreign company at the rate specified in Paragraph E of the Seventeenth Schedule.
       (3) The branch profits referred to in sub-section (1) shall be the income attributable, directly
or indirectly, to the permanent establishment or an immovable property situated in India, included in
the total income of the foreign company for the financial year, as reduced by the amount of income-
tax payable on such attributable income.
      .
                                               PART E
                                             WEALTH-TAX
                                            CHAPTER XI
                                      CHARGE OF WEALTH-TAX


115. (1) Subject to the provisions of this Code, every individual, Hindu undivided family and             Tax on     net
private discretionary trust, shall be liable to pay wealth-tax on the net wealth on the valuation date    wealth
of a financial year.
      (2) The wealth-tax shall be charged in respect of the net wealth referred to in sub-section (1),
on the valuation date of a financial year at the rate specified in Paragraph F of the Seventeenth
Schedule in the manner provided therein.


116. (1) The net wealth of a person referred to in section 115 shall be the amount computed in            Computation of
accordance with the formula--                                                                             net wealth
             A-B
             where-
             A=      the aggregate of the value, on the valuation date, of all the assets, wherever
                    located, belonging to the person , computed in accordance with the provisions of
                    sub-section (3);
             B = the aggregate of the value, on the valuation date, of all the debts (other than
                 wealth-tax) owed by the person, which have been incurred in relation to the said
                 assets.
   (2) The assets referred to in sub-section (1) shall not include the following, namely: --
          (a) any business trading asset, other than land;
          (b) any property held by the person under trust, or other legal obligation, for carrying out
              any charitable activity in India;
          (c) the interest of the person in the coparcenary property of any Hindu undivided family of
              which he is a member;
          (d) any one building in the occupation of a Ruler, being a building which immediately
              before the commencement of the Constitution (Twenty-sixth Amendment) Act, 1971,
              was his official residence by virtue of a declaration by the Central Government under
              paragraph 13 of the Merged States (Taxation Concessions) Order, 1949, or paragraph

                                                88
                                 15 of the Part B States (Taxation Concessions) Order, 1950;
                          (e)     jewellery in the possession of any Ruler, not being his personal property, which has
                                 been recognised as his heirloom---
                                 (i )    by the Central Government before the commencement of the Wealth-tax Act,
                                        1957, as it stood before the commencement of this Code; or
                                 (ii)    by the Board at the time of his first assessment to wealth-tax under the Wealth-
                                        tax Act, 1957, as it stood before the commencement of this Code;
                          (f) the value of the assets located outside India, if the person-
                                 (i)    being an individual, is not a citizen of India or is a non-resident;
                                 (ii)   other than an individual, is a non-resident;
                          (g) any one house or part of a house or one vacant plot of land not exceeding five hundred
                              square metres of area belonging to an individual or a Hindu undivided family;
                          (h) any land if such land is classified as agricultural land in the records of the Government
                              and used for agricultural purposes.
                     (3) The value of any asset, other than cash, referred to in sub-section (1), shall be determined in
                  such manner as may be prescribed.
                     (4) In this Chapter, "valuation date" means the 31st day of March in the financial year.


Net wealth to     117. (1) The assets referred to in sub-section (1) of section 116 shall be deemed to be belonging to
include certain   the person, being an individual, and included in computing his net wealth, if such assets, as on the
assets.           valuation date, are held (whether in the form they were transferred or otherwise) --
                          (a) by the spouse of such individual to whom such asset has been transferred by him,
                              directly or indirectly, otherwise than for adequate consideration or in connection with
                              an agreement to live apart;
                          (b) by a minor child, not being a person with disability or person with severe disability, of
                              such individual;
                          (c ) by the son's wife of such individual to whom such asset has been transferred by him,
                              directly or indirectly, otherwise than for adequate consideration;
                          (d) by a person to whom such asset has been transferred by the individual, directly or
                              indirectly, otherwise than for adequate consideration for the immediate or deferred
                              benefit of the individual or his spouse or his son's wife;
                          (e) by a trust to whom such asset has been transferred by the individual, if the transfer is
                              revocable during the life time of the beneficiary of the trust;
                          (f )    by a person, not being a trust, to whom such asset has been transferred by the
                                 individual, if the transfer is revocable during the life time of the person; and
                          (g) by a Hindu undivided family by way of any converted property.
                     (2) The provisions of sub-section (1) shall not apply in respect of such asset as has been acquired
                  by the minor child out of his income referred to in clause ( b) of sub-section (1) of section 9 and
                  which are held by him on the valuation date.
                     (3) In this section,--
                          (a) the asset referred to in clause (b) of sub-section (1) shall be included in the net wealth
                              of--
                                 (i )   the parent who is the guardian of the minor child; or


                                                                     89
                                (ii)    the parent whose net wealth (excluding the assets referred to in that clause) is
                                        higher, if both the parents are guardians of the child;
                         (b) a transfer shall be deemed to be revocable, if--
                                (i )    it contains any provision for the re-transfer, directly or indirectly, of the whole or
                                        any part of the income or asset to the transferor; or
                                (ii)    it, in any way, gives the transferor a right to re-assume power, directly or
                                        indirectly, over the whole or any part of the income or asset;
                         (c) the person shall, notwithstanding anything in this Code or in any other law for the time
                             being in force, be deemed to be the owner of a building or part thereof, if he is-
                                 (i) a member of a co-operative society, company or other association of persons and
                                     the building or part thereof is allotted or leased to him under a house building
                                     scheme of the society, company or association, as the case may be;
                                 (ii)     allowed to take or retain possession of any building or part thereof in part
                                        performance of a contract of the nature referred to in section 53A of the Transfer
                                        of Property Act, 1882;
                         (d) the holder of an impartible estate shall be deemed to be the individual owner of all the
                             properties comprised in the estate; and
                         (e )    the value of any assets transferred under an irrevocable transfer shall be liable to be
                                included in computing the net wealth of the transferor in the year in which the power
                                to revoke vests in him.
                    (4) Where any assets referred to in clause (b) of sub-section (1) are once included in the net
                 wealth of a parent, any such assets shall not be included in the net wealth of the other parent in any
                 succeeding year, unless the Assessing Officer considers it necessary to do so after giving an
                 opportunity of being heard to the other parent.


                                                                    PART F
                                                     PREVENTION OF ABUSE OF THE CODE
                                                                CHAPTER XII
                                            SPECIAL PROVISIONS RELATING TO AVOIDANCE OF TAX


Disallowance     118. (1) A person shall not be allowed a deduction under this Code in respect of so much of the
of expenditure   expenditure, whether capital or revenue in nature, as is considered by the Assessing Officer to be
having regard    excessive or unreasonable, if--
to fair market
                         (a) the payment in respect of the expenditure has been, or is to be, made to any associated
value.
                             person; and
                         (b) the expenditure is excessive, or unreasonable, having regard to--
                                (i )    the fair market value of the goods, services or facilities for which the payment is
                                        made;
                                (ii) the legitimate needs of the business of the person; or
                                (iii) the benefit derived by, or accruing to, the person therefrom.
                    (2) No disallowance under sub-section (1) shall be made on account of expenditure, being
                 excessive or unreasonable, having regard to the fair market value in respect of a specified domestic
                 transaction, if such transaction is at arm's length price.


                                                                     90
Determination     119. (1) The amount of any income, or expense, arising from an international transaction shall be
of      income    determined having regard to the arm's length price.
from
                     (2) The allocation or apportionment of, or any contribution to, any cost or expense incurred or to
international
                  be incurred in connection with a benefit, service or facility provided or to be provided to any
transaction or
                  associated enterprise shall be determined having regard to the arm's length price of such benefit,
specified
                  service or facility, as the case may be, if--
domestic
transaction               (a)     two or more associated enterprises have entered into a mutual agreement or
having regard                   arrangement for the allocation or apportionment of, or any contribution to, such cost or
to arm's length                 expense; and
price.
                          (b) the benefit, service or facility provided to any one or more associated enterprises
                              involves an international transaction or a specified domestic transaction.
                     (3) Any allowance for an expenditure or interest or allocation of any cost or expense or any
                  income in relation to the specified domestic transaction shall be computed having regard to the arm's
                  length price.
                     (4) The provisions of this section shall not apply in a case, if the determination under sub-section
                  (1), sub-section (2) or sub-section (3), has the effect of reducing the income chargeable to tax, or
                  increasing the loss computed, on the basis of entries made in the books of account in respect of the
                  financial year in which the international transaction or the specified domestic transaction was
                  entered.


Determination     120. (1)The arm's length price in relation to an international transaction or a specified domestic
of arm's length   transaction shall be determined in accordance with any of the methods as may be prescribed, being
price.            the most appropriate method.
                     (2) The most appropriate method referred to in sub-section (1) shall be determined having regard
                  to the nature of transaction, class of transaction, class of associated enterprise or functions
                  performed by such enterprises or such other relevant factors as may be prescribed.
                     (3) The most appropriate method determined under sub-section (2) shall be applied for
                  determination of arm's length price in such manner as may be prescribed.
                     (4) The arm's length price shall be--
                          (a) the price determined by the most appropriate method, if only one price is determined
                              by the method; or
                          (b) the arithmetical mean of the prices determined by the most appropriate method, if more
                              than one price is determined by the method.
                     (5) The price at which the international transaction or the specified domestic transaction has
                  actually been undertaken shall be deemed to be the arm's length price if the variation between the
                  arm's length price determined under sub-section (4) and the price at which the international
                  transaction or the specified domestic transaction has actually been undertaken does not exceed such
                  percentage not exceeding three per cent. of the latter, as may be notified by the Central Government
                  in this behalf.
                     (6) The income of an associated enterprise shall not be recomputed by reason of determination of
                  arm's length price in the case of the other associated enterprise.
                     (7) No deduction under Sub-chapter-IV of Chapter III shall be allowed in respect of the amount
                  of income by which the total income of the assessee is enhanced after computation of income under
                  this section.
                     (8) The determination of arm's length price shall be subject to safe harbour rules, as may be


                                                                 91
prescribed in this behalf.


121. (1) The Board, with the approval of the Central Government, may enter into an advance pricing          Advance
agreement with any person, determining the arm's length price or specifying the manner in which             pricing
arm's length price is to be determined, in relation to an international transaction to be entered into by   agreement.
that person.
   (2) The manner of determination of arm's length price referred to in sub-section (1), may include
the methods specified under section 120 or any other method, with such adjustments or variations,
as may be necessary or expedient so to do.
   (3) Notwithstanding anything in section120 and section 164, the arm's length price of any
international transaction, in respect of which the advance pricing agreement has been entered into,
shall be determined in accordance with the advance pricing agreement so entered.
   (4) The agreement referred to in sub-section (1) shall be valid for such period as may be
specified in the agreement but such agreement shall not exceed five consecutive financial years.
   (5) The advance pricing agreement entered into shall be binding--
         (a)    on the person in whose case, and in respect of the transaction in relation to which, the
                agreement has been entered into; and
         (b)     on the Commissioner, and the income-tax authorities subordinate to him, in respect of
                the said person and the transaction.
   (6) The agreement referred to in sub-section (1) shall not be binding if there is a change in law
or facts having bearing on the agreement so entered.
   (7) The Board may, with the approval of the Central Government, by an order, declare an
agreement to be void ab initio, if it finds that the agreement has been obtained by the person by
fraud or misrepresentation of facts.
   (8) Upon declaring the agreement void ab initio,--
         (a) all the provisions of the Code shall apply to the person as if such agreement had never
             been entered into; and
         (b)     notwithstanding anything in the Code , for the purpose of computing any period of
               limitation under this Code, the period beginning with the date of such agreement and
               ending on the date of order under sub-section (7) shall be excluded.
   (9) Where immediately after the exclusion of the period mentioned in sub-section (8) , the period
of limitation, referred to in any provision of this Code, is less than sixty days, such remaining period
shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended
accordingly.
   (10) The Board may, for the purposes of this section, prescribe a scheme specifying therein the
manner, form, procedure and any other matter generally in respect of the advance pricing
agreement.
    (11) Where an application is made by a person for entering into an agreement referred to in sub-
section (1), the proceeding shall be deemed to be pending in the case of the person for the purposes
of the Code.


122. (1) The total income of a person shall include all income accruing to any non-resident, if--           Avoidance of
                                                                                                            income-tax by
         (a) the income accrues by virtue of a transfer of any asset by the person, either alone or in
                                                                                                            transactinos
             conjunction with associated operations, directly or indirectly, to the non-resident;
                                                                                                            resulting    in
         (b) the person --                                                                                  transfer     of


                                                 92
                                                                                                                                income to non-
                                 (i )    acquires any rights by virtue of which he has power to enjoy, whether forthwith
                                                                                                                                residents
                                        or in the future, such income; or
                                 (ii)    is entitled to receive, or has received, any capital sum, the payment whereof is in
                                        any way connected with the transfer or any associated operations; and
                          (c) the income would have been included in the total income of the person, had the transfer
                               not taken place.
                    (2) A person shall be deemed to have the power to enjoy the income of a non-resident, if--
                          (a)      the income is in fact so dealt with by the person so as to be calculated at some point
                                  of time and, whether in the form of income or not, to enure for the benefit of the
                                  person;
                          (b)     the accrual or receipt of the income operates to increase the value to the person of any
                                  assets held by him or for his benefit;
                          (c )     the person receives, or is entitled to receive, at any time any benefit provided, or to be
                                  provided, out of that income, or out of moneys, which are or shall be available for the
                                  purpose by reason of the effect, or successive effects, of the associated operations on
                                  that income and assets which represent that income;
                          (d)     such person has power by means of the exercise of any power of appointment or
                                  power of revocation or otherwise to obtain for himself, whether with or without the
                                  consent of any other person, the beneficial enjoyment of the income; or
                          (e )     the person is able, in any manner whatsoever and whether directly or indirectly, to
                                  control the application of the income.
                     (3) For determining whether a person has power to enjoy the income, regard shall be had to--
                          (a)     the substantial result and effect of the transfer and any associated operations; and
                          (b)      all benefits which may at any time accrue to such person as a result of the transfer
                                  and any associated operations, irrespective of the nature or form of the benefits.
                     (4) The provisions of this section shall not apply if the person referred to in sub-section (1)
                  shows to the satisfaction of the Assessing Officer that the transfer and all associated operations were
                  bona fide commercial transactions and were not designed for the purpose of avoiding liability to
                  taxation.


Avoidance of      123. (1) The total income of any person shall include any interest accruing from any security owned
tax by sale and   by any other person if--
buy-back
                          (a)     the person undertakes a transaction relating to sale and buy-back of the security;
transaction in
security.                 (b)     the interest accrues to the other person as a result of such transaction; and
                          (c )     the income would have been included in the total income of the person, had the
                                  transfer not taken place.
                      (2) The provisions of sub-section (1) shall not apply to the person mentioned therein if he proves
                  to the satisfaction of the Assessing Officer that ­
                          (a) there has been no avoidance of income-tax; or
                          (b)     the avoidance of income-tax was exceptional and not systematic and there was no
                                  avoidance of income-tax in his own case in any of the three preceding years by way
                                  of a transaction relating to sale and buy-back of security.


Avoidance of      124. (1) The transaction relating to buy and sale back of security under section 123 shall, in the

                                                                    93
tax by buy and    case of the other person referred to therein, be ignored and no account shall be taken of the
sale       back   transaction in computing the income if the interest accruing to the other person is not included in his
transaction in    total income by virtue of the provisions of that section.
security.
                     (2) The loss, if any, arising to a person on account of any buy and sale back transaction in any
                  security undertaken by him, shall be ignored for the purposes of computing his total income, if any
                  other income accruing to the person on such security is not included in his total income.
                     (3) The loss, referred to in sub-section (2), shall be ignored to the extent such loss does not
                  exceed the amount of any other income referred to therein.


Broken-period     125. The income accruing from a debt instrument, transferred by a person at any time during the
income            financial year, shall not be less than the amount of broken-period income from the instrument.
accruing from
a         debt
instrument.


                                                                                                                             Special
                  126. (1) The Central Government may, having regard to the lack of effective exchange of
                                                                                                                             measures       in
                  information with any country or territory outside India, specify by notification such country or
                                                                                                                             respect        of
                  territory as a notified jurisdictional area in relation to transactions entered into by any assessee.
                                                                                                                             transactions
                    (2) Notwithstanding anything to the contrary in this Code, if an assessee enters into a transaction      with      persons
                  where one of the parties to the transaction is a person located in a notified jurisdictional area, then-   located        in
                                                                                                                             notified
                           (a)    all the parties to the transaction shall be deemed to be associated enterprises within
                                                                                                                             jurisdictional
                                 the meaning of clause (3) of section 127;
                                                                                                                             area.
                           (b)    any transaction in the nature of purchase, sale or lease of tangible or intangible
                                 property or provision of service or lending or borrowing money or any other
                                 transaction having a bearing on the profits, income, losses or assets of the assessee
                                 including a mutual agreement or arrangement for allocation or apportionment of, or
                                 any contribution to, any cost or expense incurred or to be incurred in connection with
                                 a benefit, service or facility provided or to be provided by or to the assessee shall be
                                 deemed to be an international transaction within the meaning of clause (11) of section
                                 127, and the provisions of sections 87, 88, 119, 120, 127 and 164 shall apply
                                 accordingly.
                     (3) No deduction shall be allowed under the Code, -
                           (a)    in respect of any payment made to any financial institution located in a notified
                                 jurisdictional area, unless the assessee furnishes an authorisation in the prescribed
                                 form authorising the Board or any other income-tax authority acting on its behalf to
                                 seek relevant information from the said financial institution on behalf of such
                                 assessee; and
                           (b)    in respect of any other expenditure or allowance (including depreciation) arising from
                                 the transaction with a person located in a notified jurisdictional area, unless the
                                 assessee maintains such documents and furnishes such information as may be
                                 prescribed.
                     (4) Any sum received from, or credited through, any person located in a notified jurisdictional
                  area in any financial year shall be deemed to be the income of the assessee for that financial year if
                  the assessee does not offer any explanation about the source of the said sum in the hands of such
                  person or in the hands of the beneficial owner (if such person is not the beneficial owner of the said
                  sum) or the explanation offered by the assessee is not satisfactory in the opinion of the Assessing
                  officer.



                                                                  94
Interpretations   127. In this Chapter,--
in this Chapter
                     (1) "arm's length price" means a price which is applied, or proposed to be applied, in a
                  transaction between persons, enterprises or undertakings, other than associated enterprises, in
                  uncontrolled, unrelated or independent conditions;
                     (2) "asset" includes property, or right, of any kind;
                     (3) "associated enterprise" in relation to another enterprise, means an enterprise--
                          (a) which participates, directly or indirectly, or through one or more intermediaries, in the
                              management or control or capital of the other enterprise; or
                          (b) in respect of which one or more persons who participate, directly or indirectly, or
                              through one or more intermediaries, in its management or control or capital, are the
                              same persons who participate, directly or indirectly, or through one or more
                              intermediaries, in the management or control or capital of the other enterprise,
                  and for the purposes of sub-clauses (a) and (b) above, two enterprises, shall be deemed to be
                  associated enterprises at any time during the financial year, if they are associated with each other by
                  virtue of--
                               (i)      one enterprise holding, directly or indirectly, shares carrying twenty-six per
                                       cent. or more of the voting power in the other enterprise;
                               (ii)    any person or enterprise holding, directly or indirectly, shares carrying twenty-
                                       six per cent. or more of the voting power in each of such enterprises;
                               (iii)   a loan advanced by one enterprise to the other enterprise and the loan constitutes
                                       fifty-one per cent. or more of the book value of the total assets of the other
                                       enterprise;
                               (iv)     one enterprise guarantees ten per cent. or more of the total borrowings of the
                                       other enterprise;
                               (v )     more than one-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 one enterprise, being appointed by the other enterprise;
                               (vi )   more than one-half of the directors, or members, of the governing board, or one
                                       or more of the executive directors, or executive members, of the governing
                                       board, of each of the two enterprises, being appointed by the same person or
                                       persons;
                               (vii ) the manufacture, or processing, of any goods or articles of, or carrying on the
                                      business by, one enterprise being wholly dependent on the use of know-how,
                                      patents, copyrights, trade marks, brands, licences, franchises, or any other
                                      business or commercial rights of similar nature, or any data, documentation,
                                      drawing or specification relating to any patent, invention, model, design, secret
                                      formula or process, of which the other enterprise is the owner or in respect of
                                      which the other enterprise has exclusive rights;
                               (viii) ninety per cent. or more of the raw materials and consumables required for the
                                      manufacture, or processing, of goods or articles carried out by one enterprise,
                                      being supplied by the other enterprise, or by persons specified by the other
                                      enterprise, and the prices and other conditions relating to the supply are
                                      influenced by such other enterprise;


                                                                  95
               (ix)    the goods or articles manufactured, or processed, by one enterprise, being sold
                      to the other enterprise or to persons specified by the other enterprise, and the
                      prices and other conditions relating thereto are influenced by such other
                      enterprise;
               (x )    the services provided, directly or indirectly, by one enterprise to another
                      enterprise or to persons specified by the other enterprise, and the amount
                      payable and the other conditions relating thereto are influenced by such other
                      enterprise;
               (xi)   one enterprise being controlled by an individual, and the other enterprise being
                      also controlled by such individual or his relative, or jointly by such individual
                      and his relative;
               (xii ) one enterprise being controlled by a Hindu undivided family, and the other
                      enterprise being also controlled by a member of such Hindu undivided family or
                      by a relative of a member of such Hindu undivided family or jointly by such
                      member and his relative;
               (xiii) one enterprise holding ten per cent., or more, interest in another enterprise being
                      an unincorporated body;
               (xiv) any specific or distinct location of either of the enterprises in a country or
                     territory as may be notified ; or
               (xv)    any other relationship of mutual interest, existing between the two enterprises,
                      as may be prescribed,
and includes an associated person in respect of a specified domestic transaction:
   (4) "associated operation" in relation to any transfer means an operation of any kind effected by
the transferor in relation to--
        (a) any asset transferred;
        (b) any asset representing, directly or indirectly, any asset so transferred;
        (c) the income accruing from any asset so transferred; or
        (d)      any asset representing, directly or indirectly, the accumulation of income accruing
               from any asset so transferred;
   (5) "associated person" in relation to a person, means--
        (a) any relative of the person, if the person is an individual;
        (b) any director of the company or any relative of such director, if the person is a company;
        (c )    any participant in an unincorporated body or any relative of such participant, if the
               person is an unincorporated body;
        (d) any member of the Hindu undivided family or any relative of such member, if the
            person is a Hindu undivided family;
        (e) any individual who has a substantial interest in the business of the person or any
            relative of such individual;
        (f )     a company, unincorporated body or Hindu undivided family having a substantial
               interest in the business of the person or any director, participant, or member of the
               company, body or family, or any relative of such director, participant or member or
               any other company carrying on business or profession in which the first mentioned
               company has substantial interest;
        (g)     a company, unincorporated body or Hindu undivided family, whose director,
               participant, or member have a substantial interest in the business of the person or

                                                 96
              family or any relative of such director, participant or member;
        (h) any other person who carries on a business, if--
              (i )     the person being an individual, or any relative of such person, has a substantial
                      interest in the business of that other person; or
              (ii)     the person being a company, unincorporated body or Hindu undivided family,
                      or any director, participant or member of such company, body or family, or any
                      relative of such director, participant or member, has a substantial interest in the
                      business of that other person;
   (6) "benefit" includes a payment of any kind;
    (7) "broken-period income" means the income for the period commencing from the date on
which the debt instrument is acquired by the person or the beginning of the financial year,
whichever is later, and ending on the date on which the security is sold, and shall be calculated as
if the income from such securities had accrued from day to day and been apportioned accordingly
for the broken period;
   (8) "capital sum" means--
        (a) any sum paid by way of a loan or repayment of a loan; or
        (b) any other sum paid otherwise than as income, being a sum which is not paid for full
            consideration in money or money's worth;
   (9) "enterprise" includes--
        (a) a person who is, or has been, or is likely to be, engaged in any business, industrial,
            commercial, financial, construction, mining, research, investment or any other similar
            activity, whether such activity is carried on directly or through one, or more, of its
            units, divisions or subsidiaries, wherever located; and
        (b) the permanent establishment of the person referred to in sub-clause (a);
   (10) "intangible property" includes know-how, patents, goodwill, copyrights, trade-marks,
brand name, licences, franchises, any business or commercial rights, leasehold interest, exploration
and exploitation rights, easement rights, air rights, water rights, or any other thing that derives its
value from its intellectual content instead of its physical attributes;
   (11) "international transaction" means--
        (a)    a transaction between two or more associated enterprises, either or all of whom is a
              non-resident, in the nature of--
              (i )      purchase, sale, transfer, lease or use of tangible property including building,
                      transportation vehicle, machinery, equipment, tools, plant, furniture, commodity
                      or any other article, product or thing;;
              (ii)    purchase, sale, transfer, lease or use of intangible property, including the transfer
                      of ownership or the provision of use of rights regarding land use, copyrights,
                      patents, trademarks, licences, franchises, customer list, marketing channel,
                      brand, commercial secret, know-how, industrial property right, exterior design
                      or practical and new design or any other business or commercial rights of
                      similar nature;
              (iii)    provision of services, including provision of market research, market
                      development, marketing management, administration, technical service, repairs,
                      design, consultation, agency, scientific research, legal or accounting service;
              (iv)     capital financing, including any type of long-term or short-term borrowing,
                      lending or guarantee, purchase or sale of marketable securities or any type of
                      advance, payments or deferred payment or receivable or any other debt arising


                                                  97
                       during the course of business;;
               (v)      a transaction of business restructuring or re-organisation, entered into by an
                       enterprise with an associated enterprise, irrespective of the fact that it has
                       bearing on the profit, income, losses or assets of such enterprises at the time of
                       the transaction or at any future date;
                (vi)    any other transaction, which has a bearing on the income, loss or asset of any
                       one or more of the enterprises; or
               (vii)   a mutual agreement or arrangement between two or more associated enterprises
                       for the allocation or apportionment of, or any contribution to, any cost or
                       expense incurred, or to be incurred, in connection with a benefit, service or
                       facility provided, or to be provided, to any one or more of the enterprises;
         (b)     a transaction entered into by two or more persons, not being associated enterprises,
               if--
               (i )    the transaction is of the nature referred to in sub-clause (a);
               (ii)      there exists a prior agreement in relation to the relevant transaction between
                       such other person and the associated enterprise or the terms of the relevant
                       transaction are determined in substance between such other person and the
                       associated enterprise; and
               (iii)   either, or both, of the associated enterprises is a non-resident;
   (12) "interest" includes dividend;
   (13) "person located in a notified jurisdictional area" shall include, -
         (a) a person resident of the notified jurisdictional area;
         (b) a person (other than an individual) established in the notified jurisdictional area; or
         (c) a permanent establishment of a person [ other than a person covered in sub-clause (a)
             or sub-clause (b)] in the notified jurisdictional area;
  (14) "safe harbour", in relation to computation of arm's length price, means circumstances in
which the income-tax authorities shall accept the transfer price declared by the assessee;
    (15) "similar security" means security which entitles its holder to the same rights against the
same person as to capital and interest and the same remedies for the enforcement of those rights,
irrespective of any difference in the--
         (a) total nominal amounts of the respective security;
         (b) form in which it is held; or
         (c) manner in which it can be transferred;
    (16) "substantial interest in the business"- a person shall be deemed to have a substantial interest
in the business, if--
         (a) in a case where the business is carried on by a company, such person is, at any time
             during the financial year, the beneficial owner of equity shares carrying twenty per
             cent. or more, of the voting power; or
         (b)    in any other case, such person is, at any time during the financial year, beneficially
               entitled to twenty per cent. or more, of the profits of such business.
   (17) "transaction" in relation to an international transaction or a specified domestic transaction
shall include an arrangement, 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

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                              by legal proceeding;
                   (18) "transaction relating to buy and sale back of security" means a transaction where a person
                 buys a security, and sells or transfers the same, or similar, security;
                    (19) "transaction relating to sale and buy back of security" means a transaction where a person,
                 being the owner of any security, sells or transfers the security, and buys back or re-acquires the
                 same, or similar, security;
                    (20) "transfer" in relation to any right includes the creation of a right.



                                                        CHAPTER XIII
                                                GENERAL ANTI-AVOIDANCE RULE


                 128. (1) Notwithstanding anything in the Code, an arrangement entered into by an assessee may be           Applicability of
                 declared to be an impermissible avoidance arrangement and the consequence in relation to tax               General Anti-
                 arising therefrom may be determined subject to the provisions of this Chapter.                             Avoidance Rule
                    (2) The provisions of this Chapter may be applied to any step in, or a part of, the arrangement as
                 they are applicable to the arrangement.
                    (3) The provisions of this Chapter shall be applicable to the financial year beginning on or after
                 the Ist day of April, 2015.


                 129. (1) An impermissible avoidance arrangement means an arrangement, the main purpose of                  Impermissible
                 which is to obtain a tax benefit, and it --                                                                avoidance
                                                                                                                            arrangement
                          (a) creates rights, or obligations, which are not ordinarily created between persons dealing
                              at arm's length;
                          (b) results, directly or indirectly, in the misuse, or abuse, of the provisions of this Code;
                          (c) lacks commercial substance or is deemed to lack commercial substance under section
                              130, in whole or in part; or
                          (d) is entered into, or carried out, by means, or in a manner, which are not ordinarily
                              employed for bona fide purposes.
                    (2) An arrangement shall be presumed, unless it is proved to the contrary by the assessee, to
                 have been entered into, or carried out, for the main purpose of obtaining a tax benefit, if the main
                 purpose of a step in, or a part of, the arrangement is to obtain a tax benefit, notwithstanding the fact
                 that the main purpose of the whole arrangement is not to obtain a tax benefit.


Arrangement      130. (1) An arrangement shall be deemed to lack commercial substance, if--
to        lack
                          (a) the substance or effect of the arrangement as a whole, is inconsistent with, or differs
commercial
                              significantly from, the form of its individual steps or a part;
substance
                          (b) it involves or includes--
                              (i)    round trip financing;
                              (ii)   an accommodating party;
                              (iii) elements that have effect of offsetting or cancelling each other; or
                              (iv)    a transaction which is conducted through one or more persons and disguises the
                                     value, location, source, ownership or control of funds which is the subject matter

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                                     of such transaction;
                         (c) it involves the location of an asset or of a transaction or of the place of residence of
                             any party which is without any substantial commercial purpose other than obtaining a
                             tax benefit (but for the provisions of this Chapter) for a party; or
                         (d)    it does not have a significant effect upon the business risks or net cash flows of any
                               party to the arrangement apart from any effect attributable to the tax benefit that would
                               be obtained (but for the provisions of this Chapter).
                   (2) For the purposes of sub-section (1), round trip financing includes any arrangement in which,
                through a series of transactions--
                         (a) funds are transferred among the parties to the arrangement; and
                         (b) such transactions do not have any substantial commercial purpose other than obtaining
                             the tax benefit (but for the provisions of this Chapter),
                without having any regard to--
                                         (A) whether or not the funds involved in the round trip financing can be
                                             traced to any funds transferred to, or received by, any party in connection
                                             with the arrangement;
                                         (B) the time, or sequence, in which the funds involved in the round trip
                                             financing are transferred or received; or
                                         (C) the means by, or manner in, or mode through, which funds involved in
                                             the round trip financing are transferred or received.
                    (3) For the purposes of this Chapter, a party to an arrangement shall be an accommodating party,
                if the main purpose of the direct or indirect participation of that party in the arrangement, in whole
                or in part, is to obtain, directly or indirectly, a tax benefit (but for the provisions of this Chapter) for
                the assessee whether or not the party is a connected person in relation to any party to the
                arrangement.
                   (4) For the removal of doubts, it is hereby clarified that the following may be relevant but shall
                not be sufficient for determining whether an arrangement lacks commercial substance or not,
                namely:--
                               (i)   the period or time for which the arrangement (including operations therein) exists;
                               (ii) the fact of payment of taxes, directly or indirectly, under the arrangement;
                               (iii) the fact that an exit route (including transfer of any activity or business or
                                     operations) is provided by the arrangement.




Consequences    131. (1) If an arrangement is declared to be an impermissible avoidance arrangement, then, the
of              consequences, in relation to tax, of the arrangement, including denial of tax benefit or a benefit
impermissible   under a tax treaty, shall be determined, in such manner as is deemed appropriate, in the
avoidance       circumstances of the case, including by way of but not limited to the following, namely: --
arrangement
                         (a) disregarding, combining or recharacterising any step in, or a part or whole of, the
                             impermissible avoidance arrangement;
                         (b) treating the impermissible avoidance arrangement as if it had not been entered into or
                             carried out;
                         (c) disregarding any accommodating party or treating any accommodating party and any
                             other party as one and the same person;
                         (d) deeming persons who are connected persons in relation to each other to be one and the

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              same person for the purposes of determining tax treatment of any amount;
        (e) reallocating amongst the parties to the arrangement--
              (i) any accrual, or receipt, of a capital nature or revenue nature; or
              (ii) any expenditure, deduction, relief or rebate;
        (f)   treating--
              (i) the place of residence of any party to the arrangement; or
              (ii) the situs of an asset or of a transaction,
at a place other than the place of residence, location of the asset or location of the transaction as
provided under the arrangement; or
        (g) considering or looking through any arrangement by disregarding any corporate
            structure.
   (2) For the purposes of sub-section (1),--
              (i) any equity may be treated as debt or vice versa;
              (ii) any accrual, or receipt, of a capital nature may be treated as of revenue nature or
                   vice versa; or
              (iii) any expenditure, deduction, relief or rebate may be recharacterised.


132. For the purposes of this Chapter, in determining whether a tax benefit exists, --                    Treatment   of
                                                                                                          connected
              (i)    the parties who are connected persons in relation to each other may be treated as
                                                                                                          person    and
                    one and the same person;
                                                                                                          accommodating
              (ii) any accommodating party may be disregarded;                                            party
              (iii) the accommodating party and any other party may be treated as one and the same
                    person;
              (iv) the arrangement may be considered or looked through by disregarding any
                   corporate structure.




133. The provisions of this Chapter shall apply in addition to, or in lieu of, any other basis provided   Application of
under this Code for determination of tax liability.                                                       this Chapter


134.The provisions of this Chapter shall be applied in accordance with such guidelines and subject        Framing       of
to such conditions, as may be prescribed.                                                                 guidelines


135. In this Chapter, unless the context otherwise requires,--                                            Interpretations
                                                                                                          in this Chapter
   (1) "arrangement" means any step in, or a part or whole of, any transaction, operation, scheme,
agreement or understanding, whether enforceable or not, and includes the alienation of any property
in such transaction, operation, scheme, agreement or understanding;
   (2) "asset" includes property, or right, of any kind;
   (3) "benefit" includes a payment of any kind whether in tangible or intangible form;
   (4) "connected person" means any person who is connected directly or indirectly to another


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person and includes,--
        (a) any relative of the person, if such person is an individual;
        (b) any director of the company or any relative of such director, if the person is a company;
        (c) any partner or member of a firm or association of persons or body of individuals or any
            relative of such partner or member, if the person is a firm or association of persons or
            body of individuals;
        (d) any member of the Hindu undivided family or any relative of such member, if the
            person is a Hindu undivided family;
        (e) any individual who has a substantial interest in the business of the person or any
            relative of such individual;
        (f)    a company, firm or an association of persons or a body of individuals, whether
              incorporated or not, or a Hindu undivided family having a substantial interest in the
              business of the person or any director, partner, or member of the company, firm or
              association of persons or body of individuals or family, or any relative of such director,
              partner or member or any other company carrying on business or profession in which
              the first-mentioned company has substantial interest;
        (g) a company, firm or association of persons or body of individuals, whether incorporated
            or not, or a Hindu undivided family, whose director, partner, or member has a
            substantial interest in the business of the person, or family or any relative of such
            director, partner or member;
        (h) any other person who carries on a business, if--
              (i) the person being an individual, or any relative of such person, has a substantial
              interest in the business of that other person; or
              (ii) the person being a company, firm, association of persons, body of individuals,
              whether incorporated or not, or a Hindu undivided family, or any director, partner or
              member of such company, firm or association of persons or body of individuals or
              family, or any relative of such director, partner or member, has a substantial interest in
              the business of that other person;
   (5) "fund" includes--
         (a) any cash;
         (b) cash equivalents; and
         (c) any right, or obligation, to receive or pay, the cash or cash equivalent;
   (6) "party" includes a person or a permanent establishment which participates or takes part in an
arrangement;
   (7) "relative" shall have the meaning assigned to it in clause (a) of sub-section (5) of section 58;
   (8) a person shall be deemed to have a substantial interest in the business, if,--
        (a)     in a case where the business is carried on by a company, such person is, at any time
               during the financial year, the beneficial owner of equity shares carrying twenty per
               cent. or more, of the voting power; or
        (b)     in any other case, such person is, at any time during the financial year, beneficially
               entitled to twenty per cent. or more, of the profits of such business;
   (9) "step" includes a measure or an action, particularly one of a series taken in order to deal with
or achieve a particular thing or object in the arrangement;
   (10) "tax benefit" includes,--


                                               102
         (a) a reduction or avoidance or deferral of tax or other amount payable under this Code;
         (b) an increase in a refund of tax or other amount under this Code;
         (c) a reduction or avoidance or deferral of tax or other amount that would be payable
             under this Code, as a result of a tax treaty;
         (d) an increase in a refund of tax or other amount under this Code as a result of a tax
             treaty;
         (e) a reduction in total income; or
         (f) an increase in loss,
in the relevant financial year or any other financial year;
   (11) "tax treaty" means an agreement referred to in sub-section (1) of section 295.


                                                  PART G
                                             TAX MANAGEMENT
                                               CHAPTER XIV
                                    TAX ADMINISTRATION AND PROCEDURE
                                           A. - Tax administration


136. There shall be the following classes of income-tax authorities for the purposes of this Code,      Income-tax
namely:--                                                                                               authorities.
         (a)    the Central Board of Direct Taxes constituted under the Central Boards of Revenue
               Act, 1963,
         (b) Principal Chief Commissioners of Income-tax or Principal Directors-General of
             Income-tax,
         (c) Chief Commissioners of Income-tax or Directors-General of Income-tax,
         (d) Principal Commissioners of Income-tax or Principal Directors of Income-tax,
         (e)    Commissioners of Income-tax or Directors of Income-tax or Commissioners of
               Income-tax (Appeals),
         (f) Additional Commissioners of Income-tax or Additional Directors of Income-tax,
         (g) Joint Commissioners of Income-tax or Joint Directors of Income-tax,
         (h) Deputy Commissioners of Income-tax or Deputy Directors of Income-tax,
         (i) Assistant Commissioners of Income-tax or Assistant Directors of Income-tax,
         (j) Income-tax Officers,
         (k) Tax Recovery Officers,
         (l) Inspectors of Income-tax.


137. (1) The Central Government may appoint such persons as it thinks fit to be income-tax              Appointment
authorities.                                                                                            and control of
                                                                                                        income-tax
   (2) Without prejudice to the provisions of sub-section (1), and subject to the rules and orders of
                                                                                                        authorities.
the Central Government regulating the conditions of service of persons in public services and posts,

                                               103
                   the Central Government may authorise the Board or a Director-General or a Chief Commissioner or
                   a Director or a Commissioner to appoint income-tax authorities below the rank of an Assistant
                   Commissioner.
                      (3) Subject to the rules and orders of the Central Government regulating the conditions of
                   service of persons in public services and posts, an income-tax authority authorised in this behalf by
                   the Board may appoint such executive or ministerial staff as may be necessary to assist it in the
                   execution of its functions.
                      (4) The Board may, by notification, direct that any income-tax authority or authorities specified
                   in the notification shall be subordinate to such other income-tax authority or authorities as may be
                   specified in such notification.


Power        of    138. Any income-tax authority, above the rank of Assessing Officer, shall have all the powers that
higher             an Assessing Officer has under this Code in relation to the making of any inquiry.
authorities.


Powers        of   139. (1) The Board may, from time to time, issue such orders, instructions, directions or circulars to
Board to issue     other income-tax authorities as it may consider expedient or necessary for the proper administration
instructions.      of this Code.
                      (2) The Board shall not exercise its powers under sub-section (1) so as to--
                           (a)     require any income-tax authority to make a particular assessment or to dispose of a
                                  particular case in a particular manner;
                           (b)    require the Commissioner of Income-tax (Appeals) to dispose of any matter before it
                                  in a particular manner.
                      (3) The Board may, without prejudice to the generality of the provisions of sub-section (1), if it
                   considers expedient or necessary to do so, issue general or special orders in respect of --
                           (a)    any class of tax bases or class of cases, explaining the principles, specifying the
                                  guidelines or procedures, whether by way of relaxation of any provision of this Code
                                  or otherwise, to be followed by other income-tax authorities in the work relating to
                                  assessment or collection of revenue including charging of interest or the initiation of
                                  proceedings for the imposition of penalties;
                           (b)    any case or class of cases, for avoiding genuine hardship, authorising any income-tax
                                  authority [other than Commissioner of Income-tax (Appeals)] to admit any
                                  application or claim for any exemption, deduction, refund or any other relief under
                                  this Code after the expiry of the period specified by or under this Code for making the
                                  application or claim and deal with the same on merits in accordance with law;
                           (c )    any case or class of cases, relaxing any requirement or conditions contained in this
                                  Code in relation to grant of any relief , on fulfilment of the following conditions,
                                  namely:--
                                  (i )    such relaxation is for avoiding genuine hardship;
                                  (ii) the reasons for exercise of power have been specified in the order;
                                  (iii)    the default in complying with such requirement or condition was due to
                                          circumstances beyond the control of the assessee;and
                                  (iv)     the assessee has complied with such requirement or condition before the
                                          completion of assessment of the financial year for which the relief is claimed;
                      (4) Every order issued under clause (c) of sub-section (3) shall be laid before each House of
                   Parliament.


                                                                    104
                     (5) The orders, instructions, directions and circulars issued by the Board under this section shall
                  be binding on all other income-tax authorities and other persons employed in the execution of this
                  Code.


Jurisdiction of   140. (1) The income-tax authorities shall exercise all or any of the powers and perform all or any of
income-tax        the functions conferred on, or, as the case may be, assigned to such authorities by or under this Code
authorities.      in accordance with such directions as the Board may issue for the exercise of the powers and
                  performance of the functions by all or any of those authorities.
                     (2) The directions of the Board under sub-section (1) may authorise any other income-tax
                  authority to issue orders in writing for the exercise of the powers and performance of the functions
                  by all or any of the other income-tax authorities who are subordinate to it.
                     (3) In issuing the directions or orders referred to in sub-sections (1) and (2), the Board or other
                  income-tax authority authorised by it may have regard to any one or more of the following criteria,
                  namely :--
                          (a) territorial area;
                          (b) persons or classes of persons;
                          (c) incomes or classes of income; and
                          (d) cases or classes of cases.
                     (4) Any income-tax authority, being an authority higher in rank, may, if so directed by the
                  Board, exercise the powers and perform the functions of the income-tax authority lower in rank and
                  any such direction issued by the Board shall be deemed to be a direction issued under sub-section
                  (1).
                     (5) The Board may, by order , authorise any Director General or Director to perform such
                  functions of any other income-tax authority as may be assigned to him by the Board.
                     (6) The Chief Commissioner, if authorised by the Board, may direct two or more Assessing
                  Officers (whether of same rank or not) to exercise and perform the powers and functions conferred
                  on or assigned to them concurrently and the Assessing Officer lower in rank shall follow the
                  directions of the Assessing Officer who is higher in rank.


                  141. (1) The Assessing Officer who has been vested with jurisdiction over any area, by virtue of          Jurisdiction   of
                  any direction or order issued under section 140, shall, within the limits of such area, have              Assessing
                  jurisdiction in respect of --                                                                             Officers.
                          (a) any person carrying on a business,--
                               (i )   in a case where the business is carried on in more places than one, the principal
                                      place of his business is situate within the area; or
                               (ii)    in any other case, the place at which he carries on his business is situate within
                                      the area; and
                          (b) any other person residing within the area.
                    (2) Any dispute relating to jurisdiction of an Assessing Officer shall be decided by the Chief
                  Commissioner under whom the Assessing Officer is functioning.
                      (3) Any dispute relating to jurisdiction of the Assessing Officer where it relates to areas within
                  the jurisdiction of different Chief Commissioners shall be decided by consensus between the Chief
                  Commissioners and if they are not in agreement, by the Board, or by such Chief Commissioner as
                  the Board may direct.
                     (4) No person shall be entitled to question the jurisdiction of an Assessing Officer --

                                                                 105
                           (a)     after the expiry of one month from the date on which he was served with the notice
                                  under sub-section (2) of section 161, if the person has furnished a return under sub-
                                  section (1) of section 155 or after the completion of assessment, whichever is earlier;
                           (b) after the expiry of the time allowed by the notice under sub-section (1) of section 157
                               or under sub-section (2) of section 171, if no return has been filed, or under sub-section
                               (3) of section 166, whichever is earlier.
                      (5) Subject to the provisions of sub-section (4), where an assessee calls in question the
                   jurisdiction of an Assessing Officer, then the Assessing Officer shall, if not satisfied with the
                   correctness of the claim, refer the matter for determination under sub-section (2) before the
                   assessment is made.
                      (6) Every Assessing Officer shall have all the powers conferred by, or under, this Code on an
                   Assessing Officer in respect of the tax bases accruing or received within the area over which he has
                   been vested with jurisdiction under section 140, notwithstanding anything in this section or in any
                   direction or order issued under section 139.


Power         to   142. (1) The Chief Commissioner or, as the case may be, the Commissioner may, by an order,
transfer cases.    transfer a case from any Assessing Officer to any other Assessing Officer who are subordinate to
                   him.
                       (2) The Chief Commissioner may, by an order, transfer a case from any Assessing Officer
                   subordinate to him to any Assessing Officer subordinate to any other Chief Commissioner, if both
                   the Chief Commissioners are in agreement with such transfer.
                       (3) The Board, or the Chief Commissioner as may be authorised by the Board, may, by an
                   order, transfer a case from any Assessing Officer subordinate to a Chief Commissioner to any
                   Assessing Officer subordinate to any other Chief Commissioner, if the Chief Commissioners are not
                   in agreement with such transfer.
                       (4) Any order under this section shall be passed after giving the person, whose case is being
                   transferred, as far as possible an opportunity of being heard in the matter and after recording the
                   reasons for such transfer.
                      (5) The provisions of sub-section (4) shall not apply if the case is being transferred from an
                   Assessing Officer to another Assessing Officer located in the same city, locality or place.
                      (6) The transfer of a case under this section may be made at any stage of the proceedings, and it
                   shall not be necessary to reissue any notice already issued by the transferor Assessing Officer.
                      (7) For the purposes of section 140 and this section, the expression "case" in relation to any
                   person whose name is specified in any order or direction issued thereunder, means all proceedings
                   under this Code in respect of any year which ­
                                 (i) may be pending on the date of such order or direction;
                                 (ii) may have been completed on or before such date; or
                                 (iii) may be commenced after such date.


Change     of      143. (1) The income-tax authority who succeeds another authority as a result of change in
incumbent.         jurisdiction or for any other reason, shall continue the proceedings from the stage at which it was
                   left by his predecessor.
                      (2) The assessee in such a case may be given an opportunity of being heard, if he so requests,
                   before passing any order in his case.




                                                                   106
Powers          144. (1) The prescribed income-tax authorities and the Dispute Resolution Panel shall, for the
regarding       purposes of this Code, have the same powers as are vested in a court under the Code of Civil
discovery and   Procedure, 1908, while trying a suit in respect of the following matters, namely: --
production of
                        (a) discovery and inspection;
evidence.
                        (b)     enforcing the attendance of any person, including any officer of a banking company
                               and examining him on oath;
                        (c) compelling the production of books of account and other documents; and
                        (d) issuing commissions.
                   (2)    For the purposes of making any inquiry or investigation, the prescribed income-tax
                authority shall be vested with the powers referred to in sub-section (1), whether or not any
                proceedings are pending before it.
                   (3) Any income-tax authority prescribed for the purposes of sub-section (1) or sub-section (2)
                may, subject to the rules made in this behalf, impound any books of account or other documents
                produced before it and retain them in its custody for such period as it thinks fit.
                   (4) Any income-tax authority below the rank of Commissioner shall not --
                       (a)      impound any books of account or other documents without recording his reasons for
                               doing so; or
                       (b)      retain in his custody any such books or documents for a period exceeding thirty days
                               without obtaining the approval of the Chief Commissioner or the Commissioner.


                145. (1) The Competent Investigating Authority may authorise any officer (hereinafter referred to         Search     and
                as the authorised officer) to carry out search and seizure, if he has, in consequence of information in   seizure.
                his possession, reason to believe that --
                        (a)     any person to whom a summons or a notice under sub-section (1) of section 131 or
43 of 1961                     sub-section (1) of section 142 of the Income-tax Act, 1961 or under section 37 or sub-
27 of 1957                     section (4) of section 16 of the Wealth-tax Act, 1957, as they stood before the
                               commencement of this Code, or under sub-section (1) of section 144 or section 157 or
                               section 161 of this Code, was issued, has omitted or failed to furnish the material as
                               required by such summons or notice;
                        (b) any person to whom a summons or notice as aforesaid has been or might be issued will
                            not, or would not, produce or cause to be produced, any material which will be useful
43 of 1961                  for, or relevant to, any proceeding under the Income-tax Act, 1961or the Wealth-tax
27 of 1957                  Act, 1957, as they stood before the commencement of this Code, or under this Code; or
                        (c) any person is in possession of any material which represents either wholly or partly the
                            tax bases or property which has not been, or would not be, disclosed for the purposes
43   of 1961                of the Income-tax Act, 1961, or the Wealth-tax Act, 1957, as they stood before the
27   of 1957                commencement of this Code, or this Code (hereinafter in this section referred to as the
                            undisclosed tax bases or property).
                    (2) The Authorised Officer shall, in pursuance of an authorisation issued under sub-section (1),
                carry out the search and seizure and, for this purpose, have all the powers to--
                        (a) enter and search any building, place, vessel, vehicle or aircraft where he has reason to
                            suspect that any material, referred to in sub-section (1), are kept;
                        (b) break open the lock of any door, box, locker, safe, almirah or other receptacle for
                            exercising the powers conferred by clause (a) where the keys thereof are not available;
                        (c )    search any person who has got out of, or is about to get into, or is in, the building,
                               place, vessel, vehicle or aircraft, if the Authorised Officer has reason to suspect that

                                                                107
                             such person has concealed on his person any material;
                      (d) require any person who is found to be in possession or control of any type of material,
                          being books of account or other document, maintained in the form of electronic record
                          as defined in clause (t) of sub-section (1) of section 2 of the Information Technology
21 of 2000                Act, 2000, to afford the Authorised Officer the necessary facility to inspect such
                          material;
                      (e) seize any such material, not being stock-in-trade, found as a result of such search;
                      (f )    place marks of identification on any material, being books of account or other
                             documents, or make or cause to be made extracts or copies thereof ;
                      (g) make a note or an inventory of any such material including stock-in-trade.
                  (3) A Competent Investigating Authority may exercise the powers of search and seizure
             conferred under sub-section (1), if he exercises jurisdiction over the person referred to in sub-section
             (1).
                (4) The Competent Investigating Authority may also exercise the powers of search and seizure
             conferred under sub-section (1), if --
                      (a) the building, place, vessel, vehicle or aircraft, referred to in sub-section (2), is located
                          within the area of his jurisdiction irrespective of the fact that he does not have
                          jurisdiction over the person referred to in sub-section (1); and
                      (b) he has reason to believe that any delay in getting the authorisation from the Competent
                          Investigating Authority having jurisdiction over such person may be prejudicial to the
                          interests of the revenue.
                  (5) The Competent Investigating Authority may, irrespective of anything in section 140, issue a
             consequential authorisation to any Authorised Officer to exercise the powers under sub-section (2)
             in respect of any building, place, vessel, vehicle or aircraft, if he, in consequence of information in
             his possession, has reason to suspect that any material in respect of which an authorisation under
             sub-section (1) has been issued by the same or any other Competent Investigating Authority are, or
             is, kept in any such building, place, vessel, vehicle or aircraft.
                 (6) The Authorised Officer may requisition the services of any police officer or of any officer
             of the Central Government, or of both, to assist him for all or any of the purposes specified in sub-
             section (2) and it shall be the duty of every such officer to comply with such requisition.
                 (7) The Authorised Officer may serve an order on the owner or the person, who is in immediate
             possession or control of any material, that he shall not remove, part with or otherwise deal with it
             except with his prior permission, where in the opinion of the Authorised Officer --
                      (a) it is not possible or practicable to take physical possession of such material, not being
                          stock-in-trade, to a safe place due to its volume, weight or other physical
                          characteristics (including its dangerous nature) and such action of the Authorised
                          Officer shall be deemed to be seizure under clause (e) of sub-section (2); or
                      (b)     it is not practicable to seize such material for reasons other than those mentioned in
                             clause (a) and such action of the Authorised Officer shall not be deemed to be seizure
                             under clause (e) of sub-section (2).
                (8) The order under clause (b) of sub-section (7) shall remain in force for a period not exceeding
             two months from the end of the month in which the order was served and the Authorised Officer
             may take such steps as may be necessary for ensuring compliance with the order.
                (9) The Authorised Officer may, during the course of the search or seizure, examine on oath any
             person who is found to be in possession or control of any material and any statement made by such
             person during such examination may thereafter be used in evidence in any proceeding under the
43 of 1961   Income-tax Act, 1961or the Wealth-tax Act, 1957, as they stood before the commencement of this
27 of 1957   Code, or under this Code.

                                                             108
                  (10) The person referred to in sub-section (9) may be examined in respect of any material found
               and all matters relevant for the purposes of any investigation connected with any proceeding under
43 of 1961
               the Income-tax Act, 1961, the Wealth Tax Act, 1957 or under this Code.
27 of 1957
                  (11) The provisions of the Code of Criminal Procedure, 1973, relating to search and seizure shall
2 of 1974
               apply, so far as may be, to search and seizure under this section.
                  (12) For the purposes of this section, the Board may prescribe--
                        (a) the procedure to be followed by the Authorised Officer --
                               (i )    for obtaining ingress into any building, place, vessel, vehicle or aircraft to be
                                      searched where free ingress thereto is not available; and
                               (ii)   for ensuring safe custody of any material seized; and
                        (b) any other matter in relation to search and seizure under this section.


               146. (1) The Competent Investigating Authority may authorise any income-tax authority                       Power         to
               (hereinafter referred to as the "Requisitioning Officer") to require any officer or authority to deliver    requisition
               the material, which have been taken into custody by such officer or authority under any other law           material taken
               for the time being in force, to the Requisitioning Officer.                                                 into custody.
                   (2) The authorisation for requisition under sub-section (1) shall be issued by the Competent
               Investigating Authority, if he has, in consequence of information in his possession, reasons to
               believe that --
                        (a)     any person to whom a summons or a notice under sub-section (1) of section 131 or
43 of 1961                     sub-section (1) of section 142 of the Income-tax Act, 1961or under section 37 or sub-
27 of 1957                     section (4) of section 16 of the Wealth-tax Act, 1957, as they stood before the
                               commencement of this Code, or under sub-section (1) of section 144 or section 157 or
                               section 161 of this Code was issued, has omitted or failed to produce, or cause to be
                               produced, such material; or
                        (b) any person to whom a summons or notice as aforesaid has been or might be issued will
                            not, or would not, produce or cause to be produced, such material which will be useful
43   of 1961                for, or relevant to, any proceeding under the Income-tax Act, 1961 or the Wealth-tax
27   of 1957                Act, 1957, as they stood before the commencement of this Code, or under this Code; or
                        (c )    such material represents either wholly or partly tax bases or property which has not
43 of 1961                     been, or would not be, disclosed for the purposes of the Income-tax Act, 1961, or the
27 of 1957                     Wealth-tax Act, 1957, as they stood before the commencement of this Code, or under
                               this Code.
                  (3) The officer or authority referred to in sub-section (1) shall deliver the material to the
               Requisitioning Officer either forthwith or when such officer or authority is of the opinion that it is
               no longer necessary to retain the same in his or its custody.
                   (4) Where any material has been delivered to the requisitioning officer, the provisions of sub-
               sections (11) and (12) of section 145 shall, so far as may be, apply as if such material had been
               seized under the said section by the requisitioning officer from the custody of the person referred to
               in clause (a) or clause (b) or clause (c), as the case may be, of sub-section (2) of this section and as
               if for the words "the authorized officer" occurring in sub-section (12) of section 145, the words "the
               requisitioning officer" were substituted.


               147. (1) The Authorised Officer shall hand over the material seized under section 145, within a             Retention and
               period of sixty days from the date on which the last of the authorisations for search was executed, to      release of books
               the Assessing Officer, if the Authorised Officer has no jurisdiction over the person from whom the          of account or
               material was seized.                                                                                        documents

                                                                 109
                                                                                                                            seized         or
                      (2) The Requisitioning Officer shall hand over the material delivered under section 146, within a
                                                                                                                            requisitioned.
                   period of sixty days from the date on which the material was received, to the Assessing Officer, if
                   the Requisitioning Officer has no jurisdiction over the person from whom the material was taken
                   into custody under any other law for the time being in force.
                      (3) The officers, referred to in sub-sections (1) and (2), shall, on an application made by the
                   assessee, allow him to make copies of, or take extracts from, the books of account or documents
                   seized or requisitioned.
                      (4) The Assessing Officers may retain the books of account or documents, seized or
                   requisitioned, up to a period of thirty days from the date of limitation for completion of assessment
                   specified in section 175.
                      (5) The Assessing Officer may retain the books of account or documents seized beyond the
                   period specified in sub-section (4) after obtaining the approval of the Commissioner.
                      (6) The Commissioner, shall not allow the retention of the books of account or documents
                   seized, beyond a period of thirty days from the date on which all the proceeding under the Income-
43 of 1961         tax Act, 1961 or this Code, for which such books of account or documents are relevant, are
                   completed.
                      (7) If a person legally entitled to the books of account or documents seized under section 145 or
                   section 146 objects for any reason to the approval given by the Commissioner under sub-section (6),
                   he may make an application to the Chief Commissioner stating therein the reasons for such
                   objection and requesting for the return of the books of account or documents and the Chief
                   Commissioner may, after giving the applicant an opportunity of being heard, pass such orders as he
                   thinks fit.


Delivery     of    148. The Assessing Officer, having jurisdiction over the person in whose case search and seizure
material           was carried out under section 145, or requisition was made under section 146, shall hand over any
belonging to       material to the Assessing Officer having jurisdiction over another person, if he is satisfied that the
other persons.     material seized, or requisitioned, belongs to the other person.




Retention and      149. (1) The Assessing Officer may recover the amount of any liability, referred to in sub-section
application of     (2), excluding any liability towards payment of advance tax under Part C of Chapter XIV, --
seized        or
                           (a) out of the material (hereinafter referred to as "assets"), other than books of account or
requisitioned
                               documents, seized under section 145 or requisitioned under section 146; or
assets.
                           (b) by any other mode laid down under this Code.
                      (2) The amount of any liability shall be the aggregate of --
43 of     1961             (a) the amount of any liability existing under this Code, the Income-tax Act, 1961, or the
27 of     1957                 Wealth-tax Act, 1957, as they stood before the commencement of this Code the Gift-
18 of     1958                 tax Act, 1958, the Interest-tax Act, 1974 and the Expenditure-tax Act, 1987, till the
45 of     1974                 date of search under section 145 or requisition under section 146;
35 of     1987
                           (b) the amount of any liability under this Code, or under any of the Acts referred to in
                               clause (a), determined after the date of the search, or requisition, and till the date of
                               completion of the assessment in consequence of the search or the requisition;
                           (c) the amount of any liability determined on completion of the assessment in consequence
                                of the search or the requisition; and
                           (d) the amount of any liability under this Code, or under any of the Acts referred to in
                               clause (a), determined after the completion of the assessment in consequence of the


                                                                 110
                              search, or the requisition, and till the date of release of the assets.
                   (3) The Assessing Officer may recover the existing liability referred to in clause ( a) of sub-
                section (2) and release the remaining portion of the asset, if any, within a period of one hundred and
                twenty days from the date on which the last of the authorisations for search under section 145 was
                executed, to the person from whose custody the assets were seized, if --
                        (a) an application is made by the person within a period of thirty days from the end of the
                            month in which the assets were seized;
                        (b) the nature and source of the assets are explained by the person to the satisfaction of
                            the Assessing Officer; and
                        (c) the prior approval of the Chief Commissioner or the Commissioner is obtained.
                    (4) The Assessing Officer shall release, within the time and subject to such conditions, as may
                be prescribed, to the person from whose custody the assets were seized, any asset or proceeds
                thereof, which remains after the liabilities referred to in sub-section (2) are discharged.
                    (5) The Assessing Officer may with the prior approval of the Commissioner release any seized
                or requisitioned asset (other than cash) before making assessment in consequence of search or
                requisition, if the concerned person deposits with the Assessing Officer an amount of money equal
                to the value of such asset on the date of the seizure and the amount so deposited shall be deemed to
                be cash seized or requisitioned for the purposes of this Code.
                    (6) If the assets consist solely of money, or partly of money and partly of other assets, the
                Assessing Officer may apply such money in the discharge of the liabilities referred to in sub-section
                (2) and the assessee shall be discharged of such liability to the extent of the money so applied.
                    (7) The assets, other than money, shall be deemed to be under distraint as if such distraint was
                effected by the Assessing Officer or, as the case may be, the Tax Recovery Officer and the recovery
                of any liability out of such assets shall be effected in the manner laid down in the Eighteenth
                Schedule.
                    (8) The Central Government shall pay simple interest at the rate of one-half per cent. per month
                on the amount computed in accordance with the formula ­
                        (A ­ B) + (C ­ D)
                        where
                        A=        money seized under section 145 or requisitioned under section 146;
                        B=       money, if any, released under the sub-section (3);
                        C =         proceeds, if any, of the assets sold towards the discharge of the existing liability
                                  referred to in clause (a) of sub-section (2);
                        D=         the aggregate of the amount required to meet the liabilities referred to in sub-
                                  section (2).
                    (9) The interest referred to in sub-section (8) shall be payable for the period beginning with the
                date immediately following the expiry of the period of one hundred and twenty days from the date
                on which the last of the authorisations for search under section 145 or requisition under section 146
                was executed and ending on the date of completion of the assessment in consequence of the search
                or the requisition.


Power to call   150. (1) For the purposes of this Code, the Board may, notwithstanding anything in any other law
for             for the time being in force, require--
information.
                        (a)     any prescribed person to furnish such information within such time and in such form
                               and manner as may be prescribed; and


                                                                 111
        (b)     any prescribed income-tax authority to call for such information in such form and
               manner as may be prescribed.
    (2) Any income-tax authority, not below the rank of an Income-tax Officer, may require any
person to furnish any information as may be useful for, or relevant to, any inquiry, or any
proceeding pending before him under this Code, in such form, manner and within such time as may
be specified by him.
   (3) In this section, the expression ``person'' shall include a banking compan y or any officer
thereof.


151. The Assessing Officer or the Commissioner (Appeals) or any person sub-ordinate to him                 Power          to
authorised in writing by the Assesseing officer or the Commissioner (Appeals), may inspect and if          inspect registers
necessary, take copies, or cause copies to be taken, of any register of the members, debenture             of companies.
holders or mortgagees of any company or of any entry in such register.



152. (1) The prescribed income-tax authority may enter, or authorise any other income-tax authority        Power         of
to enter, any place which is an office of, or at which a business is carried out by, a person, if          Survey.
     the place is--
        (a) within the limits of the area assigned to him; or
        (b) occupied by any person in respect of whom he exercises jurisdiction.
    (2) The action under sub-section (1) shall be taken by the income-tax authority after recording
reasons in writing and with the prior approval of the Joint Commissioner or Joint Director, as the
case may be.
   (3) The income-tax authority, referred to in sub-section (1), shall enter any place of business
referred to therein only after sunrise and before sunset, or during the hours at which such place is
open for the conduct of business.
    (4) On entering the place, the income-tax authority may require any person, who may be
attending in any manner to the business or activity at the place, to --
        (a) afford him to inspect the books of account or documents available at the place;
        (b) afford him to check or verify the cash, stock or other valuable article or thing found
            there; and
        (c) furnish any information relevant, or useful, for the proceedings under this Code, in
            respect of the person or any other person.
   (5) For the purposes of this section, any place at which a business is carried out includes a
place--
        (a) which is not the principal place of such business;
        (b) where any business or activity is being carried out and the tax bases relating to such
            business or activity is not to be included in the total tax bases under any provision of
            this Code;
        (c) where any of the books of account, documents, cash, stock-in-trade or valuables,
            relating to the business of the person or the business or activity referred to in clause
            (b), are kept; or
        (d)    where any of the books of account, documents or other record containing the
              particulars regarding deduction of tax at source, or collection of tax at source, made, or
              required to be made, under this Code, are kept.


                                               112
   (6) On entering the place, the income-tax authority may --
        (a) place marks of identification on the books of account, documents or record inspected
            by him and take extracts, or copies, therefrom;
        (b) impound any books of account, documents or record inspected by him, after recording
            the reasons for doing so;
        (c) make an inventory of cash, stock or valuables; or
        (d)     examine on oath any person if his statement would be useful for, or relevant to, any
               proceeding under this Code.
   (7) The prescribed income-tax authority, for the purpose of verifying the expenditure made by
the person in connection with any function, ceremony or event, after such function, ceremony or
event, may--
        (a) require the person by whom such expenditure has been incurred or any other person
            who is likely to possess the information regarding such expenditure, to furnish such
            information which may be useful for, or relevant to, any proceeding under this Code;
            and
        (b) record the statements of the person or any other person in this behalf.
   (8) The statement made by any person under clause (d) of sub-section (6) and clause (b) of sub-
section (7) may be used in evidence in any proceeding under this Code.
    (9) The income-tax authority acting under this section shall, on no account, remove or cause to
be removed from the place where he has entered any cash, stock or other valuable article or thing.
  (10) The income-tax authority shall not retain any books of account, documents or records
impounded by him under this section beyond a period of one month without the approval of the
Commissioner.
   (11) The income-tax authority, other than an Inspector, shall have the powers under sub-section
(1) of section 144 for enforcing compliance, if a person refuses, or evades, as the case may be, to--
        (a)     afford the facility to the income-tax authority to inspect books of account or other
               documents;
        (b) allow such authority to check or verify any cash, stock or other valuable article or
            thing;
        (c) furnish any information; or
        (d) have his statement recorded.
   (12) The income-tax authority impounding any books of account or documents, shall, on an
application made by the assessee, allow him to make copies of, or take extracts from, the books of
account or documents impounded under sub-section (6).
   (13) For the purposes of section 145 and this section, the expression "proceeding", as on the
date on which powers under section 145 or this section are exercised, shall mean all proceedings
under this Code in respect of any year which ­
              (i) may have been completed on or before such date;
              (ii) may be pending as on such date; or
              (iii) may be commenced after such date.


153. (1) No information in respect of any assessee, except as provided in sub-section (2), shall be     Power         to
provided to any person by--                                                                             disclose
                                                                                                        information   in

                                                113
                                                                                                                           respect      of
                         (a) the Board or any other income-tax authority or officer or ministerial staff; or
                                                                                                                           assessee.
                         (b)    any person, agency or authority engaged in any manner in the administration of this
                               Code.
                    (2) The Board, or any person specified by it by an order in this behalf, may furnish, or cause to
                 be furnished, any information in respect of an assessee to any other person performing any functions
                 under--
                         (a) any law relating to the imposition of any tax, duty or cess, or to dealings in foreign
                             currency; or
                         (b) any other law as the Central Government may, if it considers necessary so to do in the
                             public interest, specify by notification in this behalf.
                    (3) The information referred to in sub-section (2) shall be only such information which fulfils
                 the following conditions, namely:--
                         (a) the information is received or obtained by the Board, or any person specified by it by
                             an order under that sub-section, in the performance of its or his functions under this
                             Code; and
                         (b) the information is, in the opinion of the person furnishing the information, necessary
                             for the purpose of enabling the other person receiving the information to perform the
                             functions under the laws referred to in that sub-section.
                     (4) The Chief Commissioner or the Commissioner may furnish, or cause to be furnished, to any
                 person any information relating to any assessee received or obtained by any income-tax authority in
                 the performance of his functions under this Code, if--
                         (a)    the person makes an application to the Chief Commissioner or the Commissioner in
                               the prescribed form; and
                         (b) the Chief Commissioner or the Commissioner is satisfied that it is in the public interest
                             to do so.
                    (5) The decision of the Chief Commissioner or the Commissioner under sub-section (4) shall
                 not be called in question in any court of law.
                    (6) The Central Government may, notwithstanding anything in this section or under any other
                 law for the time being in force, direct, by an order as may be notified, that no information shall be
                 furnished under sub-section (2) or sub-section (4) in respect of such matters relating to such class of
                 assessees, or to such authorities, as may be specified in the order.


                 154. (1) Any proceeding under this Code before an income-tax authority shall be deemed to be a            Proceedings
                 judicial proceeding within the meaning of section 193 and section 228 and for the purposes of             before income-
                 section 196 of the Indian Penal Code, 1860.                                                               tax authorities
                                                                                                                           to be judicial
                   (2) Every income-tax authority shall be deemed to be a civil court for the purposes of section
                                                                                                                           proceedings.
                 195, but not for the purposes of Chapter XXVI of the Code of Criminal Procedure, 1973.




                                                    B. -- ASSESSMENT PROCEDURE


Self-reporting   155. (1) Every person shall furnish a return of tax bases on or before the due date to the Assessing
of tax bases     Officer or such other authority or agency as may be prescribed.


                                                                114
   (2) The person referred to in sub-section (1) shall---
       (a) in relation to income, be the following, namely: --
             (i )   an individual or Hindu undivided family or an artificial juridical person, if the
                    gross total income from ordinary sources exceeds the threshold limit;
             (ii) a company;
             (iii) an unincorporated body;
             (iv) a non-profit organisation;
             (v )   a co-operative society;
             (vi) a society other than a co-operative society;
             (vii) a local authority;
             (viii) a political party;
             (ix) any person who intends to carry forward the loss or any part thereof in accordance
                   with the provisions of this Code;
             (x )    any person who derives any income from special sources and such income is
                    chargeable to tax;
             (xi) any other person liable to pay tax under this Code, and
             (xii) any class or classes of persons as may be prescribed;
          (b) in relation to dividend or income distributed, be the following, namely: --
             (i )   a company referred to in section 112;
             (ii)    a domestic company, a mutual fund, a securitisation trust or a life insurer,
                    referred to in section 113;
          (c) in relation to net wealth, be any person, other than a non-profit organisation, if the
             net wealth exceeds the maximum amount which is not chargeable to wealth-tax.
    (3) Notwithstanding anything in clause (a) of sub-section (2), every person, being a resident,
shall be required to furnish a return of tax bases, if during the financial year he has any asset
(including any financial interest in any entity) located outside India or signing authority in any
account located outside India.
   (4) The return of tax bases referred to in sub-section (1) shall be a return in respect of the tax
bases of the person referred to in sub-section (2) or the tax bases of any other person in respect of
which such person is assessable for the relevant financial year.
     (5) The return of tax bases shall be furnished in such form, verified in such manner and setting
forth such other particulars, as may be prescribed.
    (6) A person may, if he discovers any omission or any wrong statement in the return of tax
bases furnished by him under sub-section (1) or under section 157, revise such return at any time
before the expiry of one year from the end of the financial year in which the return was due or
before the completion of the assessment, whichever is earlier.
   (7) A person may furnish the return of tax bases for any financial year at any time before the
expiry of one year from the end of the financial year in which the return was due or before the
completion of the assessment, whichever is earlier, if--
            (a) such person has not furnished a return by the due date; and
            (b) no notice under sub-section (1) of section 157 has been served on him.
   (8) The Assessing Officer may, if he finds that the return of tax bases has not been furnished by


                                               115
any person in the prescribed form and manner or does not contain the particulars as required under
sub-section (5), intimate to such person the deficiency and allow him an opportunity to remove the
deficiency within a period of thirty days from the service of the intimation.
    (9) The Assessing Officer shall treat the return of tax bases filed by a person as invalid, if the
deficiency referred to in sub-section (8) is not removed within the time allowed and the provisions
of the Code shall apply as if the person had failed to furnish the return.
    (10) The return of tax bases of a person specified in column (2) of the Table given below shall
be signed and verified by a person specified in column (3) of the said Table:
                                               TABLE
Serial Person furnishing the return               Person required to sign and
number       of tax bases                         verify the return of tax bases

(1)       (2)                                           (3)
1.    Individual being mentally                   (a ) guardian of the individual; or
      incapacitated from attending                (b) any other person duly
      to his affairs                              competent to act on his behalf.
2.    Any other individual                        (a) individual himself; or
                                                  (b) any person duly authorised by a valid power of
                                                  attorney by the individual in this regard, if the
                                                  individual is not in India or for some other reason,
                                                  it is not possible for him to sign the return.
3.    Hindu undivided family                      (a) Karta of the family; or
                                               (b) any other adult member of the family if the
                                                  Karta is not in India or is mentally incapacitated
                                                  from attending to his affairs.
4.    Company not being resident                  Any person who holds a valid power of
      in India                                    attorney from the company to do so.
5.    (a) Company which is being                  Liquidator referred to in clause (g)
      wound up by court or otherwise; or          of sub-section (1) of section 165.
      (b) Company where any person has
      been appointed as the receiver of
      any assets of the company
6.    Company whose management has                Principal officer of the company.
      been taken over by the Central
      Government or any State
      Government under any law
7.    Any other company                           (a) Managing director of the company; or (b) any
                                                  director of the company if there is no managing
                                                  director or the managing director, for any
                                                  unavoidable reason, is not able to sign and verify
                                                  the return.
8.    Firm (a) managing partner of the firm; or


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                                                                       (b) any partner (not being a minor) of the firm if
                                                                          there is no managing partner or the managing
                                                                          partner, for any unavoidable reason, is not able to
                                                                          sign and verify the return.
                   9.      Limited liability partnership                 (a) designated partner of the limited liability
                                                                         partnership; or
                                                                       (b) any partner (not being a minor) of the limited
                                                                          liability partnership if there is no designated
                                                                          partner or the designated partner, for any
                                                                          unavoidable reason, is not able to sign and verify
                                                                          the return.
                   10.     Local authority                               Principal officer of the local authority
                   11.     Political party                               Chief executive officer ( whether such Chief
                                                                         executive officer is known as secretary or by any
                                                                         other designation) of the party.
                   12.     Any other association of persons              Any member or the principal officer of               the
                                                                         association.
                   13.     Any other person                               (a) person himself; or
                                                                        (b) any person competent to act on his      behalf.


                      (11) Any person who is otherwise not required to furnish a return of tax bases under sub-section
                   (1) may furnish such return before the expiry of one year from the end of the financial year to which
                   it pertains and all the provisions of this Code shall, as far as may be, apply as if it is a return
                   furnished under that sub-section.


Tax       return   156. (1) The Board may, without prejudice to the provisions of section 155, frame a tax return
preparer.          preparer scheme so as to allow a tax return preparer to prepare and furnish the return of tax bases of
                   any specified class of persons, in accordance with the scheme.
                         (2) Every tax return preparer shall affix his signature on the return so prepared by him.
                      (3) The scheme framed by the Board under this section may provide for the following,
                   namely:--
                              (a) the eligibility criteria for a person to qualify as a tax return preparer;
                              (b) the code of conduct for the tax return preparer;
                              (c) the duties and obligations of the tax return preparer;
                              (d) the period for which the tax return preparer shall be authorised;
                              (e) the circumstances under which the authorisation given to a tax return preparer may be
                                  withdrawn; and
                              (f )    any other matter which may be specified by the scheme for the purposes of this
                                     section.
                         (4) In this section--
                              (a)     "tax return preparer" means any individual who has been authorised to act as a tax
                                     return preparer under the scheme framed under this section;
                              (b)     "tax return preparer scheme" means a scheme framed and notified by the Board and
                                     providing for preparing and furnishing of the return of tax bases through a tax return

                                                                      117
                               preparer; and
                         (c) "specified class of persons" means a class of persons who are req uired to furnish a
                             return of tax bases under this Code, other than a company or a person whose accounts
                             are required to be audited under section 88 or section 98.


                 157. (1) The Assessing Officer may serve on a person in whose case the time allowed under sub-           Issue of notice
                 section (1) of section 155 has expired, a notice, within a period of twelve months from the end of       to      furnish
                 the financial year in which the return was due, requiring such person to furnish a return of tax bases   return.
                 for the relevant financial year.
                     (2) The person in receipt of notice issued under sub-section (1) shall furnish the return within a
                 period of thirty days from the date of receipt of the notice and the return shall be furnished in such
                 form, verified in the manner and setting forth such other particulars, as may be prescribed.


                 158. (1) The assessee shall be liable to pay, before furnishing the return of tax bases, the aggregate   Self assessment
                 of the following amounts as self-assessment tax, namely:--                                               tax.
                         (a) the amount of tax payable on the basis of the return required to be furnished under this
                             Code for the financial year as reduced by--
                                    (i) the amount of tax, if any, already paid under this Code;
                                    (ii) any tax deducted or collected at source;
                                    (iii) any tax credit under section 105 or section 107; and
                                    (iv) any relief of tax claimed under section 228;
                         (b)    the amount of interest payable under any provision of this Code for such financial
                               year.
                    (2) The amount paid as self-assessment tax for any financial year shall first be adjusted towards
                 the interest payable under any provision of this Code and the balance, if any, shall be adjusted
                 towards the tax payable, if the amount of the self-assessment tax paid falls short of the self-
                 assessment tax payable under sub-section (1).
                   (3) After an assessment under section 165 or section 166 has been made, any amount paid
                 under sub-section (1) shall be deemed to have been paid towards such assessment.
                     (4) If any assessee fails to pay the whole or any part of such tax or interest or both in
                 accordance with the provisions of sub-section (1), he shall, without prejudice to any other
                 consequences that he may incur, be deemed to be an assessee in default in respect of the tax or
                 interest or both remaining unpaid and all the provisions of this Code shall apply accordingly.


Acknowledgm      159. On receipt of any return of tax bases for any financial year, the Assessing Officer, or any
ent of return.   other person authorised by the Board in this behalf, shall issue an acknowledgement for receipt of
                 the return.



Processing of    160. (1) The Assessing Officer, or any other income-tax authority authorised by the Board in this
return.          behalf (hereinafter referred to as the processing authority) shall process the return received under
                 section 155 or section 157 in the following manner, namely: --
                         (a) the tax bases shall be computed after making the following adjustments, namely: --
                               (i) any arithmetical error in the return; or
                               (ii) an incorrect claim, if such incorrect claim is apparent from the existence of any

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                      information in the return;
        (b) the tax and interest, if any, shall be computed on the basis of the tax base computed
            under clause (a); and
        (c) the sum payable by, or the amount of refund due to, the assessee shall be determined
            after adjustment of the tax and interest, if any, computed under clause (b) by any tax
            deducted at source, any tax collected at source, any advance tax paid, any relief
            allowable under section 228, any self-assessment tax paid and any amount paid
            otherwise than by way of tax or interest.
  (2) Notwithstanding anything in sub-section (1), it shall not be necessary to process a return,
where a notice has been issued to the assessee under sub-section (2) of section 161.
   (3) The processing authority shall send an intimation to the assessee specifying the sum
determined to be payable by, or refundable to, him and such other particulars as may be prescribed.
   (4) The processing authority shall also send an intimation to the asssessee in a case where the
loss declared in the return by the assessee is adjusted but no tax or interest is payable by, or
refundable to, him.
  (5) The processing authority shall not send any intimation after expiry of a period of twelve
months from the end of the financial year in which the return is furnished.
   (6) The acknowledgement of the return shall be deemed to be the intimation in a case where no
sum is payable by, or refundable to, the assessee under clause ( c) of sub-section (1), and where no
adjustment has been made under clause (a) of sub-section (1).
    (7) The Board may, for the purposes of sub-section (1), make a scheme for centralised
processing of returns for expeditious determination of the tax payable by, or the refund due to, the
assessee.
    (8) For the purposes of this section, "an incorrect claim apparent from the existence of any
information in the return" shall mean a claim, on the basis of an entry, in the return--
              (i )       of an item, which is inconsistent with another entry of the same, or some other
                       item, in such return;
              (ii)       in respect of which information required to be furnished to substantiate such
                       entry has not been so furnished; or
              (iii)      in respect of a deduction, where such deduction exceeds the specified statutory
                       limit which may have been expressed as monetary amount, percentage, ratio or
                       fraction.


161. (1) An Assessing Officer may make an assessment on receipt of return under section 155 or             Notice      for
section 157, if he considers it necessary or expedient to ensure that the assessee has not understated     inquiry before
his tax bases or computed excessive loss or allowance or underpaid the tax in any manner.                  assessment.
   (2) For the purposes of making an assessment, the Assessing Officer shall serve on any assessee
a notice requiring him, on a date to be specified therein--
        (a) to attend his office or to produce, or cause to be produced, evidence, if any, on which
            the assessee may rely in support of the return;
        (b)    to produce, or cause to be produced, such accounts or documents (not relating to a
              period more than six years prior to the relevant financial year) as the Assessing
              Officer may require; or
        (c) to furnish in writing, and verified in the prescribed manner, information in such form
            and on such matters (including a statement of all assets and liabilities of the assessee,
            whether included in the accounts or not) as the Assessing Officer may require.


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                   (3) The Assessing Officer shall obtain the prior approval of the Joint Commissioner before
                requiring the assessee to furnish the statement of all his assets and liabilities not included in the
                accounts for the relevant financial year.
                   (4) The Assessing Officer may make such inquiry, as he considers necessary, for the purpose of
                obtaining full information in respect of tax bases of any person for the relevant financial year.
                   (5) No notice under sub-section (2) shall be served on the assessee after the expiry of a period
                of six months from the end of the financial year in which the return is furnished.


                162. (1) The Assessing Officer may direct the assessee to get his accounts audited by an accountant,       Special audit.
                if, at any stage of the proceedings, he is of the opinion that, having regard to the nature and
                complexity of the accounts, volume of the accounts, correctness of the accounts, multiplicity of
                transactions in the accounts or specialised nature of business activity of the assessee and the
                interests of revenue, it is necessary to do so.
                   (2) The Assessing Officer shall not issue any direction under sub-section (1) unless the assessee
                has been given an opportunity of being heard and prior approval of the Chief Commissioner or
                Commissioner has been obtained.
                    (3) The provisions of sub-section (1) shall have effect irrespective of the fact that the accounts
                of the assessee have been audited under any other law for the time being in force or otherwise.
                  (4) The accountant shall, for the purposes of sub-section (1), be nominated by the Chief
                Commissioner or the Commissioner.
                   (5) The accountant shall furnish a report of the audit referred to in sub-section (1) in such form,
                duly signed and verified by him, and setting forth such particulars as may be prescribed and such
                other particulars as the Assessing Officer may require.
                   (6) The accountant shall furnish the report referred to in sub-section (5) within the time allowed
                by the Assessing Officer.
                   (7) The Assessing Officer may extend the time allowed under sub-section (6) by such further
                period or periods as he thinks fit, for reasons to be recorded in writing.
                   (8) The aggregate of the period allowed under sub-section (6) and the further period or periods
                allowed under sub-section (7) shall not exceed one hundred and eighty days from the date on which
                the direction under sub-section (1) is received by the assessee.
                   (9) The accountant shall furnish the report referred to in sub-section (5) to the Assessing Officer
                and a copy of the same to the assessee.
                   (10) The remuneration of the accountant and other expenses of any audit under sub-section (1)
                shall be determined and paid by the Chief Commissioner or the Commissioner in accordance with
                such rules as may be prescribed.


Determination   163. (1) The Assessing Officer may, for the purposes of assessment or reassessment, require a
of value of     valuation officer to make and report to him an estimate of the value, including fair market value, of
assets.         any asset, property, investment or expenditure.
                   (2) The Assessing Officer may make a reference under sub-section (1) whether or not he is
                satisfied about the correctness or completeness of the accounts of the assessee.
                   (3) On a reference made under sub-section (1), the valuation officer shall, for the purpose of
                estimating the value of the asset, property, investment or expenditure, and subject to the rules in this
                behalf, have all the powers to--
                         (a) enter any land, building or other place belonging to, or occupied by, the person in
                             connection with whose assessment the reference has been made;

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        (b) require any person in charge of, or in occupation or possession of, the land, building or
            other place to afford him the necessary facility to survey or inspect the land, building
            or other place;
        (c) inspect any asset or property in respect of which the reference has been made;
        (d) inspect any books of account, documents or record which may be relevant for the
            purpose of making the estimate of the value of the asset, property, investment or
            expenditure, in respect of which the reference has been made;
        (e) gather any other information relating to the asset, property, investment or expenditure,
            which may be relevant for the purposes of estimating the value.
   (4) The valuation officer shall, by order in writing, estimate the value of the asset, property,
investment or expenditure after taking into account--
        (a) such evidence as the assessee may produce; and
        (b)    the material in his possession gathered after giving an opportunity of being heard to
              the assessee.
   (5) The valuation officer may estimate the value of the asset, property, investment or
expenditure to the best of his judgment, if the assessee does not co-operate or comply with his
direction.
   (6) The valuation officer shall furnish a copy of his estimate under sub-section (4) or sub-
section (5), as the case may be, to the Assessing Officer and the assessee within a period of six
months from the end of the month in which a reference is made under sub-section (1).
   (7) The Assessing Officer may, on receipt of the report of the valuation officer, proceed to
compute the tax bases of the assessee after taking into account the value estimated by the valuation
officer.


164. (1) The Assessing Officer may, with the prior approval of the Commissioner, refer to the             Determination
Transfer Pricing Officer, the computation of arm's length price under section 120 in relation to any      of arm's length
international transaction or specified domestic transaction entered into by the assessee in any           price.
financial year, if he considers it necessary or expedient to do so.
   (2) The Transfer Pricing Officer may, upon reference made to him under sub-section (1), serve
on the assessee a notice requiring him, on a date to be specified therein---
        (a) to attend his office or to produce, or cause to be produced, evidence, if any, on which
            the assessee may rely in support of the computation made by him of the arm's length
            price in relation to the international transaction or specified domestic transaction; or
        (b) to produce, or cause to be produced, such accounts or documents as the Transfer
            Pricing Officer may require.
   (3) In a case where the Transfer Pricing Officer, during the course of the proceedings before
him, notices any       international transaction or specified domestic transaction other than an
international transaction or specified domestic transaction referred under sub-section (1), the
provisions of this section shall apply as if such other international transaction or specified domestic
transaction is an international transaction or a specified domestic transaction referred to him under
sub-section (1).
   (4) The Transfer Pricing Officer shall by an order in writing determine the arm's length price in
relation to the international transaction or the specified domestic transaction in accordance with the
provisions of section 120 after taking into account --
        (a) such evidence as the assessee may produce; and
        (b) the material in his possession gathered after giving an opportunity of being heard to

                                               121
                              the assessee.
                  (5) The Transfer Pricing Officer may by an order in writing determine the arm's length price in
               relation to the international transaction or the specified domestic transaction to the best of his
               judgment, if the assessee does not co-operate or comply with his direction.
                  (6) The Transfer Pricing Officer shall send the order of his determination under sub-section (4)
               or sub-section (5), as the case may be, to the Assessing Officer and the assessee.
                  (7) The determination under sub-section (4) or sub-section (5) shall be made, or report of such
               determination sent as required by sub-section (6), at any time before sixty days prior to the date on
               which the period of limitation referred to in section 175, for making an order of assessment,
               reassessment or recomputation, as the case may be, expires.
                 (8) The Transfer Pricing Officer may, for the purposes of determining the arm's length pri ce
               under this section, exercise all, or any, of the powers specified in section 144 , section 150 or section
               152.


Assessment .   165. (1) The Assessing Officer shall, consequent to a notice issued under sub-section (2) of
               section 161, by an order in writing, make an assessment of the tax bases of the assessee after taking
               into account--
                        (a)    the evidence furnished by the assessee;
                        (b)    the report of audit under section 162, if any;
                        (c) the report of the valuation officer, if any; and
                        (d)    the material in his possession, in respect of which an opportunity of being heard has
                               been provided to the assessee,
               and in conformity with-
                              (i )   the order of the Transfer Pricing Officer, if any;
                              (ii)   the direction of the Commissioner or the Approving Panel under section 169, if
                                     any;
                              (iii) the direction of the Joint Commissioner under section 168, if any.
                  (2) The Assessing Officer shall, on the basis of the assessment, determine the sum payable by,
               or refundable to, the assessee after adjusting the sum paid by, or refunded to, the assessee in
               pursuance of the intimation issued under sub-section (3) of section 160.
                  (3) Where an assessment has been made under this section --
                        (a)    any tax or interest paid by the assessee under sub-section (1) of section 160 shall be
                               deemed to have been paid towards such assessment;
                        (b)     if no refund is due on assessment or the amount refundable under sub-section (1) of
                               section 160 exceeds the amount refundable on assessment, the whole of the excess
                               amount so refunded shall be deemed to be tax payable by the assessee and the
                               provisions of this Code shall apply accordingly.
                   (4) The Assessing Officer shall, notwithstanding anything in this Code, in the first instance,
               forward a draft of the proposed order of assessment (hereinafter in this section referred to as the
               draft order) to the eligible assessee if he proposes to make any variation in the income or loss
               returned which is prejudicial to the interests of such assessee.
                   (5) On receipt of the draft order, the eligible assessee may, within a period of thirty days of the
               receipt by him of the draft order,--
                        (a)    file his acceptance of the variations to the Assessing Officer; or


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        (b)     file his objections, if any, to such variations to--
               (i) the Assessing Officer ; and
               (ii) the Dispute Resolution Panel .
   (6) The Assessing Officer shall complete the assessment on the basis of the draft order, if--
        (a)     the eligible assessee intimates to the Assessing Officer the acceptance of the
                variations;or
        (b)     no objections are received by the Assessing Officer within the period specified in sub-
                section (5).
   (7) The Assessing Officer shall, notwithstanding anything in section 175, pass the assessment
order within a period of one month from the end of the month in which-
        (a) the acceptance is received; or
        (b) the period of filing of objections under sub-section (5) expires.
   (8) Upon receipt of the directions issued under sub-section (2) of section 170, the Assessing
Officer shall, in conformity with the directions, complete the assessment within a period of one
month from the end of the month in which the direction is received notwithstanding anything in
section 175, without providing any further hearing in the matter.
   (9) In this section, "eligible assessee" means--
         (a)    any person in whose case the variation arises as a consequence of the order of the
                Transfer Pricing Officer passed under sub-section (4) or sub-section (5) of section
                164;
        (b)      any foreign company; or
        (c)      any class or classes of persons as may be prescribed,
but does not include any person in whose case prior approval of the Commissioner under sub-
section (12) of section 169 has been obtained by the Assessing Officer.


166. (1)The Assessing Officer shall make the assessment of the tax bases to the best of his                Best judgment
judgment, if--                                                                                             assessment.
        (a) the assessee fails to--
               (i )   furnish the return required under sub-section (1) of section 155 or section 157 or
                      has not furnished a return under sub-section (6) or sub-section (7) of section
                      155;
               (ii)   comply with all the terms of a notice issued under sub-section (2) of section 161;
               (iii) comply with a direction issued under section 162; or
               (iv) furnish the return in response to notice under section 171;
        (b) the assessee fails to regularly follow the method of accounting provided in sub-section
            (1) of section 89, or the accounting standards notified under sub-section (2) of that
            section; or
        (c )    he is not satisfied about the correctness or completeness of the accounts of the
               assessee.
   (2) The Assessing Officer shall, in making the assessment under sub-section (1), take into
account all relevant material which he has gathered or is available on record.
  (3) The Assessing Officer shall, before making the assessment under sub-section (1), provide the

                                                  123
                assessee an opportunity of being heard by serving a notice calling upon the assessee to show cause,
                on a date and time to be specified in the notice, as to why the assessment should not be completed to
                the best of his judgment.
                    (4) It shall not be necessary to give an opportunity under sub-section (3) before the making of
                an assessment under this section, in a case where a notice under section 157 has been issued.


Effect     to   167. (1) Notwithstanding anything in section 155, where any person has entered into an agreement
advance         and prior to the date of entering into the agreement, any return of tax bases has been furnished under
pricing         the provisions of section 155 for any financial year to which such agreement applies, such person
agreement.      shall furnish, within a period of three months from the end of the month in which the said agreement
                was entered into, a modified return of tax bases in accordance with and limited to the agreement.
                   (2) Save as otherwise provided in this section, all other provisions of this Code shall apply
                accordingly as if the modified return is a return furnished under section 155.
                   (3) If the assessment or reassessment proceedings for the financial year to which the agreement
                applies have been completed before the expiry of period allowed for furnishing of modified return
                of tax bases under sub-section (1), the Assessing Officer shall, in a case where modified return of
                tax bases is filed in accordance with the provisions of sub-section (1), proceed to assess or reassess
                or recompute the total income of the relevant financial year having regard to and in accordance with
                the agreement.
                   (4) Where the assessment or reassessment proceedings for a financial year to which the
                agreement applies are pending on the date of filing of modified return of tax bases in accordance
                with the provisions of sub-section (1), the Assessing Officer shall proceed to complete the
                assessment or reassessment proceedings in accordance with the agreement taking into consideration
                the modified return so furnished.
                   (5) Notwithstanding anything in section175,--
                        (a) the order of assessment, reassessment or recomputation of total income under sub-
                            section (3) shall be passed within a period of one year from the end of the financial
                            year in which the modified return under sub-section (1) is furnished;
                        (b) the period of limitation as provided in section 175 for completion of pending
                            assessment or reassessment proceedings referred to in sub-section (4) shall be extended
                            by a period of twelve months.
                   (6) For the purposes of this section,--
                             (i)    "agreement" means an agreement referred to in sub-section (1) of section 121;
                             (ii)    the assessment or reassessment proceedings for a financial year shall be deemed
                                    to have been completed where--
                        (a) an assessment or reassessment order has been passed; or
                        (b) no notice has been issued under sub-section (2) of section 161 till the expiry of the
                            period provided in the said section.


                168. (1) A Joint Commissioner may, on a reference being made to him by the Assessing Officer or          Directions by
                on an application of an assessee or on his own motion, call for and examine the record of any            Joint
                proceeding in which an assessment is pending and if he considers it necessary or expedient so to do,     Commissioner
                he may issue such directions as he thinks fit for the guidance of the Assessing Officer so as to         for assessment.
                enable him to complete the assessment.
                   (2) The Joint Commissioner shall not issue any direction which is prejudicial to the assessee
                unless an opportunity of being heard is given to him.


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   (3) Any direction issued under this section shall be binding on the Assessing Officer.
   (4) For the purposes of this section, any direction as to the lines on which an investigation
connected with the assessment should be made, shall not be considered as a direction prejudicial to
the assessee.


169. (1) If, the Assessing Officer, at any stage of the assessment or reassessment proceedings                 Reference      to
before him having regard to the material and evidence available, considers that it is necessary to             Commissioner
declare an arrangement as an impermissible avoidance arrangement and to determine the                          in certain cases
consequence of such an arrangement within the meaning of Chapter XII, then, he may make a
reference to the Commissioner in this regard.
      (2) The Commissioner shall, on receipt of a reference under sub-section (1), if he is of the
opinion that the provisions of Chapter XII are required to be invoked, issue a notice to the assessee,
setting out the reasons and basis of such opinion, for submitting objections, if any, and providing an
opportunity of being heard to the assessee within such period, not exceeding sixty days, as may be
specified in the notice.
      (3) If the assessee does not furnish any objection to the notice within the time specified in the
notice issued under sub-section (2), the Commissioner shall issue such directions as he deems fit in
respect of declaration of the arrangement to be an impermissible avoidance arrangement.
      (4) In case the assessee objects to the proposed action, and the Commissioner after hearing the
assessee in the matter is not satisfied by the explanation of the assessee, then, he shall make a
reference in the matter to the Approving Panel for the purpose of declaration of the arrangement as
an impermissible avoidance arrangement.
     (5) If the Commissioner is satisfied, after having heard the assessee that the provisions of
Chapter XII are not to be invoked, he shall by an order in writing, communicate the same to the
Assessing Officer with a copy to the assessee.
       (6) The Approving Panel, on receipt of a reference from the Commissioner under sub-section
(4), shall issue such directions, as it deems fit, in respect of the declaration of the arrangement as an
impermissible avoidance arrangement in accordance with the provisions of Chapter XII including
specifying of the financial year or years to which such declaration of an arrangement as an
impermissible avoidance arrangement shall apply.
      (7) No direction under sub-section (6) shall be issued unless an opportunity of being heard is
given to the assessee and the Assessing Officer, on such directions which are prejudicial to the
interest of the assessee or the interests of the revenue, as the case may be.
      (8) The Approving Panel may, before issuing any direction under sub-section (6),--
             (i)     if it is of the opinion that any further inquiry in the matter is necessary, direct the
                    Commissioner to make such inquiry or cause the inquiry to be made by any other
                    income-tax authority and furnish a report containing the result of such inquiry to
                    it; or
             (ii)   call for and examine such records relating to the matter as it deems fit; or
             (iii) require the assessee to furnish such documents and evidence as it may direct.
      (9) If the members of the Approving Panel differ in opinion on any point, such point shall be
decided according to the opinion of the majority of the members.
      (10) The Assessing Officer, on receipt of directions of the Commissioner under sub-section
(3) or of the Approving Panel under sub-section (6), shall proceed to complete the proceedings
referred to in sub-section (1) in accordance with such directions and the provisions of Chapter XII.
     (11) If any direction issued under sub-section (6) specifies that declaration of the arrangement
as impermissible avoidance arrangement is applicable for any financial year other than the financial

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year to which the proceeding referred to in sub-section (1) pertains, then, the Assessing Officer
while completing any assessment or reassessment proceedings of the such other financial year shall
do so in accordance with such directions and the provisions of Chapter XII and it shall not be
necessary for him to seek fresh direction on the issue for the other relevant financial year.
      (12) No order of assessment or reassessment shall be passed by the Assessing Officer without
the prior approval of the Commissioner, if any tax consequences have been determined in the order
under the provisions of Chapter XII.
     (13) The Approving Panel shall issue directions under sub-section (6) within a period of six
months from the end of the month in which the reference under sub-section (4) was received.
      (14) The directions issued by the Approving Panel under sub-section (6) shall be binding on --
             (i)    the assessee; and
             (ii) the Commissioner and the income-tax authorities subordinate to him,
and notwithstanding anything in other provisions of thisCode, no appeal e shall lie against such
directions.
     (15) The Central Government shall, for the purposes of this section, constitute one or more
Approving Panels as may be necessary and each panel shall consist of the following, namely:-
             (i)    a person who is or has been a judge of a High Court-- Chairperson;
             (ii)    a member of Indian Revenue Service not below the rank of Chief Commissioner
                    of Income-tax - Member; and
             (iii) a person being an academic or scholar having special knowledge of matters, such
                   as direct taxes, business accounts and international trade practices - Member.
      (16) The term of the Approving Panel shall be for a period of one year which may be extended
up to three years.
      (17) The Chairperson and members of the Approving Panel shall meet, as and when required,
to consider the references made to it and shall be paid such remuneration as may be prescribed.
    (18) The Approving Panel shall have the powers which are vested in the Authority for
Advance Rulings under section 292, in addition to the powers conferred under this section.
      (19) The Board shall provide to the Approving Panel such officials as may be necessary for
the efficient exercise of powers and discharge of functions of the Approving Panel under this Code.
      (20) The Board may make rules for the purposes of the constitution and efficient functioning
of the Approving Panel and expeditious disposal of the references received under sub-section (4).
      (21) In computing the period referred to in sub-section (13), the following shall be excluded--
             (i)    the period commencing from the date on which the first direction is issued by the
                    Approving Panel to the Commissioner for getting the inquiries conducted
                    through the authority competent under an agreement referred to in section 295
                    and ending with the date on which the information so requested is last received
                    by the Approving Panel or one year, whichever is less;
             (ii)    the period during which the proceeding of the Approving Panel is stayed by an
                    order or injunction of any court.
      (22) Where immediately after the exclusion of the period mentioned in sub-section (21), the
time available to the Approving Panel for issue of directions is less than sixty days, such remaining
period shall be extended to sixty days and the aforesaid period of six months shall be deemed to
have been extended accordingly.


170. (1) The Dispute Resolution Panel may, in a case where any objection is received under sub-         Direction   by

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                section (5) of section 165--                                                                               Dispute
                                                                                                                           Resolution
                         (a) call for and examine the record of any proceeding relating to the draft order;
                                                                                                                           Panel       for
                         (b) make such further inquiry, as it thinks fit; or                                               assessment.
                         (c) cause any further inquiry to be made by any income-tax authority and report the result
                             of the same to it. (2) The Dispute Resolution Panel shall, in the case referred to in sub-
                             section (1), issue such directions, as it thinks fit, for the guidance of the Assessing
                             Officer to enable him to complete the assessment.
                   (3) The Dispute Resolution Panel shall issue the direction referred to in sub-section (2), after
                considering--
                         (a) the draft order;
                         (b) the objections filed by the eligible assessee;
                         (c) the evidence furnished by the eligible assessee;
                         (d) the report, if any, of the Assessing Officer, valuation officer or Transfer Pricing Officer
                             or any other authority;
                         (e) the records relating to the draft order;
                         (f )   the evidence collected by, or caused to be collected by, it; and
                         (g) the result of any inquiry made by, or caused to be made by, it.
                      (4) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in
                the draft order.
                      (5) The Dispute Resolution Panel may consider any matter arising out of the assessment
                proceedings relating to the draft order, notwithstanding that such matter was raised or not by the
                eligible assessee, for the purpose of enhancing the variation.
                      (6) The Dispute Resolution Panel shall not set aside any proposed variation or issue any
                direction under sub-section (2) for further inquiry before passing of the assessment order.
                       (7) If the members of the Dispute Resolution Panel differ in opinion on any issue, then it
                shall be decided according to the opinion of the majority.
                      (8) The direction issued by the Dispute Resolution Panel shall be binding on the Assessing
                Officer.
                      (9) No direction under sub-section (2) shall be issued unless an opportunity of being heard is
                given to the eligible assessee or the Assessing Officer on such directions which are prejudicial to the
                interest of the eligible assessee or the revenue, as the case may be.
                      (10)        No direction under sub-section (2) shall be issued after a period of nine months
                from the end of the month in which the draft order is forwarded to the eligible assessee.
                      (11) The Board may make rules for the efficient functioning of the Dispute Resolution Panel
                and for the expeditious disposal of the objections filed under clause ( b) of sub-section (5) of section
                165 by the eligible assessee.
                      (12) In this section, "eligible assessee" shall have the meaning as assigned to it in section 165.


Re-opening of   171. (1)The Assessing Officer shall, for reasons to be recorded in writing, reopen a case for
assessment.     reassessment, if he has reason to believe that any tax base chargeable to tax has escaped assessment
                for the relevant financial year.
                   (2) The Assessing Officer shall, for reopening a case, serve on the assessee a notice requiring
                him to furnish, within a period of thirty days, a return of tax bases for any financial year, in such
                form, verified in the manner and setting forth such other particulars, as may be prescribed.

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                (3) For the purposes of sub-section (1) , the following cases shall be regarded as cases where the
             tax bases chargeable to tax have escaped assessment, namely: --
                     (a) where the tax base for the relevant financial year exceeds the maximum amount not
                         liable to tax but-
                            (i )    the return of tax bases has not been furnished;
                            (ii) no notice has been issued under section 157; and
                            (iii) the time limitation for issuing such notice has expired;
                     (b) where a return of tax bases has been furnished by the assessee, but-
                            (i )    no assessment under section 165, section 166 or this section has been made; and
                            (ii)    the assessee has understated the tax bases, or has claimed excessive loss,
                                    deduction, allowance or relief in the return;
                     (c) where an assessment has been made under section 165 , section 166 or this section,
                         but--
                            (i )    the tax bases liable to tax has been under-assessed;
                            (ii) the tax bases have been assessed at too low a rate;
                            (iii)    the tax bases have been made the subject of relief to which the assessee is not
                                    entitled to under this Code;
                            (iv)     excessive loss or capital allowance or any other allowance under this Code has
                                    been computed;
                            (v )     the computation or assessment has not been made in accordance with any order,
                                    direction, instruction or circular issued by the Board;
                            (vi)     the computation or assessment has not been made by the Assessing Officer in
                                    accordance with any order or direction issued, before making of the assessment,
                                    by an authority to whom the Assessing Officer is subordinate; or
                            (vii) any objection has been raised by the Comptroller and Auditor General of India to
                                  the effect that the assessment has not been made in accordance with the
                                  provisions of the Income-tax Act, 1961 or the Wealth-tax Act, 1957, as they
                                  stood before the commencement of this Code or this Code and such objection
                                  forms part of the report of the Comptroller and Auditor General of India laid
                                  before each House of Parliament;
43 of 1961           (d) where search and seizure has been carried out under section 145, or material has been
27 of 1957               obtained in pursuance of a requisition under section 146, in the case of the person;
                     (e) where any material which has been seized, or obtained in pursuance of a requisition,
                         has a bearing on the determination of the tax bases of a person other than the person
                         referred to in clause (d);
                     (f )    where the assessee has failed to furnish a report in respect of any international
                            transaction or specified domestic transaction, as the case may be, under section 88;
                     (g)     where a person is found to have any asset (including financial interest in any entity)
                            located outside India;
                     (h) where the value, including the fair market value, of any asset, property, investment or
                         expenditure estimated by the Valuation Officer under section 163 is at variance with
                         the value claimed by a person.
                (4) The notice under sub-section (2) shall be issued--
                     (a) for the seven financial years immediately preceding the financial year in which the

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               search and seizure has been carried out or the material has been obtained;
         (b) after the expiry of twelve months from the end of the financial year in which the return
             was due and within a period of seven financial years from the end of the said financial
             year, where the time allowed under sub-section (1) of section 155 has expired;
         (c)    within a period of ten financial years from the end of the relevant financial year in a
               case where the income in relation to any asset (including financial interest in any
               entity) located outside India, chargeable to tax, has escaped assessment;
         (d) within a period of seven financial years from the end of the relevant financial year, in
             any other case.
    (5) The Central Government may by rules made by it (except in cases where any assessment or
reassessment has abated under sub-section (8)), specify the class or classes of cases in which the
Assessing Officer shall not be required to issue notice for assessing or reassessing the total income
for seven financial years immediately preceding the financial year in which search and seizure is
carried out or material has been obtained in pursuance of a requisition.
   (6) Notwithstanding anything in sub-section (4), the notice under sub-section (2) for any
financial year may be issued at any time, if--
         (a) the reassessment is to be made in consequence of, or to give effect to, any finding or
             direction contained in an order passed--
               (i )    by any authority or court in any proceeding under this Code by way of appeal,
                      reference or revision; or
               (ii)   by a court in any proceeding under any other law for the time being in force; and
         (b) the period referred to in sub-section (4) for issue of such notice had not expired at the
             time the order, which was the subject-matter of appeal, reference or revision, was
             made.
   (7) No noticnder sub-section (2) shall be issued--
         (a) in a case where an assessment has been made under section 165 or section 166 or
             under this section, by an Assessing Officer below the rank of Joint Commissioner --
               (i )    within a period of four years from the end of the relevant financial year, unless
                      the Joint Commissioner is satisfied on the reasons recorded by such Assessing
                      Officer that it is a fit case for issue of such notice;
               (ii)   after the expiry of a period of four years from the end of the relevant financial
                      year, unless the Commissioner is so satisfied;
         (b) in any other case, by an Assessing Officer below the rank of Joint Commissioner after
             the expiry of a period of four years from the end of the relevant financial year, unless
             the Joint Commissioner is satisfied on the reasons recorded by such Assessing Officer
             that it is a fit case for issue of such notice.
   (8) The Commissioner or the Joint Commissioner, being satisfied on the reasons recorded by the
Assessing Officer regarding fitness of a case for the issue of notice under this section, is not
required to issue such notice himself.
   (9) Any assessment proceeding relating to any financial year falling within the period of seven
financial years referred to in clause (a) of sub-section (4) shall abate if it is pending on the date of
the initiation of the search, or on the date of obtaining the material, as the case may be.
    (10) If any proceedings initiated or any order of assessment or reassessment made under sub-
section (4) is annulled in appeal or any other legal proceeding, then notwithstanding anything
contained in sub-section (4) or section 175, the assessment or reassessment relating to any financial
year which has abated shall stand revived with effect from the date of receipt of the order of such
annulment by the Commissioner.

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   (11) The revival of proceedings referred to in sub-section (10) shall cease to have effect, if the
order of annulment under that sub-section is set aside.
    (12) The provisions of this section shall also apply in the case of any other person, referred to in
clause (e) of sub-section (3), as if search and seizure has been carried out under section 145 in his
case, if any material which has a bearing on the determination of the tax bases of such other person,
has been--
         (a) seized in the course of search and seizure under section 145 in the case of the person
             referred to in clause (d) of sub-section (3); or
         (b) obtained in pursuance of the requisition under section 146 in the case of the person
             referred to in clause (d) of sub-section (3).
   (13) On receipt of a return in pursuance of a notice under sub-section (2), or after the expiry of
time specified for furnishing the return in pursuance of such notice, the Assessing Officer shall, by
an order in writing, make the reassessment of the total income and the provisions of sections 161 to
170 shall apply accordingly.
   (14) In any reassessment made under this section, the tax shall be chargeable at the rate or rates
at which it would have been charged had the tax bases not escaped assessment.
   (15) The proceedings under this section, excluding the proceedings initiated in consequence of
the condition specified in clauses (d) and (e) of sub-section (3) shall be dropped, if--
         (a) the assessee has not impugned any part of the original assessment order for the relevant
             financial year under sections 190 and 204;
         (b) he establishes that he had been assessed on an amount not lower than what he would
             be rightly liable for, even if the tax base alleged to have escaped assessment had been
             taken into account; and
         (c) the original assessment order has not been revised under section 173 or section 203.
   (16) For the purposes of this section,--
         (a) date of initiation of search, or the date of obtaining the material under sub-sections (9)
             and (12) shall be construed as a reference to the date of receiving the material by the
             Assessing Officer having jurisdiction over such other person;
         (b) reassessment shall include any other part of the tax bases chargeable to tax which has
             escaped assessment and which comes to the notice of the Assessing Officer
             subsequently in the course of reassessment proceedings, notwithstanding that the
             reasons recorded for reopening under sub-section (1) do not refer to such part of tax
             bases; and
         (c) reopening a case for reassessment shall include opening a case for assessment where
             return for tax bases has not been furnished before the issue of notice under sub-section
             (2).


172. No order of assessment or reassessment shall be passed by an Assessing Officer without the            Approval    for
approval of the Joint Commissioner in a case where--                                                       search
                                                                                                           assessment.
         (a) search and seizure has been carried out under section 145, or material has been
             obtained in pursuance of a requisition under section 146, in the case of the person;
         (b) any material which has been seized, or obtained in pursuance of a requisition, has a
             bearing on the determination of the tax bases of a person other than the person referred
             to in clause (a).




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173. (1) An income-tax authority may amend any order passed, or intimation issued by it under             Rectification of
this Code so as to rectify any mistake apparent from the record.                                          mistake.
   (2) No amendment under this section shall be made after a period of four years from the end of
the financial year in which the order sought to be amended was passed.
    (3) The income-tax authority shall not make any amendment, which has the effect of enhancing
the tax bases or reducing a refund or otherwise increasing the liability of the assessee, unless the
authority concerned has given to the assessee an opportunity of being heard.
   (4) The income-tax authority concerned may make an amendment --
        (a) on its own motion; or
        (b) on the application made to it by the assessee or, as the case may be, by the Assessing
            Officer.
   (5) Any application received by an authority for amendment of an order or intimation shall be
decided within a period of six months from the end of the month in which such application is
received by it.
   (6) In a case where the order has been decided in an appeal or revision, the power of the
authority to amend the order, or intimation, shall be restricted to matters other than those decided in
appeal or revision.


174. (1) Any sum payable in consequence of any order made, or intimation issued, under this Code          Notice       of
shall be demanded by an income-tax authority by serving upon the assessee a notice of demand in           demand.
such form and manner as may be prescribed.
   (2) The intimation issued under sub-section (3) of section 160 or sub-section (3) of section 224
shall be deemed to be the notice of demand for the purposes of this section.


175. (1) The Assessing Officer shall not make,--                                                          Time limits for
                                                                                                          completion of
        (a) any order of assessment under section 165 or section 166 after the expiry of a period
                                                                                                          assessment or
            of twenty-four months from the end of the financial year in which the return was due;
                                                                                                          reassessment.
        (b) any order of reassessment under section 171 after the expiry of a period of--
             (i )     twenty-four months from the end of the financial year in which the last of the
                     authorisations was executed in the case of a person where search and seizure was
                     carried out under section 145 or the material was obtained in pursuance of a
                     requisition under section 146;
             (ii)     twenty-four months from the end of the financial year in which any material
                     belonging to the person referred to in section 148 is handed over to the
                     Assessing Officer having jurisdiction over such person;
             (iii)    twelve months from the end of the financial year in which the notice under
                     section 171 is served, in any other case;
        (c) any order recomputing the total income of a transferee company after the expiry of a
            period of four years from the end of the financial year in which the conditions laid
            down in clause (d) or clause (e) of sub-section (1) of section 47, as the case may be, are
            not complied with;
        (d) any order computing the capital gain by taking the reduced compensation or
            consideration referred to in sub-section (3) of section 50 after the expiry of a period of
            four years from the end of the financial year in which th order reducing the
            compensation was passed by the court, tribunal or other authority;


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        (e)    any order recomputing the deduction under section 55, in a case where in the
              assessment for any financial year, the person acquires a new asset within the extended
              time allowed under sub-section (7) of that section, after the expiry of a period of four
              years from the end of the financial year in which the compensation was received by the
              person;
        (f) any order recomputing the total income under section 84 after the expiry of a period of
            four years from the end of the financial year in which the order of the Controller or the
            High Court, as the case may be, was passed;
        (g) any order recomputing the total income of the person for succeeding financial years in
            pursuance of an order under section 171 in which loss has been recomputed for a
            financial year, after the expiry of a period of four years from the end of the financial
            year in which the order under section 171 was passed;
        (h) any order of assessment in pursuance of an order under section 197 or section 199 or
            section 202 or section 289, setting aside or cancelling an assessment, as the case may
            be, after the expiry of a period of one year from the end of the financial year in which
            the order is received by the Commissioner;
         (i) any order of assessment, reassessment or recomputation in pursuance of the revival of
             any proceeding under this Code, after the expiry of a period of one year from the end
             of the financial year in which the order of revival of the proceedings is received by the
             Commissioner.
   (2) Notwithstanding anything in sub-section (1), the Assessing Officer shall, in a case where a
reference has been made to the Transfer Pricing Officer under section 164, not make an order of
assessment or reassessment, as the case may be,-
        (a) under section 165 or section 166 for such financial year after the expiry of a period of
            thirty-six months from the end of the financial year in which the return was due;
        (b) under section 171 for such financial year after the expiry of a period of twenty-four
            months from the end of the financial year in which the notice under section 171 was
            served;
        (c) in pursuance of an order under section 197 or section 289 for such financial year after
            the expiry of a period of twenty-four months from the end of the financial year in
            which the order under section 197 or section 289, as the case may be, is received by
            the Commissioner.
   (3) The provisions of sub-sections (1) and (2) shall not apply in respect of assessment, re-
assessment or recomputation to be made in consequence of, or to give effect to, any finding or
direction contained in any order--
        (a) under sections 192, 197, 199, 202, 203, 204 or section 289; or
        (b) of any court in a proceeding otherwise than by way of appeal or reference under this
            Code.
   (4) Where, by an order referred to in sub-section (3), any income is excluded from-
              (i)    the total income of the person for a financial year and is held to be the income of
                    another financial year; or
              (ii) the total income of one person and held to be the income of another person,
then, the assessment of such income shall be made accordingly and it shall be deemed to be made in
consequence of or to give effect to any finding or direction contained in the said order.
    (5) In computing the period of limitation for the purposes of sub-sections (1) and (2), the
following period or time shall not be included, namely: --


                                               132
                         (a)     the period commencing from the date on which the application for Advance Pricing
                                Agreement is filed by the assessee and ending with --
                                (i )    the date on which the order rejecting the application is received by the
                                       Commissioner; or
                                (ii)    the date on which the copy of the Advance Pricing Agreement entered into in
                                       accordance with the provisions of section 121, is received by the Commissioner;
                         (b)     the time taken in reopening the whole or any part of the proceeding or in giving an
                                opportunity to the assessee to be reheard under section 143;
                         (c) the period during which the assessment proceeding is stayed by an order or injunction
                             of any court;
                         (d) the period commencing from the date on which the Assessing Officer directs the
                             assessee to get his accounts audited under section 162 and,-
                             (i)    ending with the last date on which the assessee is required to furnish a report of
                                   such audit under that section, or
                                (ii)   where such direction is challenged before a court, ending with the date on which
                                       the order setting aside such direction is received by the Commissioner, ;
                         (e) the period commencing from the date on which a reference for declaration of an
                             arrangement to be an impermissible avoidance arrangement is received by the
                             Commissioner under sub-section (1) of section 169 and ending on the date on which a
                             direction under sub-section (3) or sub-section (6) or an order under sub-section (5) of
                             the said section is received by the Assessing Officer;
                         (f )    the period commencing from the date on which an application is made before the
                                Authority for Advance Rulings under sub-section (1) of section 285 and ending with
                                the date on which the order rejecting the application, or the date on which the advance
                                ruling pronounced by it, is received by the Commissioner under sub-section (9) or, as
                                the case may be, sub-section (13) of that section;
                          (g) the period commencing from the date on which a reference or first of the references
                              for exchange of information is made by an authority competent under an agreement
                              referred to in section 295 and ending with the date on which the information requested
                              is last received by the Commissioner or a period of one year, whichever is less.
                     (6) The period of limitation available to the Assessing Officer for making an order of
                 assessment, reassessment or recomputation, shall be extended in any other case, to sixty days, if the
                 period immediately after the exclusion of the time or period specified in sub-section (5) is less than
                 sixty days.


                                            C. -- PROCEDURE FOR ASSESSMENT IN SPECIAL CASES


Representative   176. (1) For the purposes of this Code, "representative assessee" in respect of an assessee means--
assessee.
                         (a) the agent of a non-resident, if the assessee is a non-resident;
                         (b) the guardian, or manager, of a minor, lunatic or idiot, if the assessee is a minor, lunatic
                             or idiot;
                         (c )    the Court of Wards, the Administrator-General, the Official Trustee, any receiver or
                                manager (including any person, whatever be his designation, who manages property on
                                behalf of the assessee) appointed by, or under, any order of a court, if such person
                                receives, or is entitled to receive, income on behalf, or for the benefit, of the assessee;
                         (d) a trustee appointed under an oral trust, or a trust declared by a duly executed instrument

                                                                  133
                in writing whether testamentary or otherwise and who receives or is entitled to receive,
                income on behalf, or for the benefit, of any person, if the assessee is a trust;
         (e) the legal representative, or the executor, if the assessee dies;
         (f )    a participant, or the legal representative of the deceased participant, in the case of
                dissolution of an unincorporated body; and
         (g) the liquidator appointed under section 448, or section 490, of the Companies Act, 1956
             or under section 310, or section 359, of the Companies Act, 2013 in the case of a
             company.
   (2) The "agent" in relation to a non -resident includes--
         (a) any person in India--
                (i )   who is employed by, or on behalf of, the non-resident;
                (ii)   who has any business connection with the non-resident;
                (iii) from, or through, whom the non-resident is in receipt of any income, whether
                      directly or indirectly; or
                (iv) who is the trustee of the non-resident; and
         (b) any other person who has acquired, by means of transfer, a capital asset in India from
             the non-resident.
    (3) A broker in India who, in respect of any transaction, does not deal directly with, or on behalf
of, a non-resident principal but deals with, or through, a non-resident broker shall not be deemed to
be an agent under this section in respect of such transaction, if the following conditions are fulfilled,
namely:--
         (a) the transactions are carried on in the ordinary course of business through the first-
             mentioned broker; and
         (b) the non-resident broker is carrying on such transactions in the ordinary course of his
             business and not as a principal.
   (4) The "executor" in relation to the estate of a deceased person means--
                (i )   an individual, if such individual is the only executor; or
                (ii)   an association of persons comprising all the executors, if there are more than one
                       executor,
and includes an administrator or other person administering such estate.
   (5) No person shall be treated as an agent of a non-resident unless he has had an opportunity of
being heard by the Assessing Officer as to his liability to be treated as such.


177. (1 ) Every representative assessee shall, in his representative capacity, be liable to assessment      Rights       and
only in respect of the tax bases of the person represented by him (hereinafter in this Sub-chapter          obligations of a
referred to as the principal).                                                                              representative
                                                                                                            assessee.
   (2) Subject to sub-section (3), every representative assessee shall be subject to the same duties,
responsibilities and liabilities as if the tax bases accrued to, or is received or owned by, him.
   (3) The tax on tax bases of the representative assessee shall be levied upon, and recovered from,
him in the manner, and to the extent, as it would have been leviable upon, and recoverable from, the
principal.
    (4) Any representative assessee, or any person who apprehends that he may be assessed as a
representative assessee, may retain a sum equal to his estimated liability under this Sub-chapter out
of the money payable by him to the principal on whose behalf he is liable to pay tax.

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                         (5) The representative assessee, or the person referred to in sub-section (4), in the event of
                  disagreement between him and the principal as to the amount to be so retained, may apply to the
                  Assessing Officer for a certificate stating the amount to be so retained pending final settlement of
                  the liability.
                        (6) Upon receipt of the application under sub-section (5), the Assessing Officer shall issue,
                  within a period of one month from the date of receipt of the application, the certificate stating the
                  amount to be retained by the representative assessee or the person.
                        (7) The certificate issued under sub-section (6) shall be the warrant for retaining the amount
                  specified therein by the representative assessee or the person.
                        (8) The amount recoverable from the representative assessee, or the person referred to in sub-
                  section (4), at the time of final settlement shall not exceed the amount specified in such certificate,
                  except to the extent to which the representative assessee, or the person, may have additional assets
                  of the principal at that time.
                         (9) Every representative assessee who, as such, pays any sum under this Code, shall be
                  entitled to--
                           (a) recover the sum so paid from the principal; or
                           (b) retain an amount equal to the sum so paid out of any moneys that may be in his
                               possession, or may come to him, in his representative capacity.
                        (10) In the case of a representative assessee referred to in clause (e), (f) or clause (g) of sub-
                  section (1) of section 176--
                           (a)    any proceeding taken against the principal before his death or its dissolution or the
                                 appointment of the liquidator, shall be deemed to have been taken against the
                                 representative assessee and may be continued against him from the stage at which it
                                 stood on the date of the death or dissolution or the appointment; and
                           (b) any proceeding which could have been taken against the principal if the principal had
                               survived or existed or the liquidator had not been appointed, may be taken against the
                               representative assessee.
                       (11) For the purposes of this section tax includes interest, penalty, fine or fee payable under
                  this Code;
                       (12) The liability of a legal representative, referred to in clause (e) or (f) of sub-section (1) of
                  section 176, shall, subject to the provisions of sub-sections (4), (5), (6) and (7) and of section 179,
                  be limited to the extent to which the assets of the deceased are capable of meeting the liability.


Direct            178. Nothing in this Sub-chapter shall prevent --
assessment or
                           (a) the direct assessment of the principal; or
recovery not
barred.                    (b) the recovery of any sum payable under this Code from the principal.




Remedy            179. The Assessing Officer shall have the same remedy against all property of any kind vested in,
against           or under the control or management of, any representative assessee as he would have against the
property     in   property of the principal, in as full and ample a manner, whether the demand is raised against the
case         of   representative assessee or against the principal direct.
representative
assessee.



                                                                  135
Assessment        180. (1) The assessment of the predecessor and the successor in a business re-organisation shall, in
upon business     respect of the financial year in which the business re-organisation is undertaken, be made in the
re-               manner provided in this section.
organisation.
                         (2) The predecessor shall be assessed in respect of the income for the period beginning with
                  the first day of the financial year and ending on the day immediately preceding the date of business
                  re-organisation.
                        (3) The successor shall be assessed in respect of the income for the period beginning with the
                  date of business re-organisation and ending on the last day of the financial year.
                         (4) Any proceeding under this Code taken against the predecessor shall be deemed to have
                  been taken against the successor and may be continued against the successor from the stage at which
                  it stood on the date of the business re-organisation, if the predecessor does not exist or cannot be
                  found.
                        (5) Subject to the provisions of sub-section (4), any proceeding under this Code may be taken
                  against the successor, which could have been taken against the predecessor if he existed or was
                  found.


Assessment        181. (1) A Hindu undivided family, hitherto assessed as undivided, shall be deemed, for the
after partition   purposes of this Code, to continue to be a Hindu undivided family, except where, and in so far as, a
of a Hindu        finding of partition has been given under this section in respect of the Hindu undivided family.
undivided
                        (2) The Assessing Officer shall--
family
                          (a) make an inquiry into the claim of partition made by, or on behalf of, any member of a
                              Hindu undivided family, hitherto assessed as undivided, at the time of making the
                              assessment;
                          (b) give notice of the inquiry to all members of the family; and
                          (c) record a finding as to whether there has been a total, or partial, partition of the joint
                              family property and, if there has been such a partition, the date on which it has taken
                              place.
                        (3) The tax bases of the Hindu undivided family, hitherto assessed as undivided, shall, for the
                  financial year in which the partition took place, be the tax bases in respect of the period up to the
                  date of partition, as if no partition had taken place.
                        (4) Each member, or group of members, of the Hindu undivided family, hitherto assessed as
                  undivided, shall be jointly and severally liable for tax on the tax bases of any financial year or
                  period, up to the date of partition, and such tax shall be recovered from him, or them, accordingly.
                        (5) For the purposes of this section, the several liability of any member, or group of members,
                  shall be computed according to the portion of the joint family property allotted to him, or to them,
                  upon the partition.
                         (6) The provisions of this section shall, so far as may be, apply in relation to the levy and
                  collection of any penalty, interest, fine or other sum in respect of any period upto the date of the
                  partition, whether total or partial, of a Hindu undivided family as they apply in relation to the levy
                  and collection of tax in respect of any such period.
                         (7) For the purposes of this Code, no claim of partial partition of a Hindu undivided family
                  shall be inquired into, or recognised as such.
                        (8) In case of a partial partition of a Hindu undivided family--
                          (a) the Hindu undivided family shall continue to be assessed under this Code as if no
                              partial partition had taken place; and

                                                                136
         (b) the liability of that Hindu undivided family or its members under this Code, before or
             after the partial partition, shall remain the same.
      (9) In this section--
         (a) "partition" means--
             (i) where the property admits of a physical division, such division of the property, but
                 a physical division of the income without a physical division of a property
                 producing the income shall not be deemed to be a partition; or
             (ii) where the property does not admit of a physical division, then such division as the
                  property admits of, but a mere severance of status shall not be deemed to be a
                  partition;
         (b) "partial partition" means a partition which is partial as regards the persons constituting
             the Hindu undivided family, or the properties belonging to the Hindu undivided family,
             or both.


182. (1) Notwithstanding anything in this Code, the assessment of the income of a non-resident              Assessment of
from the business of operation of ships (including an arrangement such as slot charter, space charter       non-resident in
or joint charter) shall be made in accordance with the provisions of this section.                          respect      of
                                                                                                            occasional
    (2) The master of a ship belonging to, or chartered by, a non-resident shall, before the departure
                                                                                                            shipping
of the ship, furnish to the Assessing Officer a return of the full amount of transportation charges
                                                                                                            business.
accrued to, or received by, the owner or charterer, since the last arrival of the ship in that port.
   (3) The requirement of furnishing the return shall be deemed to have been complied with, if--
         (a) the Assessing Officer is satisfied that--
             (i )    it is not possible for the master of the ship to furnish the return before the
                    departure of the ship from the port; and
             (ii)     the master of the ship has made satisfactory arrangements for furnishing the
                    return and payment of tax; and
         (b) the return is furnished within a period of thirty days of the departure of the ship by any
             person authorised by the master of the ship.
   (4) On receipt of the return, the Assessing Officer shall--
         (a) assess the income referred to in sub-section (1) in accordance with serial number 7 of
             the Table under Paragraph 1 of the Eleventh Schedule, after calling for such
             documents as he deems fit; and
         (b) determine the sum payable as tax thereon at the rates applicable to the total income of
             a foreign company.
   (5) The sum determined under sub-section (4) shall be payable by the master of the ship or any
other person authorised by him.
   (6) A port clearance shall not be granted to the ship until the Commissioner of Customs, or
other officer duly authorised to grant it, is satisfied that the tax assessable under this section has
been duly paid or that satisfactory arrangements have been made for the payment.
    (7) Nothing in this section shall prevent the assessment of the income, referred to in sub-section
(1), for the relevant financial year of the owner, or charterer, of the ship in accordance with the other
provisions of this Code, at his option.
   (8) Any payment of tax made under this section shall be treated as advance tax, in case an
assessment is made as envisaged in sub-section (7).


                                                137
Assessment of    183. (1) The tax bases of an individual for part of a financial year may be chargeable to tax in that
persons          financial year, if--
leaving India.
                         (a) it appears to the Assessing Officer that the individual may leave India during the
                             financial year or shortly after its expiry; and
                         (b) has no intention of returning to India.
                       (2) The part of a financial year, referred to in sub-section (1) shall be the period beginning
                 with the first day of the financial year and ending with the probable date of his departure from India.
                       (3) The Assessing Officer may estimate the tax bases of the individual for part of a financial
                 year if it cannot be readily determined in accordance with this Code.
                        (4) For the purposes of making an assessment under sub-section (1), the Assessing Officer
                 may require the individual to furnish the return of tax bases within the time specified therein, which
                 shall not be less than seven days.
                       (5) Notwithstanding anything in this Code, the Assessing Officer may require the individual
                 to furnish the return of tax bases, within the time specified therein, which shall not be less than
                 seven days--
                         (a) for the financial year for which the due date for filing of return has not expired; and
                         (b)    for such other financial years for which no return of tax bases has been filed which
                               was otherwise required to be filed.
                       (6) The Assessing Officer shall, upon receipt of the return, or after the expiry of the time
                 allowed for furnishing the return under sub-section (4) or sub-section (5), proceed to make the
                 assessment in accordance with the provisions of this Code in so far as they apply.
                        (7) The tax payable on the tax bases computed under this section shall be in addition to the
                 tax, if any, payable under any other provision of this Code.


                 184. (1) Notwithstanding anything in this Code, where it appears to the Assessing Officer that an         Assessment of
                 unincorporated body formed for a particular event or purpose in a financial year is likely to be          an
                 dissolved in the financial year or shortly thereafter, then the Assessing Officer may charge to tax in    unincorporated
                 that financial year the tax bases of the unincorporated body for the period beginning from the first      body     formed
                 day of the financial year to the likely date of its dissolution.                                          for a particular
                                                                                                                           event         or
                     (2) The provisions of section 183 shall apply to any proceeding under this section as they apply
                                                                                                                           purpose.
                 in the case of a person leaving India.

                 185. (1) Notwithstanding anything in this Code, where it appears to the Assessing Officer that any        Assessment of
                 person is likely to charge, sell, transfer, dispose of or otherwise part with any of his assets, in any   persons likely
                 financial year, with a view to avoiding payment of any liability under this Code, then the Assessing      to       transfer
                 Officer may charge to tax in that financial year the tax bases of such person for the period beginning    property       to
                 from the first day of the financial year to the date when the Assessing Officer commences                 avoid tax.
                 proceedings under this section.
                     (2) The provisions of section 183 shall apply to any proceeding under this section as they apply
                 in the case of a person leaving India.


                 186. (1) Notwithstanding anything in this Code, where any business is discontinued in any                 Discontinued
                 financial year, the Assessing Officer may, in his discretion, charge to tax in that financial year the    business.
                 tax bases of such business for the period beginning from the first day of the financial year to the
                 date on which the business has been discontinued.

                                                                138
                        (2) Any person discontinuing any business shall give to the Assessing Officer notice of such
                  discontinuance within a period of fifteen days thereof.
                        (3) Any sum received after the discontinuance of business shall be deemed to be the income of
                  the recipient and charged to tax accordingly in the year of receipt, if such sum would have been
                  included in the tax bases of the person who carried on the business had such sum been received
                  before such discontinuance.
                        (4) The Assessing Officer may require the person whose business has been discontinued to
                  furnish the return of tax bases, within the time specified therein, which shall not be less than a
                  period of seven days.
                        (5) The notice for furnishing the return shall be served by the Assessing Officer, in the case of
                  discontinuance of the business of--
                           (a) the individual, on him;
                           (b)    the unincorporated body, on the participant who was member of the unincorporated
                                 body at the time of discontinuance; and
                           (c) the company, on the principal officer thereof.
                       (6) The Assessing Officer shall, upon receipt of the return, or after the expiry of the time
                  allowed for furnishing the return under sub-section (4) proceed to make the assessment in
                  accordance with the provisions of this Code in so far as they apply.
                         (7) The tax payable on the tax bases computed under this section shall be in addition to the
                  tax, if any, payable under any other provision of this Code.


Assessment of     187. (1) The Assessing Officer shall, in a case where a change has occurred in the constitution of
unincorporated    an unincorporated body, make a single assessment in respect of the entire financial year in which
body in case of   the change has occurred.
change in its
                        (2) The assessment referred to in sub-section (1) shall be made on the unincorporated body as
constitution.
                  constituted on the last day of the relevant financial year.
                        (3) In this section, a change in the constitution of an unincorporated body is said to have taken
                  place, if--
                           (a) one, or more, of the participants cease to be participants;
                           (b) one, or more, new participants are admitted; or
                           (c) all the participants continue with a change in their respective shares or in the shares of
                               some of them.
                        (4) The provisions of this section shall not apply, if the change in constitution is on account of
                  the death of a participant or the retirement of all the participants.


Assessment on     188. (1) The Assessing Officer shall make separate assessments on any two unincorporated bodies,
retirement or     if--
death        of
                           (a) one unincorporated body succeeds another unincorporated body; and
participant.
                           (b) the succession is by virtue of retirement of all participants in the unincorporated body
                               or death of any of the participants.
                         (2) The separate assessments shall be made in accordance with the provisions of section 169
                  as if--
                           (a) the unincorporated body, succeeding the other unincorporated body, is the successor;
                               and

                                                                 139
                           (b) the unincorporated body being succeeded is the predecessor.


                  189. (1) The Assessing Officer may assess a return filed under section 217 or section 221, as if it         Assessment of a
                  were a return of tax bases referred to in section 155, and all the other provisions of this Code shall,     deductor     or
                  as far as may be, apply accordingly.                                                                        collector.
                      (2) The Assessing Officer may, in a case where a person has failed to file the return under
                  section 217 or section 221, issue a notice to the person requiring him to furnish the return within the
                  time specified therein and all the other provisions of this Code shall, as far as may be, apply as if it
                  were a return of tax bases referred to in section 155.
                      (3) The provisions of sub-section (1) shall be applicable in a case where the Assessing Officer
                  has reasons to believe that the persistent failure on part of the deductor or the seller or the lessor or
                  licensor, as the case may be, in complying with the provisions of Part A or Part B of Chapter XIV,
                  has adversely impacted the interests of revenue.
                     (4) The Assessing Officer shall take approval of the Commissioner before issue of notice for the
                  purposes of sub-section (1).



                                                         D.--APPEALS AND REVISION


                  190. (1) An assessee may prefer an appeal to the Commissioner (Appeals) where he is aggrieved               Appeal      to
                  by an intimation issued or an order passed by any income-tax authority below the rank of the                Commissioner
                  Commissioner as specified in the Nineteenth Schedule.                                                       (Appeals).
                     (2) Without prejudice to sub-section (1), the assessee may prefer an appeal--
                                 (i )    where an application filed by him under section 173 has not been disposed of by
                                        the Assessing Officer within a period of six months from the end of the month in
                                        which the application was filed; or
                                 (ii)    where he is required to bear the liability in respect of the tax deductible under
                                        section 213 on the income payable to a non-resident under any agreement or
                                        other arrangement and--
                           (a)    he claims that no tax was deductible by him on such income payable by him to the
                                 non-resident; and
                           (b) has paid the tax on such income to the credit of the Central Government.


Form of appeal    191. (1) Every appeal under section 190 shall be in such form and verified in such manner and
and limitation.   accompanied by such fees, as may be prescribed.
                     (2) The appeal by an assessee under section 190 shall be preferred within a period of thirty
                  days from--
                           (a) the date of service of the notice of demand, if the appeal relates to any order or
                               intimation in pursuance of which such notice of demand is issued;
                           (b) the date on which the period of six months for disposing of the application expired, if
                               the appeal relates to not disposing of the application for rectification under section
                               173;
                           (c) the date of payment of the tax to the Central Government, if the appeal is filed under
                               clause (ii) of sub-section (2) of section 190; and


                                                                   140
                         (d) the date on which the order sought to be appealed against is served, if the appeal relates
                             to any other matter.
                    (3) The Commissioner (Appeals) may admit an appeal after the expiry of the period specified in
                 sub-section (2), if
                         (a)    he is satisfied that the appellant had sufficient cause for not preferring it within that
                               time.
                         ; and
                         (b) the delay in preferring the appeal does not exceed a period of one year.
                    (4) No appeal under this section shall be admitted unless--
                         (a) the assessee has paid the tax due in accordance with the return of tax bases furnished;
                         (b) the assessee has paid an amount equal to the amount of advance-tax which was payable
                             by him, if no return of tax bases has been filed by the assessee.
                     (5) The Commissioner (Appeals) may, on an application made by the assessee, exempt him
                 from the operation of the provisions of clause (b) of sub-section (4) for any good and sufficient
                 reason to be recorded in writing.


Procedure   in   192. (1) The Commissioner (Appeals) shall fix a day and place for the hearing of the appeal, and
appeal.          shall give notice of the same to the appellant and the Assessing Officer against whose order the
                 appeal is preferred.
                    (2) The following shall have the right to be heard at the hearing of the appeal, namely: --
                         (a) the appellant, either in person or by an authorised representative;
                         (b) the Assessing Officer, either in person or by a representative.
                     (3) The Commissioner (Appeals) may adjourn the hearing of the appeal whenever he considers
                 it necessary or expedient to do so.
                    (4) The Commissioner (Appeals) may, before disposing of any appeal, make such further
                 inquiry as he thinks fit.
                    (5) The Commissioner (Appeals) may, during the proceedings before him, direct the Assessing
                 Officer to make an inquiry and report to him on the points arising out of any question of law or fact.
                    (6) The Commissioner (Appeals) may, at the hearing of an appeal, allow the appellant to go into
                 any ground of appeal not specified in the grounds of appeal, if the Commissioner (Appeals) is
                 satisfied that the omission was not wilful or unreasonable.
                    (7) The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and
                 shall state the points for determination, the decision thereon and the reasons therefor.
                    (8) Every appeal preferred under section 190 shall be heard and disposed of by the
                 Commissioner (Appeals) as expeditiously as possible and endeavour shall be made to dispose of
                 such appeal within a period of one year from the end of the financial year in which the appeal is
                 preferred.
                    (9) On the disposal of the appeal, the Commissioner (Appeals) shall communicate the order
                 passed by him to the assessee and to the Chief Commissioner or the Commissioner.


                 193. (1) In disposing of an appeal, the Commissioner (Appeals) shall have the following powers,            Powers      of
                 namely:--                                                                                                  Commissioner
                                                                                                                            (Appeals).
                         (a) in an appeal against an order of assessment, he may confirm, reduce, enhance or annul

                                                                141
               the assessment;
        (b) in an appeal against an order imposing a penalty, he may confirm or cancel such order
            or vary it so as to enhance or reduce the penalty;
        (c )    in any other case, he may determine the issues arising in the appeal and pass such
               orders thereon, as he thinks fit.
    (2) The Commissioner (Appeals) may consider and decide any matter which was not considered
by the Assessing Officer.
   (3) The Commissioner (Appeals) shall not enhance an assessment or a penalty or reduce the
amount of refund unless the appellant has had an opportunity of showing cause against such
enhancement or reduction.
   (4) In disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter
arising out of the proceedings in which the order appealed against was passed, notwithstanding that
such matter was not raised before him by the appellant.


194. (1) The Central Government shall constitute an Appellate Tribunal consisting of a President             Appellate
and as many judicial and accountant members, as it thinks fit, to exercise the powers and discharge          Tribunal.
the functions conferred on the Appellate Tribunal by this Code.
   (2) A judicial member shall be a person--
               (i) who has for at least ten years held a judicial office in the territory of India;
               (ii) who has been a member of the Indian Legal Service and has held a post in Grade I
                    of that Service, or any equivalent or higher post, for at least three years; or
               (iii) who has for at least ten years been an advocate of a High Court or of two or more
                     such courts in succession.
   (3) An accountant member shall be a person--
        (a)     who has for at least fifteen years been in the practice of accountancy as a chartered
               accountant under the Chartered Accountants Act, 1949; or
        (b) who has been a member of the Indian Revenue Service and has held the post of
            Additional Commissioner of Income-tax or any equivalent or higher post for at least
            three years.
  (4) The Central Government may appoint one or more judicial or accountant members of the
Appellate Tribunal to be Vice-President or, as the case may be, Vice-Presidents thereof.
    (5) The Central Government may appoint one of the Vice-Presidents of the Appellate Tribunal
to be the Senior Vice-President thereof.
   (6) The Central Government may appoint­­
        (a) a person who is a sitting or retired Judge of a High Court and who has completed not
            less than seven years of service as a Judge in a High Court; or
        (b) the Senior Vice-President or one of the Vice-Presidents of the Appellate Tribunal,
               to be the President of the Tribunal constituted under sub-section (1)..
    (7) The Senior Vice-President or a Vice-President shall exercise such of the powers and
perform such of the functions of the President as may be delegated to him by the President by a
general or special order in writing.
   (8) For the purpose of sub-section (2),--
       (a)     in computing the period during which a person has held judicial office in the territory
               of India, there shall be included any period, after he has held any judicial office, during

                                                  142
                               which the person has been an advocate of a High Court or has held the office of a
                               member of a tribunal or any post, under the Union or a State, requiring special
                               knowledge of law;
                        (b)     in computing the period during which a person has been an advocate of a High Court,
                               there shall be included any period during which the person has held judicial office or
                               the office of a member of a tribunal or any post, under the Union or a State, requiring
                               special knowledge of law after he became an advocate.
                     (9) In this Sub-chapter, "judicial member" means a judicial member referred to in sub-section
                 (2) and includes the President.


Appeals     to   195. (1) An assessee may prefer an appeal to the Appellate Tribunal, where he is aggrieved by an
Appellate        order passed by­
Tribunal.
                        (a)    Commissioner (Appeals) under section 192;
                        (b)    Commissioner under section 97 and section 203;
                        (c )   Commissioner or Commissioner (Appeals) in respect of levy of penalty under Chapter
                               XV relating to Penalties;
                        (d)    Assessing Officer in consequence of an order of the Commissioner under section 192;
                        (e )   Assessing Officer in pursuance of the directions of the Dispute Resolution Panel;
                        (f)     an Assessing Officer with the approval of the Commissioner as referred to in sub-
                               section (12) of section 169; and
                        (g)    the income-tax authorities referred to in clauses (a) to (f) above, under section 173, in
                               respect of the orders mentioned in the said clauses.
                    (2) The Commissioner may, if he is not satisfied with the order passed by the Commissioner
                 (Appeals), direct the Assessing Officer to prefer an appeal to the Appellate Tribunal against such
                 order.
                    (3) The Commissioner may, if he is not satisfied with the direction issued by the Dispute
                 Resolution Panel under sub-section (2) of section 170 in pursuance of which the Assessing Officer
                 has passed an order completing the assessment or reassessment, direct the Assessing Officer to
                 appeal to the Appellate Tribunal against such order.
                     (4) Notwithstanding anything in sub-sections (1) and (2), no appeal shall lie to the Appellate
                 Tribunal against the order of the Commissioner (Appeals) or the Commissioner, as the case may be,
                 in the case of a public sector company, irrespective of the fact whether the order is prejudicial to the
                 company or the revenue, but shall lie to the Authority as referred to in section 284.
                    (5) Every appeal under sub-section (1), or sub-section (2), shall be preferred within a period of
                 sixty days from the date on which the order sought to be appealed against is communicated to the
                 assessee or to the Commissioner, as the case may be.
                    (6) An appeal under sub-section (3) shall be preferred within a period of sixty days from the date
                 on which the order sought to be appealed against is passed by the Assessing Officer in pursuance of
                 the directions of the Dispute Resolution Panel under sub-section (2) of section 170.
                    (7) The Assessing Officer or the assessee may, on receipt of notice that an appeal against the
                 order of the Commissioner (Appeals) has been preferred under sub-section (1) or sub-section (2) by
                 the other party, file a memorandum of cross-objection against any part of the order of the
                 Commissioner (Appeals) within a period of thirty days of the receipt of the notice.
                    (8) The memorandum of cross-objection shall be disposed of by the Appellate Tribunal as if it
                 were an appeal preferred within the time specified in sub-section (5).
                    (9) The Appellate Tribunal may admit an appeal, or a memorandum of cross-objection, after the

                                                                143
                 expiry of the period specified in sub-section (5) or sub-section (6) or sub-section (7), if--
                          (a)    it is satisfied that the appellant or the    respondent had sufficient cause for not
                                presenting it within that time; and
                          (b) the delay in filing the appeal does not exceed a period of one year.
                       (10) An appeal or the memorandum of cross-objection to the Appellate Tribunal shall be in
                 such form and be verified in such manner, as may be prescribed.
                       (11) The appeal by an assessee shall be accompanied by such fees as may be prescribed.


Stay        of   196. (1) An assessee may make an application to the Appellate Tribunal for stay of demand
demand      by   relating to the appeal preferred by him under section 195 and such application shall be accompanied
Appellate        by such fee as may be prescribed.
Tribunal.
                       (2) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of
                 being heard and having considered the merits of the case, pass such orders on the stay application as
                 it deems fit.
                      (3) The Appellate Tribunal may grant stay under sub-section (2) for a period not exceeding
                 one hundred and eighty days from the date of passing of the order for stay and the Appellate
                 Tribunal shall dispose of the appeal within the said period of stay specified in that order.
                       (4) The Appellate Tribunal may, on an application made by the assessee seeking extension of
                 the period of stay, extend the period of stay allowed under sub-section (2), if it is satisfied that the
                 delay in disposing of the appeal is not attributable to the assessee.
                       (5) The aggregate of the period originally allowed under sub-section (2) and the period or
                 periods extended under sub-section (4) shall not, in any case, exceed three hundred and sixty-five
                 days from the date of passing the order of stay under sub-section (2).
                        (6) The Appellate Tribunal shall dispose of the appeal during the period of stay allowed under
                 sub-section (2) or the period or periods extended under sub-section (4), and where it fails to do so,
                 the stay order shall stand vacated notwithstanding that the delay in disposing of the appeal is not
                 attributable to the assessee.


Orders      of   197. (1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of
Appellate        being heard, pass such orders thereon as it thinks fit.
Tribunal.
                        (2) The Appellate Tribunal may, either suo motu or on the mistake being brought to its notice
                 by the assessee or the Assessing Officer at any time within a period of four years from the date of
                 the order, with a view to rectifying any mistake apparent from the record, amend any order passed
                 by it under sub-section (1).
                       (3) The Appellate Tribunal shall not make an amendment which has the effect of enhancing
                 an assessment or reducing a refund or otherwise increasing the liability of the assessee under sub-
                 section (2) without giving the assessee an opportunity of being heard.
                       (4) Every appeal preferred under section 195 shall be heard and disposed of by the Appellate
                 Tribunal as expeditiously as possible and endeavour shall be made to dispose of such appeal within
                 a period of two years from the end of the financial year in which the appeal is preferred.
                      (5) The costs of any appeal to the Appellate Tribunal may be allowed at the discretion of the
                 Tribunal.
                       (6) The Appellate Tribunal shall send a copy of any order passed under this section to the
                 assessee and to the Commissioner.
                       (7) Subject to the provisions of section 199, the orders passed by the Appellate Tribunal shall
                 be final.

                                                                 144
Constitution of   198. (1) The powers and functions of the Appellate Tribunal may be exercised and discharged by
Benches and       its Benches constituted by the President of the Appellate Tribunal from among the members thereof.
procedure of
                       (2) Subject to sub-section (3), a Bench shall consist of one judicial member and one
Appellate
                  accountant member.
Tribunal.
                        (3) The Vice-President or any other member of the Appellate Tribunal authorised in this
                  behalf by the Central Government may, sitting alone, dispose of any case allotted to the Bench of
                  which he is a member and which pertains to an assessee, not being a company or a non-resident,
                  whose tax bases as computed by the Assessing Officer does not exceed five lakh rupees.
                        (4) The President may, in the interests of justice and for the disposal of any particular case,
                  constitute a Special Bench consisting of three or more members, one of whom shall necessarily be a
                  judicial member and one an accountant member.
                        (5) The President may, on a reference received from the Board for the disposal of any
                  particular case or class of cases, constitute a Special Bench consisting of five members or more, two
                  of whom shall necessarily be judicial members and two accountant members.
                       (6) Where on any point the members of a Bench differ in opinion, it shall be decided
                  according to the opinion of the majority.
                        (7) If the members of a Bench are equally divided in opinion on any point or points, they
                  shall state the point or points on which they differ and make a reference to the President of the
                  Appellate Tribunal who shall either hear himself or refer for hearing on such point or points by
                  one or more of the other members of the Appellate Tribunal and such point or points shall be
                  decided according to the opinion of the majority of the members of the Appellate Tribunal who have
                  heard the case, including those who first heard it.
                         (8) Subject to the provisions of this Code, the Appellate Tribunal shall have powers to
                  regulate its own procedure and the procedure of Benches thereof in all matters arising out of the
                  exercise of its powers or of the discharge of its functions, including the place at which the Benches
                  shall hold their sittings.
                       (9) The Appellate Tribunal shall, for the purpose of discharging its functions, have all the
                  powers which are vested in the income-tax authorities under section 144.
                        (10) Any proceeding before the Appellate Tribunal shall be deemed to be a judicial
                  proceeding within the meaning of section 193 and section 228, and for the purpose of section 196,       45 of 1860
                  of the Indian Penal Code.
                       (11) The Appellate Tribunal 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


                  199. (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate       Appeal to High
                  Tribunal, if the High Court is satisfied that the case involves a substantial question of law.          Court.
                       (2) The Chief Commissioner or the Commissioner or an assessee, may file an appeal to the
                  High Court on being aggrieved by any order passed by the Appellate Tribunal and such appeal shall
                  be--
                          (a) filed within a period of one hundred and twenty days from the date on which the order
                              appealed against is received by the Chief Commissioner or the Commissioner or the
                              assessee;
                          (b) in the form of a memorandum of appeal precisely stating therein the substantial
                              question of law involved.
                        (3) The High Court may admit an appeal after the expiry of the period of one hundred and


                                                                145
                 twenty days referred to in sub-section (2), if it is satisfied that there was sufficient cause for not
                 filing the appeal within that period.
                        (4) If the High Court is satisfied that a substantial question of law is involved in any case, it
                 shall formulate that question.
                        (5) The appeal shall be heard only on the question so formulated, and the respondents shall,
                 at the hearing of the appeal, be allowed to argue that the case does not involve such question.
                        (6) Notwithstanding anything in sub-sections (4) and (5), the High Court may exercise its
                 power to hear the appeal on any other substantial question of law not formulated by it, if it is
                 satisfied that the case involves such question of law.
                       (7) The High Court shall decide the question of law so formulated and deliver such judgment
                 thereon containing the grounds on which such decision is founded and may award such cost as it
                 deems fit.
                       (8) The High Court may determine any issue which --
                          (a) has not been determined by the Appellate Tribunal; or
                          (b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on the
                              question of law referred to in sub-section (1).
                      ( 9) The provisions of the Code of Civil Procedure, 1908, relating to appeals to the High             5 of 1908
                 Court shall, so far as may be, apply in the case of appeals under this section.
                        (10) When the High Court delivers a judgment in an appeal filed before it under sub-section
                 (7), effect shall be given to the order passed on the appeal by the Assessing Officer on the basis of a
                 certified copy of the judgment.


Case    before   200. (1) An appeal filed before the High Court shall be heard by a Bench of not less than two
High Court to    Judges of the High Court and shall be decided in accordance with the opinion of such Judges or of
be heard by      the majority, if any, of such Judges.
not less than
                        (2) Where there is no such majority, the Judges shall state the point of law upon which they
two Judges.
                 differ and the case shall then be heard upon that point only by one or more of the other Judges of the
                 High Court and such point shall be decided according to the opinion of the majority of the Judges
                 who have heard the case including those who first heard it.


Appeal      to   201. An appeal shall lie to the Supreme Court from any judgment of the High Court delivered
Supreme          under section 199 which the High Court certifies to be a fit case for appeal to the Supreme Court.
Court.




Hearing before   202. (1) The provisions of the Code of Civil Procedure, 1908, relating to appeals to the Supreme           5 of 1908
Supreme          Court shall, so far as may be, apply in the case of appeals under section 201 as they apply in the case
Court.           of appeals from decrees of a High Court.
                       (2) The costs of the appeal shall be in the discretion of the Supreme Court.
                       (3) Where the judgment of the High Court is varied or reversed in the appeal, effect shall be
                 given to the order of the Supreme Court in the manner provided in sub-section (10) of section 199.


                 203. (1) The Commissioner may, for the purposes of revising any order passed in any proceeding             Revision    of

                                                                146
                   under this Code before any income-tax authority subordinate to him, call for and examine all                 orders
                   available records relating thereto.                                                                          prejudicial   to
                                                                                                                                revenue.
                          (2) The Commissioner may, after giving the assessee an opportunity of being heard, pass an
                   order (hereinafter referred to as the revision order) as the circumstances of the case justify, if he is
                   satisfied that the order sought to be revised is erroneous in so far as it is prejudicial to the interests
                   of the revenue.
                        (3) The Commissioner may make, or cause to be made, such inquiry as he considers
                   necessary for the purposes of passing an order under sub-section (2).
                         (4) The revision order passed by the Commissioner under sub-section (2) may have the effect
                   of enhancing or modifying the assessment but shall not be an order cancelling the assessment and
                   directing a fresh assessment.
                         (5) The power of the Commissioner under sub-section (2) for revising an order shall extend
                   to such matters --
                            (a) as have not been considered and decided in any appeal; or
                            (b) as have not been considered and adjudicated by the Dispute Resolution Panel.
                         (6) No order under sub-section (2) shall be made after the expiry of a period of two years
                   from the end of the financial year in which the order sought to be revised was passed.
                          (7) Notwithstanding anything in sub-section(6), an order in revision under this section may
                   be passed at any time in respect of an order which has been passed in consequence of, or to give
                   effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or
                   the Supreme Court
                         (8) In computing the period of limitation under sub-section (6), the following shall not be
                   included, namely:--
                            (a) the time taken in giving an opportunity to the assessee to be reheard under section 143;
                                or
                            (b)     any period during which any proceeding under this section is stayed by an order or
                                   injunction of any court.
                         (9) Without prejudice to the generality of the foregoing provisions, an order passed by an
                   income-tax authority shall be deemed to be erroneous in so far as it is prejudicial to the interests of
                   the revenue, if--
                            (a)     the order is passed without making inquiries or verification which, in the opinion of
                                   the Commissioner, should have been made;
                            (b) the order is passed allowing any relief without inquiring into the claim;
                            (c )     the order has not been made in accordance with any order, direction or instruction
                                   issued by the Board under section 139; or
                            (d) the order has not been passed in accordance with any decision, prejudicial to the
                                assessee, rendered by the jurisdictional High Court or Supreme Court in the case of
43 of 1961                      the assessee or any other person under this Code, the Income-tax Act, 1961, or the
27 of 1957                      Wealth-tax Act, 1957, as they stood before the commencement of this Code.;
                        (10) In this section, "record" shall include all records relating to any proceeding under this
                   Code available at the time of examination by the Commissioner.


Revision      of   204. (1) The Commissioner may, suo motu or on an application made by the assessee, for the
other orders.      purposes of revising any order passed by an authority subordinate to him, other than an order to
                   which section 203 applies, call for and examine all available records relating thereto.


                                                                   147
       (2) The Commissioner may pass an order, as he considers necessary, which is not prejudicial
to the assessee.
      (3) The power of the Commissioner under sub-section (2) for revising an order shall not
extend to such order--
         (a) against which an appeal has not been filed but the time for filing an appeal before the
             Commissioner (Appeals) has not expired;
         (b) against which an appeal is pending before the Commissioner (Appeals);
         (c) as has been considered and decided in any appeal; or
         (d) as has been considered by and passed in pursuance of the directions of, the Dispute
             Resolution Panel.
      (4) The assessee shall make the application for revision of any order referred to in sub-
section (1), within a period of one year from the date on which the order sought to be revised was
communicated to him, or the date on which he otherwise came to know of it, whichever is earlier.
      (5) The Commissioner may, if he is satisfied that the assessee was prevented by sufficient
cause from making the application within the period of one year, admit an application made after the
expiry of one year but before expiry of two years from the date referred to in sub-section (4).
      (6) Every application by an assessee for revision under this section shall be accompanied by
such fees as may be prescribed.
      (7) No order under sub-section (2) shall be made after the expiry of--
         (a) a period of one year from the end of the financial year in which an application is made
             by the assessee under sub-section (4); or
         (b) a period of one year from the date of the order sought to be revised, if the order is
             revised by the Commissioner suo motu.
      (8) In computing the period of limitation under sub-section (7), the following shall not be
included, namely:--
         (a) the time taken in giving an opportunity to the assessee to be reheard under section 143;
             or
         (b)    any period during which any proceeding under this section is stayed by an order or
               injunction of any court.
     (9) An order by the Commissioner declining to interfere shall, for the purposes of this section,
be deemed not to be an order prejudicial to the assessee.


      E. SPECIAL PROVISION FOR AVOIDING REPETETIVE APPEALS


205. (1) Notwithstanding anything in this Code, where an assessee claims that any question of law           Procedure when
arising in his case for a financial year which is pending before the Assessing Officer or any               assessee claim
appellate authority ( hereafter referred to as the relevant case) is identical with a question of law       identical
arising in his case for another financial year which is pending in appeal under section 199 before          question of law
the High Court or in appeal under section 201 before the Supreme Court (hereafter referred to as the        pending before
identical case), he may furnish to the Assessing Officer or the appellate authority, as the case may        High Court or
be, a declaration made in the prescribed form and verified in the prescribed manner, and that if the        Supreme Court.
Assessing Officer, or as the case may be, the appellate authority, agrees to apply in the relevant
case the final decision on the question of law in the identical case, he shall not raise such question of
law in the relevant case in appeal before any appellate authority or the High Court or the Supreme
Court .


                                               148
                    (2) Where a declaration under sub-section (1) is furnished to any appellate authority, the
                 appellate authority shall call for a report from the Assessing Officer on the correctness of the claim
                 made by the assessee and, where the Assessing Officer makes a request to the appellate authority to
                 give him an opportunity of being heard in the matter, the appellate authority shall allow him such
                 opportunity.
                    (3) The Assessing Officer or the appellate authority, as the case may be, may, by order in
                 writing,--
                              (i )   admit the claim of the assessee if he or it is satisfied that the question of law
                                     arising in the relevant case is similar with the question of law in the identical
                                     case; or
                              (ii) reject the claim if he or it is not so satisfied.
                    (4) Where a claim is admitted under sub-section (3),--
                         (a) the Assessing Officer or, as the case may be, the appellate authority may make an order
                             disposing of the relevant case without awaiting the final decision on the question of
                             law in the identical case; and
                         (b) the assessee shall not be entitled to raise, in relation to the relevant case, such question
                             of law in appeal before any appellate authority or the High Court or the Supreme
                             Court .
                    (5) When the decision on the question of law in the identical case becomes final, it shall be
                 applied to the relevant case and the Assessing Officer or the appellate authority, as the case may be,
                 shall, if necessary, amend the order referred to in clause ( a) of sub-section (4) conformably to such
                 decision.
                    (6) An order under sub-section (3) shall be final and shall not be called in question in any
                 proceeding by way of appeal, reference or revision under this Act.
                    (7) In this section,--
                         (a) "appellate authority" means the Commissioner (Appeals) or the Appellate Tribunal;
                         (b) "case", in relation to an assessee, means any proceeding under this Code for the
                             assessment of the tax bases of the assessee or for the imposition of any penalty or fine
                             on him.



                                      F. MISCELLANEOUS



Tax to be paid   206. Notwithstanding any appeal preferred to the High Court or the Supreme Court, the tax shall
notwithstandin   be payable in accordance with the assessment made under this Code.
g appeal



Execution for    207. The High Court may, on petition made for the execution of the order in respect of the costs
costs awarded    awarded by the Supreme Court, transmit such order for execution to any court subordinate to it.
by    Supreme
Court




                                                                 149
Amendment of     208. Where as a result of an appeal under section 190 or section 195, any change is made in the
assessment on    assessment of a body of individuals or an association of persons or an order for new assessment of a
appeal           body of individuals or an association of persons is made, the Commissioner (Appeals) or the
                 Appellate Tribunal, as the case may be, shall pass an order authorising the Assessing Officer either
                 to amend the assessment made or make a fresh assessment on any member of the body or
                 association.


Exclusion of     209. In computing the period of limitation prescribed for an appeal under this Code, the day on
time taken for   which the notice of the order was served upon the assessee without serving a copy of the order
copy.            the time taken for obtaining a copy of such order, shall be excluded.


                 210. (1) The Board may, from time to time, issue orders, instructions or directions to other income-       Filing of appeal
                 tax authorities, fixing such monetary limits as it may deem fit, for the purpose of regulating the         by income-tax
                 filing of appeal by any income-tax authority under the provisions of this Chapter.                         authority.
                    (2) Where, in pursuance of the orders, instructions or directions issued under sub-section (1), an
                 income-tax authority has not filed any appeal on any issue in the case of an assessee for any
                 financial year, it shall not preclude such authority from filing an appeal on the same issue in the case
                 of--
                          (a) the same assessee for any other financial year; or
                          (b) any other assessee for the same or any other financial year.
                    (3) Notwithstanding that no appeal has been filed by an income-tax authority persuant to the
                 orders or instructions or directions issued under sub-section (1), it shall not be lawful for an
                 assessee, being a party in any appeal, to contend that the income-tax authority has acquiesced in the
                 decision on the disputed issue by not filing an appeal in any case.
                    (4) The Appellate Tribunal , hearing such appeal, shall have regard to the orders, instructions or
                 directions issued under sub-section (1) and the circumstances under which such appeal was filed or
                 not filed in respect of any case.
                    (5) Every order, instruction or direction which has been issued by the Board fixing monetary
                 limits for filing an appeal shall be deemed to have been issued under sub-section (1) and the
                 provisions of sub-sections (2), (3) and (4) shall apply accordingly.


                                                            CHAPTER XV
                                             COLLECTION AND RECOVERY OF TAX
                                                    A.--Deduction of tax at source


                 211. (1) The tax on any income shall be payable by deduction or collection at source or by advance         Deduction      or
                 payment, as the case may be, in accordance with the provisions of this Chapter, notwithstanding that       collection of tax
                 the regular assessment in respect of such income is to be made in a later financial year.                  at source and
                                                                                                                            advance
                       (2) Nothing in this section shall prejudice the charge of tax on such income under the
                                                                                                                            payment.
                 provisions of sub-section (2) of section 2.
                        (3) The power to recover tax by deduction or collection under the provisions of this Chapter
                 shall be without prejudice to any other mode of recovery.


Direct           212. (1) The tax on income shall be payable by the assessee direct, if--
payment.

                                                                150
                         (a)    there is no provision under this Chapter for deduction or collection of income-tax at
                               the time of payment; or
                         (b)    income-tax has not been deducted or collected in accordance with the provisions of
                               this Chapter.
                   (2) A person shall not be called upon to pay the tax himself to the extent tax is deductible at
                source and has been so deducted from payment made to him.
                    (3) Notwithstanding anything in sub-section (1), any person, who is required to deduct or
                collect any sum in accordance with the provisions of this Code, does not deduct or collect, or after
                so deducting or collecting fails to pay, or does not pay, the whole or any part of the tax, as required
                by or under this Code, shall, without prejudice to any other consequences which he may incur, be
                deemed to be an assessee in default for the purposes of section 240 in respect of such tax and all
                the provisions of this Code shall apply accordingly.
                    (4) No order shall be made under sub-section (3) deeming a person to be an assessee in default
                for failure to deduct or collect the whole or any part of the tax from a person resident in India, at any
                time after the expiry of--
                               (i)     two years from the end of the financial year in which the return of tax deduction
                                      or tax collection is furnished in a case where the return referred to in section 217
                                      or section 221 has been furnished;
                               (ii)   six years from the end of the financial year in which payment is made or credit is
                                      given, in any other case.


Liability  to   213. (1) Any person responsible for making a specified payment shall, at the time of such payment,
deduct tax at   deduct income-tax therefrom at the appropriate rate.
source.
                       (2) The specified payment referred to in sub-section (1), if the deductee is a resident, shall be
                the payment of the nature specified in column (2) of the Twentieth Schedule and the appropriate
                rate, in respect of such specified payment, shall be the rate specified in the corresponding entry in
                column (3) of the said Schedule.
                      (3) The specified payment referred to in sub-section (1), if the deductee is a non-resident,
                shall be the payment of the nature specified in column (2) of the Twenty-First Schedule and the
                appropriate rate, in respect of such specified payment, shall be the rate specified in the
                corresponding entry in column (3) of the said Schedule.
                      (4) Without prejudice to sub-section (3), where a rate in respect of such specified payment
                has been provided in the relevant agreement entered into, or adopted by, the Central Government
                under section 295, then appropriate rate referred to in sub-section (1) shall be the rate specified in
                the corresponding entry in column (3) of the Twenty- First Schedule or the rate provided in such
                agreement, whichever is lower.
                       (5) Notwithstanding anything in this Code, the appropriate rate referred to in sub-section (1)
                shall,-
                         (a) in a case where the deductee has failed to furnish his permanent account number to the
                             deductor (except where the deductee is not required to obtain permanent account
                             number under section 296), be the higher of following rates, namely: --
                               (i)    twenty per cent.; and
                               (ii) the rate specified in sub-sections (2), (3) or sub-section (4), as the case may be;
                         (b) in a case where any person located in a notified jurisdictional area is entitled to receive
                             any sum, be the higher of the following rates, namely:-
                               (i)    thirty per cent.


                                                                 151
                                  (ii) the rate specified in sub-sections(2),(3) or sub-section (4), as the case may be.
                     (6) Where the permanent Account Number provided to the deductor is invalid or does not belong
                  to the deductee, it shall be deemed that the deductee has not furnished his Permanent Account
                  Number to the deductor and the provisions of sub-section (5) shall apply accordingly.
                    (7) The expression "person located in a notified jurisdictional area" referred to in sub-section (5)
                  shall have the meaning assigned to it in clause (13) of section 127.
                     (8) The provisions of clause (a) of sub-section (5) shall not apply in respect of payment of
                  interest, on long-term infrastructure bonds, as referred to in the Twenty- First Schedule, to a non-
                  resident, not being a company, or to a foreign company.


                  214. (1) For the purposes of section 213, the specified payment shall be deemed to have been                Specified
                  made, if the payment has been made--                                                                        payment     and
                                                                                                                              deduction    of
                           (a) in cash;
                                                                                                                              tax.
                           (b) by issue of a cheque or draft;
                           (c )    by credit to the account of the payee or any other account, whether called suspense
                                  account or by any other name; or
                           (d) by any other mode as may be prescribed,
                  whichever is earlier.
                        (2) If the payment is wholly or partly in kind, the deductor shall ensure that the tax deductible
                  in respect of such payment has been paid before making the payment.
                        (3) The deductor may, at the time of making any deduction of tax from the payment liable to
                  be taxed under the head "Income from employment" or from the payment in the nature of interest,
                  increase or reduce the amount to be deducted from any payment to be made to a deductee for the
                  purposes of adjusting any deficiency, or excess, arising out of any previous deduction or non-
                  deduction during the financial year in respect of such deductee.
                        (4) For the purposes of making any deduction of tax from the payment liable to be taxed
                  under the head "Income from employment", the deductor shall take into account the following
                  particulars, if any, furnished by the deductee in such form and manner, as may be prescribed,
                  namely:--
                                  (i )   details of payment liable to be taxed under the head "Income from employment"
                                         due to, or received by, the deductee from any other employer during the year and
                                         any tax deducted therefrom;
                                  (ii)   any income other than income from employment and tax, if any, deducted
                                         therefrom, if it does not have the effect of reducing the tax deductible on income
                                         under the head "Income from employment";
                                   (iii) tax relief for arrears or advance receipts under section 227.
                      (5) If the tax payable on any payment is to be borne by the deductor in pursuance of an
                  agreement or arrangement, then, for the purposes of deduction of tax, the payment shall be grossed
                  up to such amount as would, after deduction of tax thereon at the rate referred to in sub-section (1)
                  of section 213, be equal to the net amount payable under such agreement or arrangement.
Certificate for   215. (1) The deductee may make an application, in such form and manner as may be prescribed, to
lower or no       the Assessing Officer seeking a certificate for deduction of income-tax at a lower rate or, as the case
deduction of      may be, no deduction of income-tax from payments to be received by him.
tax
                        (2) The deductor may make an application, in such form and manner as may be prescribed, to
                  the Assessing Officer seeking a certificate for deduction of income-tax at a lower rate or, as the case


                                                                    152
                  may be, no deduction of income-tax from payments to be made by him to a non-resident deductee.
                         (3) If the Assessing Officer is satisfied that the total income of the deductee, being a resident,
                  justifies deduction of income-tax at a lower rate or no deduction of income-tax, he shall give to the
                  deductee, such certificate as may be appropriate.
                       (4) If the Assessing Officer is satisfied that the whole of the specified payment referred to in
                  the Twenty-First Schedule (other than item number 1) is not chargeable to tax, he shall give to the,-
                                   (i) deductee, a certificate for deduction of income-tax at a lower rate or no deduction
                                       of income-tax;
                                   (ii) deductor, a certificate for deduction of income-tax at a lower rate.
                     (5) The deductor shall deduct income-tax at the rates specified in the certificate issued under
                  sub-section (3) or sub-section (4), until--
                             (a)   such certificate is cancelled by the Assessing Officer; or
                             (b)   the expiry of the validity of the certificate,
                  whichever is earlier.
                     (6) The Board may prescribe the circumstances and the cases in which an application may be
                  made for the grant of the certificate and the conditions subject to which such certificate may be
                  granted and provide for all other matters connected therewith.


                  216. (1) No deduction of tax shall be made in the case of resident deductee mentioned in column             Declaration for
                  (3) of the Table given below where payment of the nature mentioned in column (2) of the said Table          no deduction of
                  is made to him if the conditions referred to in sub-section (2) are fulfilled:                              tax.
                                                                     TABLE


                          Serial                    Nature of payment                    Resident deductee eligible to file
                         number                                                                    declaration
                           (1)                              (2)                                         (3)
                                     Dividend other than dividend liable to tax in
                     1                                                                   Any Individual
                                     accordance with the provisions of section 109.
                                     Interest.
                     2                                                                   Any person other than-
                                                                                          a) a company; or
                                                                                          b) an unincorporated body.
                     (2) The provisions of sub-section (1) shall apply if the deductee furnishes a declaration to the
                  deductor in such form and manner as may be prescribed to the effect that the payment of the nature
                  referred to in the Table below sub-section (1) or his estimated total income of the financial year in
                  which such payment is to be included shall not exceed the maximum amount which is not
                  chargeable to tax.
                     (3) The provisions of this section or section 215 shall not apply if the declaration made under
                  sub-section (2), or the application made under sub-section (1) or sub-section(2) of section 215, does
                  not contain the Permanent Account Number of the deductee.


Obligation   of   217. (1) Every deductor shall pay the sum deducted to the credit of the Central Government within
deductor          such time and in such manner, as may be prescribed.




                                                                     153
                      (2) Every deductor shall furnish to the deductee a certificate to the effect that tax has been
                   deducted within such time and containing such particulars, as may be prescribed.
                     (3) Every deductor shall deliver, or cause to be delivered, a return of tax deduction in such
                   manner as is provided under sub-section (4) of section 218.
                      (4) Every deductor shall furnish the information relating to any specified payment to a non-
                   resident in such form and manner as may be prescribed.


Reporting    of    218. (1) Every deductor shall deliver, or cause to be delivered, a return in respect of payment of
payments           interest to residents without deduction of tax.
without
                         (2) The deductor referred to in sub-section (1) shall be--
deduction    of
tax.                       (a)    any financial institution; or
                           (b)    any co-operative society.
                         (3) The Central Government may, by notification, require any deductor to deliver, or cause to
                   be delivered, a return in respect of any payment without deduction of tax.
                        (4) The Board shall, in respect of the return of tax deduction under section 217 and the return
                   under this section, prescribe the following, namely:--
                           (a) the period in respect of which the return is to be furnished;
                           (b) the form of the return and the particulars therein;
                           (c) the manner of verification of the return;
                           (d) the time by, and the medium in, which the return is to be delivered;
                           (e) the income-tax authority, or any other person, authorised to receive the return; and
                           (f) any other matter connected therewith.


No deduction       219. Notwithstanding anything in section 213, no tax shall be deducted at source, --
of    tax     in
                   (A) where the payee is a resident, from the following, namely: --
certain cases.
                           (a) any payment, other thanpayment of the nature referred to in items 1,12, 13 and 15 of
                               the Twentieth Schedule, made by an individual or a Hindu undivided family, if the
                               individual or the Hindu undivided family is not liable to get the accounts audited under
                               section 88 for the financial year immediately preceding the financial year in which the
                               payment is made;
                           (b) any interest payable on any security--
                                 (i )   of the Central Government or a State Government; or
                                 (ii)   issued by a company, if such security is in dematerialised form and is listed on a
                                        recognised stock exchange in India;
                           (c) any interest on debenture payable to an individual or a Hindu undivided family,, if -
                                 (i )   the debentures are issued by a widely held company;
                                 and
                                 (ii)    the aggregate amount payable during the financial year does not exceed five
                                        thousand rupees;
                           (d) any interest on time deposits (being deposits repayable on the expiry of fixed periods,
                               excluding recurring deposits) payable, if--

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       (i )   the time deposits are made with a banking company or a co-operative bank or a
              housing-finance public company; and
       (ii)   the aggregate amount payable by the payer, being a branch of the bank or
              company during the financial year does not exceed,-
                (I) twenty thousand rupees in the case of a senior citizen; and
                (II) ten thousand rupees, in any other case;
(e) any other interest payable if the aggregate amount of the payments during the financial
    year does not exceed five thousand rupees;
(f) any interest payable to--
       (i )   any banking company;
       (ii) any co-operative bank;
       (iii) any financial corporation established by or under a Central or State or Provincial
             Act;
       (iv) any insurer;
       (v) any mutual fund; or
       (vi) any institution, association or body, or class of institutions, associations or bodies,
            which the Central Government may, for reasons to be recorded in writing, notify
            in this behalf;
(g) any interest payable by a firm to a partner of the firm;
(h)     any interest payable in respect of deposits under any scheme framed by the Central
       Government and notified by it in this behalf;
(i )    any interest payable in respect of deposits (other than time deposits) with a banking
       company or a co-operative bank;
(j )    any interest payable by the Central Government under any provision of this Code or
       the Income-tax Act, 1961, or the Wealth-tax Act, 1957, as they stood before the
       commencement of this Code;
(k )    any interest payable on the amount of compensation awarded by the Motor Accidents
       Claims Tribunal, if the aggregate of the amounts of such interest paid, or credited,
       during the financial year does not exceed one lakh rupees;
(l) any amount payable on maturity, or redemption, of a zero coupon bond;
(m) any payment for carriage of goods by road transport if the payee furnishes his
    permanent account number to the payer;
(n) any payment to a contractor in respect of works contract, service contract, advertising,
    broadcasting and telecasting, supply of labour for carrying out any works contract, or
    service contract, or carriage of goods or passengers by any mode of transport, other
    than by railways, if --
       (i )    the amount of any payment during the financial year does not exceed thirty
              thousand rupees; and
       (ii)   the aggregate amount of the payments during the financial year does not exceed
              seventy-five thousand rupees;
(o)     any payment of commission or brokerage, if the aggregate amount of the payments
       during the financial year does not exceed five thousand rupees;
(p) any payment of rent, if the aggregate amount of the payments during the financial year


                                         155
                 does not exceed one lakh eighty thousand rupees;
           (q)    any payment of compensation on compulsory acquisition of immovable property, if
                 the aggregate amount of the payments during the financial year does not exceed two
                 lakh rupees;
           (r) any payment by way of consideration for transfer of immovable property, if the
               consideration for the transfer of immovable property is less than fifty lakh rupees.
           (s)    any fees for professional services if the aggregate amount of the payments during the
                 financial year does not exceed thirty thousand rupees;
           (t)    any fees for technical services if the aggregate amount of the payments during the
                 financial year does not exceed thirty thousand rupees;
           (u) any payment for royalty if the aggregate amount of the payments during the financial
               year does not exceed thirty thousand rupees;
           (v) any payment for non-compete fee if the aggregate amount of the payments during the
               financial year does not exceed thirty thousand rupees.
(B) where the payee is a non-resident, being a foreign institutional investor, on any payment made to
it as a consideration for sale of securities listed on a recognised stock exchange;
(C) where the payee is a person listed in the Fourth Schedule;
(D) from such specified payment to such institution, association or body or class of institutions,
associations or bodies as may be notified by the Central Government in this behalf.


220. (1) All sums deducted in accordance with the provisions of this Chapter shall, for the               Credit for tax
purposes of computing total income of a deductee, be deemed to be the income received.                    deducted.
      (2) Any deduction made in accordance with the provisions of this Chapter and paid to the
credit of the Central Government shall be treated as a payment of tax on behalf of the person in
respect of whom the deduction was made.
         (3) For the purposes of giving credit in respect of tax deducted, the Board may prescribe--
           (a) the procedure for giving credit to the deductee, or any other person;
           (b) the financial year for which such credit may be given; and
           (c) any other matter connected therewith.


                                     B.--Collection of tax at source


221. (1) Any person, being a seller, lessor or licensor, who is responsible for collecting any amount     Tax collection
on account of any transaction specified in column (2) of the Table given below, shall collect from        at source.
the buyer, lessee or licensee, as the case may be, a sum by way of income- tax, equal to the
percentage, as specified in the corresponding entry in column (3) of the said Table, of such amount:
                                                 TABLE
Serial                  Nature of transaction                                      Percentage number
  (1)                 (2)                                                         (3)
 1.        Sale of alcoholic liquor for human consumption                         Three per cent.
 2.        Sale of tendu leaves                                                   Three per cent.
 3.        Sale of timber obtained under a forest lease or otherwise              Three per cent.
 4.        Sale of any other forest produce not being timber                      Three per cent.


                                                 156
          or tendu leaves
 5.       Sale of scrap                                                                Three per cent.
 6.       Grant of lease or licence or contract or transfer of any right or
          interest, either in whole or in part, for a parking lot                      Three per cent.
 7.       Grant of lease or licence or contract or transfer of any right
          or interest, either in whole or in part, for a toll plaza                    Three per cent.
 8.       Grant of lease or licence or contract or transfer of any right or
          interest, either in whole or in part, for mining or quarrying                Three per cent.
 9.       Sale of minerals, being coal or lignite or iron ore                          One per cent.

   (2) Every person, being a seller, who receives any amount in cash as consideration for sale of
bullion or jewellery, shall, at the time of receipt of such amount in cash, collect from the buyer, a
sum equal to one per cent of sale consideration as income-tax, if such consideration,--
                  (i)    for bullion, exceeds two hundred thousand rupees; or
                  (ii)   for jewellery, exceeds five hundred thousand rupees.
   (3) For the purposes of sub-section (1), the collection of an amount shall be deemed to have
been made, if the amount has been received--
           (a)     in cash;
           (b) by way of a cheque or a draft;
           (c )    by debit to any account, whether called "suspense account" or by any other name; or
           (d)     by any other mode as may be prescribed, whichever is earlier.
   (4) Any person collecting any amount under sub-section (1) or sub-section (2) shall pay the sum
so collected to the credit of the Central Government within such time and manner, as may be
prescribed.
    (5) Every person responsible for collecting any amount under sub-section (1) or sub-section (2)
shall furnish to the buyer, lessee or licensee referred to in sub-section (1) or sub-section (2), a
certificate of tax collection within such time as may be prescribed .
    (6) Every person responsible for collecting any amount under sub-section (1) or sub-section (2)
shall deliver, or cause to be delivered, a return of tax collection in the manner provided under sub-
section (7).
  (7) The Board shall, in respect of the return of tax collection, prescribe the following,
namely:--
           (a) the period in respect of which the return is to be furnished;
           (b) the form of the return and the particulars therein;
           (c) the manner of verification of the return;
           (d) the time by, and the medium in, which the return is to be delivered;
           (e) the income-tax authority, or any other person, authorised to receive the return; and
           (f) any other matter connected therewith.


222. (1) All sums collected in accordance with the provisions of this Sub-chapter and paid to the        Credit for tax
credit of the Central Government shall be deemed to be a payment of tax on behalf of the person          collected.
from whom such amount has been collected (in this section referred to as collectee).
      (2) For the purpose of giving credit in respect of tax collected, the Board may prescribe--
           (a)     the procedure for giving credit to the collectee, or any other person;

                                                    157
                           (b) the financial year for which such credit may be given; and
                           (c) any other matter connected therewith.
                  223. The income-tax authority or any other person authorised under clause (e) of sub-section (4) of          Furnishing of
                  section 218, shall, within the prescribed time after the end of each financial year prepare and make         statement of tax
                  available to every deductee or the buyer, lessee or licencee, as the case may be, a statement in the         deducted      or
                  prescribed form specifying the amount of tax deducted or collected and such other particulars as             collected.
                  may be prescribed.


                  224. (1) Every return furnished under sub-section (3) of section 217 or under sub-section (6) of Processing of
                  section 221 shall be processed within six months from the end of the month in which it has been return of tax
                  furnished, in the following manner-                                                               deduction   or
                                                                                                                    collection.
                           (a) the sums deductible or collectible under Chapter XIII shall be computed after making
                                the following adjustments, namely:--
                                 (i) any arithmetical error in the return; or
                                 (ii) an incorrect claim apparent from any information in the return;
                           (b) the interest under section 235, if any, shall be computed on the basis of the sums
                               deductible or collectible as computed under clause (a);
                           (c) the fee, if any, shall be computed in accordance with the provisions of section 239.
                      (2) The sum payable by, or the amount of refund due to, the deductor, the seller, the lessor or the
                  licensor, as the case may be, shall be determined after adjustment of the amount computed under
                  sub-section (1) against any amount paid under section 217 or section 221 or section 235 or section
                  239 and any amount paid otherwise by way of tax, interest or fee.
                    (3) If any sum is found payable by the deductor, the seller, the lessor or the licensor, as the case
                  may be, an intimation shall be sent to him specifying such sum.
                     (4) If any refund is determined under sub-section (2), the same shall be granted to the deductor,
                  the seller, the lessor or the licensor, as the case may be, in such circumstances and the manner as
                  may be prescribed.
                     (5) The acknowledgement of the return shall be deemed to be the intimation in a case where,
                  under sub-section (2), no sum is payable by, or refundable to, the deductor, the seller, the lessor or
                  the licensor, as the case may be.
                     (6) For the purposes of processing of returns under sub-section (1), the Board may make a
                  scheme for centralised processing of such returns, to expeditiously determine the tax payable by, or
                  the refund due to, the deductor, the seller, the lessor or the licensor, as the case may be, as required
                  under the said sub-section.
                     (7) For the purposes of sub-section (1), "an incorrect claim apparent from any information in the
                  return" shall mean a claim, on the basis of an entry, in the return--
                                 (i) of an item, which is inconsistent with another entry of the same or some other item
                                     in such return;
                                 (ii) in respect of rate of deduction or collection of tax at source, where such rate is not
                                      in accordance with the provisions of this Code;
                                 (iii) which, for the purposes of sub-section (5) of section 213, is not consistent with
                                      the database available with the income-tax authority authorised in this behalf by
                                      the Board.
Interpretations   225. (1) In Sub-chapter A--
under      Sub-
                           (a)    ``broadcasting and telecasting'' includes production of programmes for broadcasting

                                                                   158
chapters A and                 or telecasting;
B.
                         (b) "commission or brokerage" includes any payment received or receivable, directly or
                             indirectly, by a person acting on behalf of another person for services rendered (not
                             being professional services) or for any services in the course of buying or selling of
                             goods or in relation to any transaction relating to any asset, valuable article or thing,
                             not being securities;
                         (c) ``contract'' and ``contractor'' include ``sub-contract'' and ``sub-contractor''
                             respectively;
                         (d) ``professional services'' means services rendered by a person in the course of carrying
                             on legal, medical, engineering, architectural or accountancy profession, technical
                             consultancy, interior decoration or any other profession as notified by the Board;
                         (e)     "rent" means any payment, by whatever name called, under any lease, sub-lease,
                               tenancy or any other agreement or arrangement for the use of (either separately or
                               together) any,--
                               (i)   land;
                               (ii) building (including factory building);
                               (iii) land appurtenant to a building (including factory building); or
                               (iv) machinery;
                               (v)   plant;
                               (vi) equipment;
                               (vii) furniture; or
                               (viii) fittings,
                               whether or not any or all of the above are owned by the payee;
                         (f) ``service contract'' means a contract in respect of the following services, namely: -
                                    a)      Custom House Agent;
                                    b)      Clearing and Forwarding Agent;
                                    c)      Manpower recruitment;
                                    d)      Security agencies;
                                    e)      Credit rating agencies;
                                    f)      Market research agencies;
                                    g)      Event managers;
                                    h)      Warehouse keeper;
                                    i)      Programme producer,
                 and includes a contract for job work in respect of the above services;
                        (g) ``works contract'' shall include contract for -
                               (i) advertising;
                               (ii) broadcasting and telecasting including production of programmes for such
                                    broadcasting and telecasting;
                               (iii) carriage of goods or passengers by any mode of transport other than by railways;
                               (iv) catering;
                               (v) manufacturing or supplying a product according to the requirement or specification
                                   of a customer by using material purchased from such customer and not from any
                                   other person.



                                                                159
               Explanation.- For the purposes of sub-clause (v) of clause (g), the value of material shall not form
               part of amount on which tax is deductible at source, if it is separately mentioned in the invoice.
                  (2) In Sub-chapter B--
                       (a) "buyer" with respect to--
                             (i)     sub-section (1) of section 221 means a person who obtains in any sale, by way of
                                    auction, tender, or any other mode, goods of the nature specified in the Table
                                    given in sub-section (1) of section 221 or the right to receive any such goods but
                                    does not include--
               (A) a public sector company, the Central Government, a State Government, an embassy, a high
               commission, legation, commission, consulate and trade representation of a foreign State, and a club;
               or
               (B) a buyer in the retail sale of such goods purchased by him for personal consumption;
                             (ii) sub-section (2) of section 221 means a person who obtains in any sale, goods of
                                  the nature specified in the said sub-section;
                       (b) "lessee or licensee" means a person other than a public sector company who is granted
                           a lease or licence or is awarded a contract or is transferred, wholly or partly, any right
                           or interest by a lessor or licensor;
                       (c) "lessor or licensor" means a person who grants a lease or licence or enters into a
                           contract or otherwise transfers, wholly or partly, any right or interest to a lessee or
                           licensee;
                       (d) "scrap" means waste from the manufacture or mechanical working of materials which
                           is unusable because of breakage, wear and tear and other reasons;
                       (e) "seller" means--
                             (i) the Central Government, a State Government or any local authority;
                             (ii)    a corporation or authority established by or under a Central, State or Provincial
                                    Act;
                             (iii) any company, firm or co-operative society; and
                             (iv) an individual or a Hindu undivided family, if the total sales, gross receipts or
                                  turnover from the business carried on by him exceed the monetary limits specified
                                  in sub-section (1) of section 88 during the financial year immediately preceding
                                  the financial year in which the goods of the nature specified in column (2) of the
                                  Table given in sub-section (1) of section 221 against serial numbers 1 to 5, serial
                                  number 9 or sub-section (2) of section 221 are sold.


                                                           C.--Advance Tax


Liability to   226. (1) Every assessee shall be liable to pay advance tax during any financial year in respect of his
pay advance    total income of the financial year, if the amount of advance tax payable exceeds ten thousand
tax            rupees.
                  (2) The amount of advance -tax payable by an assessee in the financial year shall be computed in
               the following manner, namely:--
                       (a)    the assessee shall first estimate his total income and calculate income-tax thereon at
                             the rate in force in the financial year;
                       (b) the income-tax so calculated shall be reduced by ­

                                                                160
             (i )    the amount of income-tax which would be deductible or collectible at source
                    during the financial year from any income which is taken into account in
                    estimating the total income;
             (ii)   the amount of credit under section 228allowed to be set-off in the financial year;
                    and
        (c) the balance amount of income-tax shall be the advance tax payable.
    (3) For computing liability for advance tax payable by an assessee under sub-section (2),
income-tax calculated under clause (a) shall not be reduced by the amount of income-tax which
would be deductible or collectible at source during the financial year from any income which is
taken into account in estimating the total income, if the deductor has paid or credited such income
without deduction of tax or it has been received or debited by the person responsible for collection
of tax without collection of such tax.
   (4) The advance tax, in case of any person other than a company, shall be payable in three
instalments during the financial year on or before the dates specified in column (2) of the Table
given below and shall be equal to the amount specified in corresponding entry in column (3) of the
said Table:
                                               TABLE
Serial Date of instalment                         Amount payable
Number in the financial year
 (1)                (2)                          (3)
 1.      On or before the 15th September Not less than thirty per cent. of the advance income-tax.
 2.      On or before the 15th December Not less than sixty per cent. of the advance income-
                                        tax, as reduced by the amount, if any,paid in the
                                      earlier instalment.
 3.      On or before the 15th March       The whole amount of the advance income-tax as
                                             reduced by the amount or amounts, if any, paid in the
                                           earlier instalment or instalments.
   (5) The advance tax in the case of a company shall be payable in four instalments during the
financial year on or before the dates specified in column (2) of the Table given below and shall be
equal to the amount specified in corresponding entry in column (3) of the said Table:
                                               TABLE
Serial                                            Date of instalment          Amount payable
Number in the financial year
 (1)                (2)                          (3)
1.     On or before the 15th June                Not less than fifteen per cent. of the advance
                                                 income-tax.
2.     On or before the 15th September           Not less than forty-five per cent. of the advance
                                                 income-tax, as reduced by the amount, if any, paid
                                                 in the earlier instalment.
3.     On or before the 15th December            Not less than seventy-five per cent. of the advance
                                                 income-tax as reduced by the amount or amounts, if
                                                 any, paid in the earlier instalment or instalments.
4.     On or before the 15th March               The whole amount of the advance income-tax as
                                                 reduced by the amount or amounts, if any, paid in
                                                 the earlier instalment or instalments.


                                               161
                    (6) Any amount of advance tax paid after the 15th March but before the expiry of the financial
                 year shall be treated as advance income-tax paid during the financial year.
                    (7) Every person who is liable to pay advance tax shall, of his own volition, pay the appropriate
                 percentage of the advance income-tax on or before the dates specified in this section.
                    (8) The assessee may increase or reduce the payment of remaining instalments of the advance
                 tax in accordance with his estimation of the total income.
                   (9) Where, in the opinion of the Assessing Officer, any person is liable to pay advance tax, he
                 may by an order in writing--
                          (a) require such person to pay advance tax calculated in such             manner as may be
                              prescribed; and
                         (b) issue to such person a notice of demand under section 174 specifying the instalments
                             in which such tax is to be paid.
                    (10) The person who has been served with an order under sub-section (9)--
                         (a) may file an estimation, in such form as may be prescribed, to the Assessing Officer, if
                             in his estimation, the advance tax payable by him is lower than the amount specified in
                             the said order; and
                          (b) pay the advance tax in accordance with his estimation on or before the dates specified
                              in this section.
                    (11) No order under sub-section (9) shall be passed after the last day of February of the financial
                 year.
                                       D.--Tax relief in respect of arrears or advance receipts


Tax relief for   227. (1) The Assessing Officer shall, on an application made to him by any person, grant such
arrears     or   relief as may be prescribed, if the person is in receipt, in any financial year, of any arrears or
advance          advance of salary or family pension relating to any other financial year.
receipts
                     (2) The relief referred to in sub-section (1) shall not be allowed in respect of any
                 compensation received towards retrenchment, voluntary retirement or termination of service.
                                                         E.--Foreign tax credit


Foreign    tax   228. (1) An assessee, being a resident in India in any financial year, shall be allowed a credit in
credit.          respect of income-tax paid by deduction or otherwise, in any country or other specified territory
                 under the law in force in that country or territory, in accordance with the provisions of this section.
                      (2) An assessee, referred to in sub-section (1), shall be allowed a credit against the Indian
                 income-tax payable by him in respect of his income of the financial year,--
                         (a) which has been taxed in any country or other specified territory with which India has
                             entered into an agreement under section 295, in accordance with the agreement with
                             such country or specified territory; or
                         (b) which has accrued outside India (but not deemed to accrue in India) and taxed in a
                             country with which India does not entered into an agreement under section 295 or
                             where an agreement under that section 295 does not specify the mode of tax credit, of
                             the amount determined in the following manner, namely: --
                               (i) at the Indian rate of tax or the rate of tax of the other country, whichever is lower;
                              (ii) at the Indian rate of tax, if both the rates are equal.
                    (3) Notwithstanding anything in sub-section (2), the amount of credit of foreign tax referred to

                                                                 162
therein shall not, in any case, exceed--
        (a)    the Indian income-tax payable in respect of income which is taxed outside India; and
        (b)    the Indian income-tax payable on total income of the assessee.
   (4) The Central Government may, for the relief or avoidance of double taxation, prescribe--
        (a) the method for computing the amount of credit;
        (b) the manner of claiming credit; and
        (c) such other particulars as may be considered necessary.


                                       F.--Payment of Wealth-tax
229. The wealth-tax referred to in section 115 shall be payable by the due date of filing of the return   Payment      of
of tax bases.                                                                                             wealth-tax




                             G.--Interest payable to the Central Government


230. (1) Where an assessee defaults in furnishing the return of taxbases, he shall be liable to pay       Interest     for
simple interest at the rate of one per cent. per month, in circumstances specified in sub-section (2)     default       in
for the period mentioned in sub-section (3) on the amount computed under sub-section (4).                 furnishing
                                                                                                          return of    tax
   (2) The circumstances referred to in sub-section (1) shall be ­
                                                                                                          bases.
        (a) where the return of taxbases for any financial year under sub-section (1) or sub-section
            (7) of section 155 or sub-section (1) of section 157 is furnished after the due date, or is
            not furnished;
        (b) where the return of taxbases for any financial year is required by a notice under section
            171 and no return of taxbases has been furnished for such year before the issue of such
            notice; or
        (c) where the return of tax bases for any financial year is required by a notice under section
            171 and--
              (i )    such notice has been issued after the determination of income under sub-section
                     (1) of section 160 or after the completion of an assessment under section 165 or
                     section 166 or section 171; and
              (ii) such return has been furnished after the expiry of time allowed under such notice
                   or is not furnished.
   (3) The period referred to in sub-section (1) shall,--
        (a) in a case referred to in clause (a) or clause (b) of sub-section (2), commence on the
            date immediately following the due date and--
              (i) end on the date of furnishing of the return; or
              (ii) end on the date of completion of assessment under section 166 or section 171,
                   where no return has been furnished;
        (b) in a case referred to in clause (c) of sub-section (2), commence on the date immediately
            following the last date of the time allowed under the notice referred in said clause ( c),

                                                163
                                and--
                                (i) end on the date of furnishing of the return where the return is furnished after expiry
                                     of the time allowed; or
                                (ii) end on the date of completion of assessment under section 171 where no return
                                     has been furnished.
                     (4) The amount referred to in sub-section (1),--
                          (a) in a case referred to in clause (a) or clause (b) of sub-section (2), shall be computed in
                              accordance with the following formula ­
                                    A­B
                                    where-
                          A=         the amount of the tax on the total income determined under sub-section (1) of
                                    section 160 or on assessment made under sub-section (1) of section 165 or sub-
                                    section (1) of section 166 or under section 171, as the case may be;
                          B=       the aggregate of --
                                (i) advance tax paid, if any;
                                (ii) any tax deducted or collected at source;
                                (iii) any deduction, from the Indian income-tax payable, allowed under section 228, on
                                      account of the tax paid in a country outside India; and
                                (iv) any tax credit available for set-off under section 105 or section 107;
                          (b) in a case referred to in clause (c) of sub-section (2), shall be the amount by which tax
                              determined on reassessment exceeds the tax on the total income determined under sub-
                              section (1) of section 160 or on the basis of the earlier assessment, as the case may be.
                     (5) The interest payable under sub-section (1) shall be reduced by the interest, if any, paid under
                  section 158 towards the interest chargeable under this section.
                     (6) The interest payable under this section shall be increased or reduced, in accordance with the
                  variation in the amount of tax on which interest was payable under this section, as a result of
                  modification in the assessed income on account of any rectification, revision or appellate order
                  under this Code.
                     (7) The Assessing Officer shall serve on the assessee a notice of demand, in such form as may
                  be prescribed, specifying the sum payable on account of increase in the interest referred under sub-
                  section (6) and such notice shall be deemed to be a notice under section 174 and the provisions of
                  this Code shall apply accordingly.
                    (8) The excess interest paid, if any, shall be refunded in a case where the interest is reduced
                  under sub-section (6).


Interest    for   231. (1) Where an assessee defaults in payment of advance tax under section 226, he shall be liable
default      in   to pay simple interest at the rate of one per cent. per month in the circumstances specified in sub-
payment      of   section (2) for the period mentioned in sub-section (3) on the amount computed under sub-section
advance tax.      (4).
                       (2) The circumstances referred to in sub-section (1) shall be the following,
                  namely:--
                          (a) where the assessee is liable to pay advance tax under section 226 and has failed to pay
                              such tax; or
                          (b)    where the advance tax paid by such assessee is less than ninety per cent. of the


                                                                 164
             assessed tax.
    (3) The period referred to in sub-section (1) shall in a case referred to in sub-section (2)
commence on the 1st day of April next following the financial year and--
         (a) end on the date of determination of total income under sub-section (1) of section 160;
             or
         (b) end on the date of assessment, where an assessment has been made under section 165
             or section 166 or an assessment under section 171 made for the
             first time.
      (4) The amount referred to in sub-section (1) shall be--
         (a) the assessed tax less the advance tax paid, if any; and
         (b) in a case where the assessee has paid self-assessment tax under section 158 before the
             date of determination of total income or the date of an assessment referred to in clause
             (b) of sub-section (3), as the case may be,--
             (i )   the assessed tax less the advance tax, for the period up to the date on which the
                    self- assessment tax is paid; and
             (ii) the assessed tax less the advance tax and such self-assessment tax, for the period
                  commencing immediately after the date on which such self-
                  assessment tax is paid.
      (5) The assessed tax referred to in sub-section (4) shall be calculated in accordance with the
following formula--
            A­B
            where-
            A=          the amount of the tax on the total income determined under sub-section (1) of
                        section 160, and where an assessment referred to in clause (b) of sub-section
                        (3) has been made, the amount of tax on the total income determined on such
                        assessment;
            B=         the aggregate of --
             (i) any tax deducted or collected at source;
             (ii) any relief of tax claimed under section 228; and
             (iii) any tax credit available for set-off under section 105 or section 107.
      (6) Where tax is paid under section 158 or otherwise before the determination of total income
under sub-section (1) of section 160 or completion of an assessment referred to in clause ( b) of sub-
section (3), interest shall be calculated--
             (i )    in accordance with sub-sections (1) to (5), up to the date on which the tax is so
                    paid and reduced by the interest, if any, paid under section 158 towards the
                    interest chargeable under this section; and
             (ii) thereafter, at the rate specified in sub-section (1) on the amount by which the tax
                  so paid together with the advance tax paid falls short of the assessed tax.
      (7) In a case where as a result of reassessment under section 171 (not being an assessment
made for the first time), the amount of tax on total income, as referred to in
sub-section (5) is increased then, in addition to the interest under sub-section (1), the assessee shall
be liable to pay simple interest at the rate of one per cent. per month for the period mentioned in
sub-section (8) on the amount computed under sub-section (9).
      (8) The period referred to in sub-section (7) shall commence on the day immediately
following the end of the period mentioned in sub-section (3), as applicable, and end on the date of

                                               165
                  reassessment under section 171.
                        (9) The amount referred to in sub-section (7) shall be the amount by which the tax on the total
                  income determined on the basis of reassessment under section 171 exceeds the relevant amount
                  determined in variable A in the formula contained in sub-section (5).
                         (10) The interest payable under this section shall be increased or reduced, in accordance with
                  the variation in the amount on which interest was payable under this section, on account of any
                  rectification, revision or appellate order under this Code.
                         (11) The Assessing Officer shall serve on the assessee a notice of demand in such form as
                  may be prescribed specifying the sum payable on account of increase in the interest referred to in
                  sub-section (10) and such notice shall be deemed to be a notice under section 174 and the provisions
                  of this Code shall apply accordingly.
                       (12) The excess interest paid, if any, shall be refunded in a case where the interest is reduced
                  under sub-section (10).


Interest    for   232. (1) Where a person other than a company, who is liable to pay advance tax under section 226
deferment of      has--
advance tax.
                             (a) failed to pay such tax; or
                             (b) paid the tax on or before the dates specified in column (2) of the Table given below
                                 which is less than the percentage of the tax due on the returned income specified in
                                 column (3) of the said Table,
                  he shall be liable to pay simple interest at the rate of one per cent. per month for the period specified
                  in column (4) of the said Table on the amount of shortfall from the percentages of tax due on the
                  returned income as specified in column (5) and the interest payable by such person under this
                  section shall be the aggregate of all such amounts:
                                                                     TABLE
                  Serial Due                      Percentage for           Period          Percentage for
                  number date                     purposes of                              purposes of
                                                  ascertaining                             computing
                                                  liability                                Interest
                  (1)        (2)                  (3)                      (4)                (5)
                  1.         15th September.      Thirty per cent.         Three months.   Thirty per cent.
                  2.         15th December.       Sixty per cent.          Three months. Sixty per cent.
                  3.         15th March.          One Hundred per cent.One month.          One hundred per cent.
                           (2) Where a company, which is liable to pay advance income-tax under section 226 has--
                             (a) failed to pay such tax; or
                             (b)    paid the tax on or before the dates specified in column (2) of the Table given below
                                   which is less than the percentage of the tax due on the returned income specified in
                                   column (3) of the said Table,
                  it shall be liable to pay simple interest at the rate of one per cent. per month for the period specified
                  in column (4) of the said Table on the amount of shortfall from the percentages of tax due on the
                  returned income as specified in column (5) and the interest payable by such company under this
                  section shall be the aggregate of all such amounts:
                                                                     TABLE
                  Serial     Due                  Percentage for           Period          Percentage for

                                                                     166
number date                   purposes of                               purposes of
                              ascertaining                              computing
                              liability                                 Interest
(1)      (2)                  (3)                     (4)               (5)
1.       15th June.           Twelve per cent.        Three months      Fifteen per cent.
2.       15th September.      Thirty-six per cent.    Three months      Forty-five per cent.
3.       15th December.       Seventy-five            Three months      Seventy-five
                              per cent.                                 per cent.
4.       15th March.          One Hundred per cent.One month            One Hundred per cent..
      (3) The assessee shall not be liable to pay interest under sub-section (1) or sub-section (2), as
the case may be, on any shortfall in the advance tax payable where such shortfall is on account of
under estimation or failure to estimate--
         (a) the amount of capital gains; or
         (b)   income of nature listed at serial number 6 in the Table in Part III of the First Schedule.
      (4) The provisions of sub-section (3) shall apply in a case where the assessee has paid the
whole of the amount of tax payable, in respect of the income of the nature referred to in that sub-
section, in the remaining instalments of advance tax or where no such instalments are due, by the
31st day of March of the financial year.


233. (1) An assessee shall be liable to pay simple interest at the rate of one-half per cent. per month     Interest     on
on the excess amount of refund granted to him in circumstances specified in sub-section (2) for the         excess refund.
period mentioned in sub-section (3).
      (2) The circumstances referred to in sub-section (1) shall be where any refund is granted to
the assessee under sub-section (1) of section 160 and--
         (a) no refund is due on assesment made under section 165 or section 166 or section 171;
         or
         (b) the amount refunded under sub-section (1) of section 160 exceeds the amount
             refundable on assessment, made under section 165 or section 166 or section 171.
      (3) The period referred to in sub-section (1) shall commence from the date of grant of refund
and end on the date of regular assessment.
      (4) The interest chargeable, if any, under sub-section (1) shall be varied in accordance with
any rectification, revision or appellate order under this Code.


234. (1) Any amount, otherwise than by way of advance tax, specified as payable in a notice of              Interest payable
demand under section 174 shall be paid within a period of thirty days of the service of the notice.         on       demand
                                                                                                            raised.
      (2) The period mentioned in sub-section (1) may be reduced with the prior approval of the
Joint Commissioner, if the Assessing Officer has any reason to believe that it will be detrimental to
revenue if the period of thirty days is allowed.
      (3) If the amount specified in any notice of demand under section 174 is not paid within the
period specified therein, then the assessee shall be liable to pay simple interest at the rate of one per
cent. per month for the period commencing from the day immediately following the end of the
period specified in such notice and ending with the day on which the amount is paid.
     (4) Where interest is charged under section 235 on the amount of tax specified in the order
issued under sub-section (1) of section 189 for any period, then, no interest shall be charged under
sub-section (3) on the same amount for the same period.

                                                167
                       (5) The interest payable under this section shall be increased or reduced, in accordance with
                  the variation in the amount on which interest was payable under this section, on account of any
                  rectification, revision or appellate order under this Code.


Interest    for   235. (1) Where any person who is required to deduct or collect any tax in accordance with the
failure      to   provisions of this Code, does not deduct or collect the whole or any part of the tax, or after
deduct       or   deduction or collection fails to pay the tax, he shall be liable to pay simple interest-
collect or pay
                          (a) at the rate of one per cent. per month on the amount of such tax for the period from
tax.
                              the date on which such tax was deductible or collectible-
                              (i) to the date on which such tax is deducted or collected, as the case may be; or
                              (ii) in a case where such tax has been paid by the deductee or the collectee, to the
                                   date of filing of return by the deductee or the collectee, as the case may be; and
                          (b) at the rate of one and one-half per cent. per month on the amount of such tax for the
                              period from the date on which such tax was deducted or collected, as the case may be,
                              to the date on which such tax is paid.
                     (2) The interest computed under sub-section (1) shall be paid before furnishing the return under
                  sub-section (3) of section 217 or sub-section (6) of section 221, as the case may be.


                                                               H.--Refunds


Refunds.          236. (1) An assessee shall be entitled to a refund of the excess of any amount paid by him or on his
                  behalf, or treated as paid by him or on his behalf, for any financial year over the amount with which
                  he is liable under this Code.
                       (2) Every claim for refund shall be made within such time and such form and manner, as
                  may be prescribed.
                         (3) An assessee shall, in a case where an assessment is set aside or cancelled or an order of
                  fresh assessment is directed to be made in an appeal, or any other proceeding under this Code, be
                  entitled to the refund only on the making of the fresh assessment.
                        (4) The amount of refund determined under this Sub-chapter shall be reduced by the amount,
                  if any, remaining payable under this Code by the assessee to whom the refund is due, and the
                  balance amount of refund, if any, shall be issued along with an intimation to this effect to the
                  assessee.
                        (5) In a claim under this Sub-chapter, it shall not be open to the assessee to question the
                  correctness of any assessment or other matter which has become final and conclusive or ask for a
                  review of the same, and accordingly the assessee shall not be entitled to any relief on such claim
                  except refund of tax paid in excess.


Interest    on    237. (1) An assessee shall be entitled to receive simple interest at the rate of one-half per cent. per
refund.           month on any amount refundable to him under section 236 in respect of any financial year for the
                  period mentioned in sub-section (2).
                        (2) The period referred to in sub-section (1) shall, --
                          (a) in a case where refund is out of any tax paid by way of advance tax or treated as so
                              paid under section 220 or collected at source under section 222, commence on the 1st
                              day of April next following the financial year and end on the date on which the refund
                              is granted; and
                          (b) in any other case, commence from the date on which such amount was paid and end on

                                                                 168
               the date on which the refund is granted.
      (3) Notwithstanding anything in sub-section (2), in a case where the return is furnished after
the due date, the period referred to in sub-section (1) shall commence on the date on which the
return is furnished and end on the date on which the refund is granted.
      (4) No interest shall be payable,-
         (a)    under sub-section (1) if the amount of refund is less than ten per cent. of the tax as
               determined under sub-section (1) of section 160 or on regular assessment;
         (b) to the deductor, seller, lessor or licensor, as the case may be, if any refund arises to
             him under section 189 or section 224, as the case may be.
      (5) If the proceedings resulting in the refund are delayed for reasons attributable to the
assessee, whether wholly or in part, the period of the delay so attributable to him shall be excluded
from the period for which interest is payable, and where any question arises as to the period to be
excluded, it shall be decided by the Chief Commissioner or the Commissioner.
      (6) The interest under this section shall be increased or reduced in accordance with the
variation in the amount on which the interest was payable as a result of any rectification, revision or
appellate order under this Code.
       (7) The Assessing Officer shall serve on the assessee a notice of demand in such form as may
be prescribed specifying the amount of excess interest paid to him where interest is reduced under
sub-section (6) and such notice shall be deemed to be a notice under section 174 and the provisions
of this Code shall apply accordingly.
      (8) An assessee shall be entitled to receive simple interest at the rate of one-half per cent. per
month on the amount of interest receivable by him under this section for the period from the date of
grant of refund to the date of actual payment of such interest, if such interest is not paid to him
along with the refund.


238. (1) If the income of a person is included in the total income of any other person under the           Person entitled
provisions of this Code, then notwithstanding such inclusion of income, the other person shall be          to claim refund
entitled to a refund in respect of such income.                                                            in        certain
                                                                                                           special cases.
       (2) The legal representative or the trustee or guardian or receiver, as the case may be, of a
person shall be entitled to claim or receive refund for the benefit of such person or his estate if such
person is unable to claim or receive any refund due to him on account of death, incapacity,
insolvency, liquidation or any other cause.



                                 I.--Levy of fee in certain cases


239. (1) Without prejudice to the provisions of this Code, where a person fails to deliver or cause        Fee for default
to be delivered a return within the time prescribed in sub-section (4) of section 218 or sub-section       in    furnishing
(7) of section 221, he shall be liable to pay, by way of fee, a sum of two hundred rupees for every        returns.
day during which the failure continues.
   (2) The amount of fee referred to in sub-section (1) shall not exceed the amount of tax
deductible or collectible, as the case may be.
    (3) The amount of fee referred to in sub-section (1) shall be paid before delivering or causing to
be delivered a return in accordance with sub-section (3) of section 217 or sub-section (6) of section
221.



                                                169
                                                             J.--Recovery


Recovery    by   240. (1) Any amount specified as payable in a notice of demand under section 174, otherwise than
Assessing        by way of advance tax, shall be paid within thirty days of the service of the notice, to the credit of
Officer.         the Central Government in such manner as may be prescribed.
                       (2) Where the Assessing Officer has any reason to believe that it will be detrimental to the
                 interests of revenue, if the period of thirty days referred to in sub-section (1) is allowed, he may,
                 with the previous approval of the Joint Commissioner, reduce such period as he deems fit.
                       (3) The Assessing Officer may, on an application made by the assessee, before the expiry of a
                 period of thirty days or the period reduced under sub-section (2) or during the pendency of appeal
                 with the Commissioner (Appeals), extend the time for payment, or allow payment by instalments,
                 subject to such conditions as he may think fit to impose in the circumstances of the case.
                       (4) An assessee shall be deemed to be an assessee in default, if the tax arrear is not paid
                 within the time allowed under sub-section (1) or the period reduced under sub-section (2) or
                 extended under sub-section (3), as the case may be.
                      (5) Where an assessee defaults in paying any one of the instalments within the time fixed
                 under sub-section (3), he shall be deemed to be an assessee in default in respect of the whole of the
                 amount then outstanding.
                       (6) The Assessing Officer may, in a case where no certificate has been drawn up under
                 section 241 by the Tax Recovery Officer, recover the amount in respect of which the assessee is in
                 default, or is deemed to be in default, by any one or more of the modes provided in section 2421.
                      (7) The Tax Recovery Officer shall be vested with the powers to recover the tax arrear on
                 drawing up of a statement of tax arrear under section 241.


Recovery by      241. (1) The Tax Recovery Officer may draw up under his signature a statement of tax arrears of
Tax Recovery     an assessee referred to in sub-section (4) or sub-section (5) of section 240, in such form, as may be
Officer.         prescribed ( such statement being hereafter in this Chapter and in the Eighteenth Schedule referred
                 to as "certificate").
                       (2) The certificate under sub-section (1) shall stand amended from time to time consequent to
                 any proceeding under this Code and the Tax Recovery Officer shall recover the amount so modified.
                       (3) The Tax Recovery Officer may rectify any mistake apparent from the record.
                      (4) The Tax Recovery Officer shall have the power to extend the time for payment, or allow
                 payment by instalments, subject to such conditions as he may think fit to impose in the
                 circumstances of the case.
                       (5) The Tax Recovery Officer shall proceed to recover from the assessee the amount specified
                 in the certificate by one or more of the modes referred to in section 242 or in the Eighteenth
                 Schedule.
                       (6) It shall not be open to the assessee to dispute the correctness of any certificate drawn up
                 by the Tax Recovery Officer on any ground whatsoever, but it shall be lawful for the Tax Recovery
                 Officer to cancel the certificate if, for any reason, he thinks it necessary so to do.


                 242. (1) The Assessing Officer or the Tax Recovery Officer may require the employer of the               Modes       of
                 assessee to deduct from any payment to the assessee such amount as is sufficient to meet the tax         recovery.
                 arrear from the assessee.


                                                               170
                  (2) Upon requisition under sub-section (1), the employer shall comply with the requisition
            and shall pay the sum so deducted to the credit of the Central Government in such manner as may be
            prescribed.
                 (3) Any part of the salary ,exempt from attachment in execution of a decree of a civil Court
5 of 1908   under section 60 of the Code of Civil Procedure, 1908, shall be exempt from any requisition made
            under sub-section (1).
                  (4) The Assessing Officer or the Tax Recovery Officer may, by notice in writing, require any
            debtor of the assessee to pay such amount, not exceeding the amount of debt, as is sufficient to meet
            the tax arrear of the assessee.
                  (5) Upon receipt of the notice under sub-section (4), the debtor shall comply with the
            requisition and shall pay the sum to the credit of the Central Government in such manner as may be
            prescribed within the time (not being before the debt becomes due to the assessee) specified in the
            notice.
                  (6) A copy of the notice issued under sub-section (4) shall be forwarded to the assessee at his
            last address known to the Assessing Officer or the Tax Recovery Officer and in the case of a joint
            account, to all the joint holders at their last addresses known to the Assessing Officer or the Tax
            Recovery Officer.
                  (7) It shall not be necessary for any pass book, deposit receipt, policy or any other document
            to be produced for the purpose of any entry, endorsement or the like being made before payment is
            made, notwithstanding any rule, practice or requirement to the contrary if the notice under sub-
            section (4) is issued to a post office, banking company, insurer or any other person.
                  (8) Any claim in respect of any property, in relation to which a notice under sub-section (4)
            has been issued, arising after the date of the notice, shall be void as against any demand contained in
            the notice.
                  (9) A person to whom a notice under sub-section (4) has been issued, shall not be required to
            pay the amount of tax arrear specified therein, or part thereof, if he objects to it by a statement on
            oath that the sum demanded, or any part thereof, is not due to the assessee or that he does not hold
            any money for, or on account of, the assessee.
                  (10) The person referred to in sub-section (9) shall be personally liable to the Assessing
            Officer or the Tax Recovery Officer, as the case may be, to the extent of his own liability to the
            assessee on the date of the notice, or to the extent of the liability of the assessee for any sum due
            under this Code, whichever is less, if it is discovered that the statement made by him was false in
            any respect.
                  (11) The Assessing Officer or the Tax Recovery Officer may amend or revoke any notice
            issued under sub-section (4) or extend the time for making any payment in pursuance of such notice.
                   (12) The Assessing Officer or the Tax Recovery Officer shall grant a receipt for any amount
            paid in compliance with a notice issued under sub-section (4), and the person so paying shall be
            fully discharged from his liability to the assessee to the extent of the amount so paid.
                  (13) Any person discharging any liability to the assessee after receipt of a notice under sub-
            section (4) shall be personally liable to the Assessing Officer or the Tax Recovery Officer to the
            extent of his own liability to the assessee so discharged or to the extent of the liability of the
            assessee for any sum due under this Code, whichever is less.
                  (14) The debtor to whom a notice under sub-section (4) is sent shall be deemed to be an
            assessee in default, if he fails to make such payment and further proceedings may be initiated
            against him for the realisation of the amount in the manner provided in this section and the
            Eighteenth Schedule.
                  (15) The Assessing Officer or the Tax Recovery Officer may apply to the court, in whose
            custody there is money belonging to the assessee, for payment to him of the entire amount of such


                                                           171
                  money or if it is more than the tax arrear, an amount sufficient to meet the tax arrear.
                        (16) The Assessing Officer or the Tax Recovery Officer shall effect the recovery of any tax
                  arrear in the same manner as attachment, distraint and sale of any movable property under the
                  Eighteenth Schedule, if he is so authorised by the Chief Commissioner, or the Commissioner, by
                  general or special order.
                        (17) In this section,--
                          (a) ``debtor'' in relation to an assessee, means,--
                                (i) any person from whom any money is due, or may become due, to the assessee; or
                                (ii) any person who holds, or may subsequently hold, any money for, or on account
                                     of, the assessee; or
                                (iii) any person who holds, or may subsequently hold, any money for, or on account
                                     of, the assessee jointly with any other person;
                          (b) shares of the joint holders in the account shall be presumed, until the contrary is
                              proved, to be equal.


Tax Recovery      243. (1) The Tax Recovery Officer competent to take action under section 241 shall be the Tax
Officer      by   Recovery Officer --
whom
                          (a) within whose jurisdiction --
recovery is to
be effected.                    (i )   the assessee carries on his business;
                                (ii) the principal place of business of the assessee is situate;
                                (iii) the assessee resides; or
                                (iv) any movable or immovable property of the assessee is situate; or
                          (b) who has been assigned jurisdiction under section 140.
                        (2) The Tax Recovery Officer, referred to in sub-section (1), may send a certificate, in such
                  manner as may be prescribed, specifying the tax arrear to be recovered, to another Tax Recovery
                  Officer within whose jurisdiction the assessee resides or has property, if the first-mentioned Tax
                  Recovery Officer --
                          (a) is not able to recover the entire amount by sale of the property, movable or immovable,
                              within his jurisdiction; or
                          (b)    is of the opinion that, for the purpose of expediting, or securing, the recovery of the
                                whole, or any part, of the amount under this Chapter, it is necessary to do so.
                        (3) The second-mentioned Tax Recovery Officer shall, on receipt of the certificate, assume
                  jurisdiction for recovery of the amount of tax arrear specified therein and proceed to recover the
                  amount in accordance with the provisions of this Chapter.


                  244. The amount of tax arrears due from a non-resident may be recovered from--                           Recovery of tax
                                                                                                                           arrear in respect
                          (a) any asset of the non-resident, wherever located; or
                                                                                                                           of non-resident
                          (b) any amount payable by any person to the non-resident.                                        from his assets.


                  245. (1) The liquidator shall inform the Assessing Officer, who has jurisdiction to assess the           Recovery       in
                  income of the company, of his appointment within a period of thirty days of his becoming the             case     of     a
                  liquidator.                                                                                              company        in
                                                                                                                           liquidation.

                                                                   172
                      (2) The Assessing Officer shall, within a period of three months from the date on which he
               receives the information, intimate to the liquidator the amount which, in his opinion, would be
               sufficient to provide for any tax arrears or any amount which is likely to become payable thereafter,
43   of 1961   by the company under this Code or under the Income tax Act, 1961 or the Wealth-tax Act, 1957, as
27   of 1957   they stood before the commencement of this Code.
                     (3) The liquidator--
                        (a) shall not part with any of the assets of the company, or the properties, in his custody
                            until he has been intimated by the Assessing Officer under sub-section (2); and
                        (b) on being so intimated, shall set aside an amount equal to the amount intimated.
                     (4) Upon receipt of the intimation from the Assessing Officer under sub-section (2), the
               amount so intimated shall, notwithstanding anything in any other law for the time being in force, be
               the first charge on the assets of the company remaining after payment of the following dues,
               namely:--
                        (a)   workmen's dues; and
                        (b)    debts due to secured creditors to the extent such debts rank under
                              clause (iii) of the proviso to sub-section (1) of section 325 of the Companies Act, 2013    18 of 2013
                              pari passu with such dues.
                   (5) The liquidator shall be personally liable for the payment of the amount payable by the
               company, if he--
                        (a) fails to inform in accordance with sub-section (1); or
                        (b) fails to set aside the amount as required by sub-section (3).
                      (6) The obligations and liabilities attached to the liquidator under this section shall attach to
               all the liquidators jointly and severally in a case where there is more than one liquidator.
                     (7) The provisions of this section shall prevail over anything to the contrary contained in any
               other law for the time being in force.
                     (8) In this section,--
                        (a) "liquidator" in relation to a company which is being wound up,whether under the
                            orders of a court or otherwise, shall include a receiver of the assets of the company;
                        (b)    "workmen's dues" shall have the meaning assigned to it in section 325 of the
                              Companies Act, 2013.                                                                        18 of 2013


Liability of   246. (1) Every person being a manager at any time during the financial year shall be jointly and
manager of a   severally liable for the payment of any amount due under this Code in respect of the company for
company.       the financial year, if the amount cannot be recovered from the company.
                      (2) The provisions of sub-section (1) shall not apply, if the manager proves that non-recovery
               cannot be attributed to any neglect, misfeasance or breach of duty on his part in relation to the
               affairs of the company.
                   (3) The provisions of this section shall prevail over anything to the contrary contained in the
               Companies Act, 2013.                                                                                       18 of 2013

                     (4) In this section, "manager" shall include a managing director and both shall have the
               meaning respectively assigned to them in clause (53) and clause (54) of section 2 of the Companies
               Act, 2013.                                                                                                 18 of 2013


               247. (1) Every person, being a participant in an unincorporated body at any time during the                Joint        and


                                                               173
financial year, or the representative assessee of the deceased participant, shall be jointly and            several liability
severally liable, along with the unincorporated body, for payment of any amount payable by the              of participants
unincorporated body under this Code and all the provisions of this Code shall apply accordingly.
       (2) In case of a limited liability partnership, the provisions of sub-section (1) shall not apply,
if the partner proves that non-recovery cannot be attributed to any neglect, misfeasance or breach of
duty on his part in relation to the affairs of the partnership.
     (3) The provisions of this section shall prevail over anything to the contrary contained in the
Limited Liability Partnership Act, 2008.

                                                                                                            6 of 2009
248 . If the recovery of tax in any area has been entrusted to a State Government under clause (1)          Recovery
of article 258 of the Constitution, the State Government may direct, with respect to that area or any       through State
part thereof, that tax shall be recovered therein with, and as an addition to, any municipal tax or         Government.
local rate, by the same person and in the same manner as the municipal tax or local rate is recovered.



249. (1) The Board may forward a certificate to any Tax Recovery Officer for recovery of any                Recovery of tax
amount under the corresponding law in force in any country or specified territory outside India             in pursuance of
from a person having property in India, if such country or territory or any authority under the             agreements
Government of that territory or country, has entered into an agreement with India under sub-sections        with       foreign
(1) and (2) or sub-section (4) of section 295, as the case may be, for the purposes specified in clause     countries       or
(d) of sub-section (1) of section 295.                                                                      specified
                                                                                                            territory.
      (2) On receipt of the certificate under sub-section (1) from the Board, the Tax Recovery
Officer shall --
         (a)    proceed to recover the amount specified in the certificate in the manner in which he
               would proceed to recover the amount specified in a certificate under section 241; and
         (b) remit any sum so recovered by him to the Board after deducting his expenses in
             connection with the recovery proceedings.
      (3) The Tax Recovery Officer may, in a case where an assessee has property in a country or a
specified territory outside India, forward a certificate to the Board for recovery of the tax arrears
from the assessee, if the Central Government or any specified association in India has entered into
an agreement with that country or territory under sub-sections (1), (2) or sub-section (4) of section
295, as the case may be, for the purposes specified in clause (d) of sub-section (1) of section 295.
     (4) On receipt of the certificate under sub-section (3) from the Tax Recovery Officer, the
Board may take such action thereon as it may deem appropriate having regard to the terms of the
agreement with such country or a specified territory.


250. (1) No person referred to in sub-section (2) shall leave the territory of India unless he              Tax clearance
furnishes to such authority as may be notified, an undertaking to the effect that he has made               certificate    in
satisfactory arrangement for discharging his tax liability, if any, in respect of any income or wealth      certain cases.
liable to tax in India.
      (2) The person referred to in sub-section (1) shall be a person--
         (a) who is not domiciled in India;
         (b) who has come to India in connection with business or employment; and
         (c) who has income derived from any source in India.
       (3) Every person, who is domiciled in India at the time of his departure from India,
shall--

                                                174
                         (a) furnish to the notified authority such particulars as may be prescribed; and
                         (b) obtain a certificate from the notified authority that he has no liability, if in the opinion
                             of the Assessing Officer, it is necessary for such person to obtain such certificate.
                      (4) The Central Government may notify the class of persons to whom the provisions of sub-
                section (1) or sub-section (3) shall not apply.
                       (5) The notified authority shall, on receipt of the undertaking or particulars referred to in sub-
                section (1) or sub-section (3), immediately issue to the person a no objection certificate for leaving
                India.
                      (6) The owner, or charterer, of any ship, or aircraft, shall be personally liable to pay the
                whole, or any part, of the amount payable under this Code by any person required to obtain a no
                objection certificate in accordance with the foregoing sub-sections if the person leaves India,
                without the possession of the certificate, in the ship, or aircraft, of the owner or the charterer.
                      (7) The owner, or charterer, of any ship, or aircraft, shall be deemed to be an assessee in
                default in respect of the liability created under sub-section (6) and such amount shall be recoverable
                from him in the manner provided in this Chapter as if it were tax arrears.
                      (8) The Board may, having regard to the interests of revenue, prescribe--
                         (a) the circumstances;
                         (b) the form and the manner, in which the undertaking is to be furnished; and
                         (c) any other matter connected therewith.
                     (9) In this section, the expressions "owner" and "charterer" include any representative, agent
                or employee authorised by the owner, or charterer, to allow persons to travel by the ship or aircraft.


Recovery by     251. (1) The several modes of recovery specified in this Chapter shall not affect in any way--
suit or under
                         (a) any other law for the time being in force relating to the recovery of debts due to the
other law not
                             Government; or
affected.
                         (b) the right of the Government to institute a suit for the recovery of the tax arrears from
                             the assessee.
                      (2) It shall be lawful for the Assessing Officer, or the Government, to have recourse to any
                such law or suit, notwithstanding that the tax arrears are being recovered from the assessee by any
                mode specified in this Sub-chapter.


                                                           CHAPTER - XVI
                                                             PENALTIES


                252. (1) A person shall be liable to a penalty if he has under reported the tax bases for any               Penalty       for
                financial year.                                                                                             under reporting
                                                                                                                            of tax bases.
                     (2) The penalty referred to in sub-section (1) shall be a sum which shall not be less than, but
                which shall not exceed two times, the amount of tax payable in respect of the amount of tax bases
                under reported for the financial year.
                      (3) A person shall be considered to have under reported the tax bases, if--
                         (a)    the tax bases assessed or reassessed, for the first time, is greater than the maximum
                               amount not chargeable to tax, if any, where no return of tax bases has been filed;
                         (b) the tax bases assessed is greater than the tax bases disclosed in the return of tax bases;

                                                               175
              or
        (c) the tax bases reassessed is greater than the tax bases assessed immediately before the
            re-assessment.
      (4) The amount of tax bases under reported shall be the aggregate amount of the addition or
disallowance made by the Assessing Officer, the Commissioner or the Commissioner (Appeals), as
the case may be.
      (5) The aggregate amount of the addition or disallowance made by the Assessing Officer in
assessment or re-assessment shall, in a case--
        (a)    where no return of tax bases has been filed, which was required by any provision of
              this Code, be the assessed tax bases as reduced by the maximum amount not
              chargeable to tax, if any;
        (b) where the return of tax bases has been filed as required under section 155 or section
            157, be the amount of tax bases assessed as reduced by the tax bases disclosed in the
            return filed before the issue of notice under sub-section (2) of section 161;
         (c) where no return of tax bases has been filed under section 155 or in response to a notice
             under section 157 and whether or not the return of tax bases has been filed in response
             to a notice under section 171, be the tax bases reassessed as reduced by the maximum
             amount not chargeable to tax, if any; and
        (d) where a return of tax bases has been filed as required by section 155 or in response to a
            notice under section 157 and whether or not the return of the tax bases has also been
            filed as required by section 171, be the amount of the tax bases reassessed as reduced
            by the tax bases assessed immediately before the reassessment.
       (6) The aggregate amount of the addition or disallowance made by the Commissioner in
revision shall be the tax bases assessed consequent to revision as reduced by the tax bases assessed
in the order so revised.
     (7) The aggregate amount of the addition or disallowance made by the Commissioner
(Appeals) in appeal shall be the aggregate of all enhancements made by the Commissioner
(Appeals) in the order under appeal.
      (8) Subject to the provisions of sub-section (10), the aggregate amount of the addition or
disallowance referred to in sub-sections (5) to (7) shall include--
        (a) the amount of any money or the value of bullion, jewellery or other valuable article or
            thing (hereinafter referred to as "assets") found in the possession of the assessee, or
            under his control, in the course of search under section 145, if the assessee claims that
            such assets have been acquired by him by utilising (wholly or in part) his income for
            any financial year which has ended before the date of search, and--
              (i) the due date for filing the return of tax bases for the financial year has expired, but
                  the assessee has not filed such return in accordance with the provisions of this
                  Code before the date of search; or
              (ii) the return of tax bases for such financial year has been furnished before the date of
                   search, but such income has not been declared therein;
        (b) the amount, or value, of assets belonging to the assessee and delivered to the
            requisitioning officer under sub-section (3) of section 146 or handed over to the
            Assessing Officer under section 148, if the assessee claims that such assets have been
            acquired by him by utilising (wholly or partly) his income for any financial year which
            has ended before the date of requisition or the date of search, as the case may be,
            during the course of which the assets were seized, and--
              (i) the due date for filing the return of tax bases for the financial year has expired, but
                  the assessee has not filed such return in accordance with the provisions of this

                                                176
                 Code before the date of search or requisition, as the case may be; or
             (ii) the return of tax bases for such financial year has been furnished before the date
                  of requisition or the date of search, as the case may be, but such income has not
                  been declared therein;
        (c) any tax bases based on any entry in any books of account or other documents or
            transactions, if the assessee claims that such entry in the books of account or other
            documents or transactions represents his tax bases, wholly or in part, for any financial
            year which has ended before the date of search , and--
             (i) the due date for filing the return of tax bases for the financial year has expired, but
                 the assessee has not filed such return in accordance with the provisions of this
                 Code before the date of search; or
             (ii) the return of tax bases for such financial year has been furnished before the date
                  of search, but such tax bases has not been declared therein;
        (d) in a case where the source of any receipt, deposit or investment in any financial year is
            claimed to have been added or deducted, as the case may be, in any year prior to the
            financial year in which such receipt, deposit or investment appears (hereinafter referred
            to as "preceding year") and no penalty was levied for such preceding year, then such
            amount as is sufficient to cover such receipt, deposit or investment.
   (9) For the purposes of clause (d) of sub-section (8), the amount referred to in said clause shall
be deemed to be amount of tax bases under reported for the preceding year in the following order --
        (a) the preceding year immediately before the year in which the receipt, deposit or
            investment appears, being the first preceding year, and
        (b) where the amount added or deducted in the first preceding year is not sufficient to
            cover the receipt, deposit or investment, the year immediately preceding the first
            preceding year and so on.
   (10) The aggregate amount of the addition or disallowance referred to in sub-sections (5) to (7)
shall not include the following, namely:--
        (a) the amount relating to addition or disallowance in respect of which the assessee offers
            an explanation and the Assessing Officer or the Commissioner or the Commissioner
            (Appeals), as the case may be, is satisfied that--
             (i) the explanation is bona fide;
             (ii) the assessee has disclosed all the facts material to the addition or disallowance; and
             (iii) the assessee has disclosed all the facts relating to the explanation.
        (b) the amount relating to addition or disallowance determined on the basis of an estimate
            by the Assessing Officer or the Commissioner or the Commissioner (Appeals), as the
            case may be, if the accounts are correct and complete to the satisfaction of the
            Assessing Officer, or the Commissioner or the Commissioner (Appeals), as the case
            may be, but the method employed is such that, in the opinion of the Assessing Officer
            or the Commissioner or the Commissioner (Appeals),as the case may be, the income
            cannot properly be deduced therefrom;
        (c) the amount relating to addition or disallowance pertaining to any issue, determined on
            the basis of an estimate by the Assessing Officer or the Commissioner or the
            Commissioner (Appeals), as the case may be, if the assessee --
             (i) has, on his own, estimated a lower amount of addition or disallowance on the same
                 issue;
             (ii) has included such amount in the computation of his tax bases; and


                                                 177
              (iii) has disclosed all the facts material to the addition or disallowance; and
         (d) the amount of undisclosed tax bases referred to in section 253.
   (11) The tax payable in respect of the aggregate amount of the addition or disallowance shall be
the amount of tax calculated on the aggregate amount of the addition or disallowance made by the
Assessing Officer, the Commissioner or the Commissioner (Appeals), as the case may be,--
        (a)    at the maximum marginal rate in the case to which Paragraph A or Paragraph B or
              Paragraph C of Part I of the First Schedule applies; and
        (b)   at the rate specified in the First Schedule or the Seventeenth Schedule, as the case
              may be, in all other cases.
    (12) No addition or disallowance of an amount shall form the basis for imposition of penalty,
if--
        (a) such addition or disallowance has formed the basis of imposition of penalty in the case
            of the person for the same or any other financial year; or
        (b)    the amount relates to any addition or disallowance made pursuant to the adjustment
              under section 160.
   (13) The penalty referred to in sub-section (1) shall be imposed, by an order in writing, by--
        (a) the Assessing Officer, if the amount of tax bases under reported is determined in
            assessment or re-assessment;
        (b) the Commissioner, if the amount of tax bases under reported is determined in revision
            of the tax bases by the Commissioner; or
        (c) the Commissioner (Appeals), if the amount of tax bases under reported is determined
            in appeal against an assessment or re-assessment order.


253. (1) A person shall be liable to a penalty in respect of the undisclosed tax bases for the               Penalty where
specified financial year, if a search and seizure has been conducted under section 145 in his case.          search has been
                                                                                                             initiated
     (2) The person referred to in sub-section (1) shall be liable to a penalty--
        (a) of ten per cent. of the undisclosed tax bases for the specified financial year, if such
            person--
              (i )    in a statement under sub-section (9) of section 145 in the course of the search,
                     admits the undisclosed tax bases;
              (ii) substantiates the manner in which the undisclosed tax bases was derived; and
              (iii) pays the tax, together with interest, if any, in respect of the undisclosed tax bases.
        (b) of twenty per cent. of the undisclosed tax bases for the specified financial year, if in a
            statement under sub-section (9) of section 145 in the course of the search, such person
            does not admit the undisclosed tax bases, but declares such tax bases in the return of
            tax bases for such financial year and pays the tax, together with interest, if any, in
            respect of such tax bases; or
        (c) which shall not be less than thirty per cent. but which may extend to sixty per cent. of
            the undisclosed tax bases, if in a statement under sub-section (9) of section 145 in the
            course of the search, such person does not admit the undisclosed tax bases and also
            fails to declare such tax bases in the return of tax bases for such financial year.
  (3) The penalty referred to in sub-section (1) shall be imposed, by an order in writing, by the
Assessing Officer.
   (4) In this section--

                                                178
                         (a) "undisclosed tax bases" means--
                                (i) any tax bases of the specified financial year represented, either wholly or partly, by
                                    any money, bullion, jewellery or other valuable article or thing or any entry in the
                                    books of account or other document or any transaction, found in the course of a
                                    search under section 145, which has--
                         (A) not been recorded on or before the date of search in the books of account or other
                         documents maintained in the normal course relating to the specified financial year; or
                         (B) otherwise not been disclosed to the Chief Commissioner or the Commissioner before
                         the date of the search; or
                                (ii) any tax bases of the specified financial year represented, either wholly or partly,
                                     by any entry in respect of an expense recorded in the books of account or other
                                     documents maintained in the normal course relating to the specified financial year
                                     which is found to be false and would not have been found to be so, had the search
                                     not been conducted;
                           (b) "specified financial year" means the financial year ---
                                (i) which has ended before the date of search, but the due date for filing the return of
                                    tax bases for such year has not expired before the date of search and the assessee
                                    has not furnished the return of tax bases for the financial year before the date of
                                    search; or
                                (ii) in which search was conducted.


Penalty    for   254. (1) Every person who is an assessee in default, or an assessee deemed to be in default, as the
default     in   case may be, in making payment of tax, and in case of continuing default by such assessee, he shall
payment of tax   be liable to a penalty of such amount, as the Assessing Officer may direct.
arrear
                    (2) The total amount of penalty under sub-section (1) shall not exceed the amount of tax arrear.
                     (3) An assessee shall not cease to be liable to any penalty under sub-section (1) merely by reason
                 of the fact that before the levy of such penalty he has paid the tax.


                 255. (1) A person shall be liable to a penalty if he has, without reasonable cause, failed to--             Penalty       for
                                                                                                                             other defaults.
                         (a) keep and maintain any books of account and other documents as required under
                             section 87 or section 98 for any financial year or to retain such books of account and
                             other documents in accordance with the rules made thereunder;
                         (b) get his accounts audited in respect of any financial year or obtain and furnish a report
                             of such audit as required under section 88 or section 98;
                         (c )    deduct the whole, or any part, of the tax as required under the provisions of Sub--
                                chapter A of Chapter XIV;
                         (d)     collect the whole, or any part, of the tax as required under the provisions of Sub--
                                chapter B of Chapter XIV;
                         (e) pay the whole, or any part, of the tax as required under section 217 or section 221;
                         (f)    furnish the return of tax bases under section 155 by the end of the financial year in
                                which such return is due;
                         (g) comply with the provisions of section 298;
                         (h) furnish the information as required under section 150;
                         (i)      answer any question put to him by an income-tax authority in the exercise of its

                                                                 179
           powers under this Code;
     (j)   sign any statement made by him in the course of any proceedings under this Code
           which an income-tax authority may legally require him to sign;
     (k) attend or produce books of account or documents at the place or time, if he is required
         to attend or to give evidence or produce books of account or other documents, at
         certain place and time in response to summons issued under sub-section (1) of section
         144;
     (l)   furnish in time the return of transportation charges as required under section 182;
     (m) give notice of discontinuance of business as required under section 186;
     (n) to allow inspection of any register under section 151 or of any entry in such register or
         to allow copies of such register or of any entry therein to be taken;
     (o)    furnish in time the return of tax deduction as required under section 217 or furnish
           correct information in such return;
     (p) furnish in time the return of tax collection as required under section 221 or furnish
         correct information in such return;
     (q) furnish a certificate to the deductee as required under section 217;
     (r) furnish a certificate to the buyer, lessee or licensee as required under section 221;
     (s) deduct and pay tax as required under sub-section (2) of section 242;
     (t)    deliver, or cause to be delivered, a return in respect of payment of interest as required
           under sub-section (1) of section 218;
     (u) deliver, or cause to be delivered, a return in respect of payment as required under sub-
         section (3) of section 218;
     (v) comply with the provisions of section 296;
     (w) comply with the provisions of section 297;
     (x) comply with a notice issued under section 157 or section 161 or section 164 or
         directions under section 162; or
     (y) furnish the annual information return as required under sub-section (3) of section 299,;
     (z) obtain and furnish a report from an accountant as required under section 103 or 106, as
         the case may be.
(2) he penalty referred to in sub-section (1) shall be --
     (a) any sum which shall not be less than fifty thousand rupees but which may extend to
         two lakh rupees, in the cases referred to in clause (a) or clause (b) of sub-section (1);
     (b) a sum which shall be equal to the amount of tax deductible or collectible or payable,
         as the case may be, in the cases referred to in clauses (c) to (e) of sub-section (1);
     (c) five thousand rupees, in the case referred to in clause (f) of subsection (1);
     (d) a sum equal to the amount of loan or deposit taken or accepted, or repaid, as the case
         may be, in the case referred to in clause (g) of sub-section (1);
     (e) ten thousand rupees for each default, in the cases referred to in clause (v) or clause
         (w) of sub-section (1);
     (f) any sum which shall not be less than five thousand rupees but which may extend to one
         lakh rupees, in any other case referred to in sub-section (1).




                                            180
Procedure   256. (1) The income-tax authority shall, for the purposes of imposing any penalty under this
            Chapter, issue a notice to any assessee requiring him to show cause why the penalty should not be
            imposed on him.
                  (2) The income-tax authority for the purposes of sub-section (1) shall be--
                    (a) the income-tax authority referred to in sub-section (13) of section 252, if the penalty is
                        imposable under the said section;
                    (b) the Assessing Officer, if the penalty is imposable under section 253; and
                    (c) the income-tax authority before whom the default has been committed, if the penalty is
                        imposable under section 254 or section 255.
               (3) The notice referred to in sub-section (1) shall be issued--
                     (a) during the pendency of any proceedings under this Code for the relevant financial
                        year, in respect of penalties referred to in section 252 or section 253;
                     (b) within a period of three years from the end of the financial year in which the default is
                         committed, in respect of penalties referred to in section 255.
               (4) No order imposing a penalty under this Chapter shall be made unless the assessee has been
            given an opportunity of being heard.
              (5) An order imposing a penalty under this Chapter shall be made with the approval of the Joint
            Commissioner, if--
                    (a) the penalty exceeds one lakh rupees and the income-tax authority levying the penalty
                        is in the rank of Income-tax Officer; or
                    (b) the penalty exceeds five lakh rupees and the income-tax authority levying the penalty
                        is in the rank of Assistant Commissioner or Deputy Commissioner.
               (6) Every order of penalty issued under this Chapter shall be accompanied by a notice of
            demand in respect of the amount of penalty imposed and such notice of demand shall be deemed to
            be a notice under section 174.


            257. (1) No order imposing a penalty under this Chapter shall be passed after the expiry of a            Bar           of
            period of one year from the end of the financial year in which the notice for imposition of penalty is   limitation   for
            issued under section 256.                                                                                imposing
                                                                                                                     penalty
                  (2) An order imposing, or dropping the proceedings for imposition of, penalty under this
            Chapter may be revised, or revived, as the case may be, on the basis of assessment of the tax bases
            as revised after giving effect to the order of the Commissioner (Appeals), the Appellate Tribunal,
            the High Court or the Supreme Court or order of revision under section 203 or section 204.
                  (3) An order revising or reviving the penalty under sub-section (2) shall not be passed after
            the expiry of a period of six months from the end of the month in which order of the Commissioner
            (Appeals), the Appellate Tribunal, the Authority for Advance Rulings and Dispute Resolution, the
            High Court or the Supreme Court is received by the Chief Commissioner or the Commissioner or
            the order of revision under section 203 or section 204 is passed.
                  (4) In computing the period of limitation for the purposes of this section, the following time
            or period shall not be included--
                    (a)    the time taken in giving an opportunity to the assessee to be reheard under section
                          143; and
                    (b)    any period during which a proceeding under this Chapter for the levy of penalty is
                          stayed by an order, or injunction, of any court.



                                                          181
                                                             CHAPTER XVII
                                                              PROSECUTION


                  258. The provisions of this Chapter shall be in addition to, and not in derogation of, the provisions      Chapter not in
                  of any other law for the time being in force, relating to prosecution for offences thereunder.             derogation of
                                                                                                                             any other law


                  259. Whoever contravenes any order referred to in sub-section (7) of section 145 shall be                  Contravention
                  punishable with rigorous imprisonment which may extend to two years and with fine, which shall             of any restraint
                  not be less than fifty thousand rupees but which may extend to five lakh rupees.                           order


                  260. If a person who is required to afford the authorised officer the necessary facility to inspect the    Failure        to
                  books of account or other documents, as required under clause (d) of sub-section (2) of section 145,       comply with the
                  fails to afford such facility to the authorised officer, he shall be punishable with rigorous              provisions    of
                  imprisonment for a term which may extend to two years and with fine, which shall not be less than          clause (d) of
                  fifty thousand rupees but which may extend to five lakh rupees.                                            sub-section (2)
                                                                                                                             of section 145.


                  261. Whoever fraudulently removes, conceals, transfers or delivers to any person, any property or          Removal,
                  any interest therein, intending thereby to prevent that property or interest therein from being taken in   concealment,
                  execution of a certificate under the provisions of the Eighteenth Schedule shall be punishable with        transfer      or
                  rigorous imprisonment for a term which may extend to two years and with fine, which shall not be           delivery      of
                  less than fifty thousand rupees but which may extend to five lakh rupees.                                  property      to
                                                                                                                             thwart       tax
                                                                                                                             recovery.


Failure      to   262. (1) If a person --
comply with
                           (a) fails to give the information as required by sub-section (1) of section 245;
the provisions
of sub-sections            (b) fails to set aside the amount as required by sub-section (3) of that section; or
(1) and (3) of
section 245.               (c) parts with any of the assets of the company, or the properties, in his custody in
                               contravention of the provisions of the said sub-section (3),
                  he shall be punishable with rigorous imprisonment for a term which shall not be less than six
                  months but which may extend to two years and with fine, which shall not be less than fifty thousand
                  rupees, but which may extend to five lakh rupees.
                         (2) No person shall be punishable for any failure referred to in sub-section (1), if he proves
                  that there was reasonable cause for such failure.


Failure to pay    263. (1) If a person fails to pay to the credit of the Central Government,--
tax deducted
                           (a) the tax deducted, or collected, at source by him as required by, or under, the provisions
or collected at
                               of Sub-chapter A or Sub-chapter B of Chapter XIV;
source or to
pay dividend               (b) the dividend distribution tax under section 112; or
or      income
                           (c) the tax on distributed income under section 113,
distribution
tax.              he shall be punishable--


                                                                 182
                                (i) with rigorous imprisonment for a term which shall not be less than three months
                                    but which may extend to seven years; and
                                (ii) with fine to be determined at the rate of three per cent. of the tax for each month
                                     of default, for the period commencing from the date on which the amount was
                                     required to be paid to the credit of the Central Government and ending with the
                                     date of payment or the date of conviction, whichever is earlier.
                         (2) No person shall be punishable for any failure referred to in clause (a) of sub-section (1), if
                   he proves that there was reasonable cause for such failure.


Wilful attempt     264. (1) If a person wilfully attempts in any manner whatsoever to evade any tax, penalty or
to evade tax.      interest chargeable or imposable under this Code, he shall, without prejudice to any penalty that
                   may be imposable on him under any other provision of this Code, be punishable, --
                                (i )    in a case where the amount sought to be evaded exceeds twenty five lakh rupees,
                                       with rigorous imprisonment for a term which shall not be less than six months but
                                       which may extend to seven years and with fine which shall not be less than fifty
                                       thousand rupees but which may extend to five lakh rupees;
                                (ii) in any other case, with rigorous imprisonment for a term which shall not be less
                                     than three months but which may extend to two years and with fine which shall
                                     not be less than twenty-five thousand rupees but which may extend to three lakh
                                     rupees.
                         (2) If a person wilfully attempts in any manner whatsoever to evade the payment of any tax,
                   penalty or interest under this Code, he shall, without prejudice to any penalty that may be
                   imposable on him under any other provision of this Code, be punishable with rigorous
                   imprisonment for a term which shall not be less than three months but which may extend to two
                   years and shall, in the discretion of the court, also be liable to fine.
                        (3) For the purposes of this section, a wilful attempt to evade any tax, penalty or interest
                   chargeable or imposable under this Code or the payment thereof shall include a case where any
                   person--
                            (a) has in his possession, or control, any books of account or other documents, relevant to
                                any proceeding under this Code, containing a false entry or statement;
                            (b) makes, or causes to be made, any false entry, or statement, in such books of account or
                                other documents;
                            (c) wilfully omits, or causes to be omitted, any relevant entry, or statement, in such books
                                of account or other documents; or
                            (d) causes any other circumstance to exist which will have the effect of enabling such
                                person to evade any tax, penalty or interest chargeable or imposable under this Code,
                                or the payment thereof.


Failure       to   265. (1) If a person wilfully fails to furnish in due time the return of tax bases--
furnish return
                            (a) under sub-section (1) of section 155 or in response to a notice given under section 157;
of tax bases.
                                or
                            (b) in response to a notice given under section 171,
                            he shall be punishable--
                                (i )    in a case where the amount of tax which would have been evaded, if the failure
                                       had not been discovered, exceeds twenty five lakh rupees, with rigorous
                                       imprisonment for a term which shall not be less than six months but which may

                                                                  183
                                     extend to seven years and with fine which shall not be less than one hundred
                                     rupees but which may extend to five hundred rupees, for every day during which
                                     the default continues;
                                 (ii) in any other case, with imprisonment for a term which shall not be less than three
                                      months but which may extend to two years and with fine which shall not be less
                                      than fifty rupees but which may extend to three hundred rupees, for every day
                                      during which the default continues.
                      (2) A person shall not be proceeded against under this section for failure to furnish in due time
                   the return of tax bases--
                           (a)    under sub-section (1) of section 155, or in response to a notice given under section
                                 157, if the return is furnished before the expiry of the financial year in which such
                                 return is due;
                           (b) in response to a notice given under section 171, if the return is filed before the expiry
                               of the period specified in the said notice; or
                            (c) the tax payable by the person on the tax bases determined on assessment or re-
                               assessment as reduced by advance tax, or tax collected or deducted at source, does not
                               exceed twenty-five thousand rupees.


Failure       to   266. If a person wilfully fails to produce, or cause to be produced, on or before the date specified in
furnish            any notice served on him under sub-section (2) of section 161, such accounts and documents as are
statements,        referred to in the notice, he shall be punishable with rigorous imprisonment for a term which may
reports, etc.      extend to one year or with fine equal to a sum calculated at a rate which shall not be less than one
                   thousand rupees or more than five thousand rupees for every day during which the default
                   continues, or with both.


Failure      to    267. If a person wilfully fails to comply with a direction issued to him under sub-section (1) of
comply with        section 162, he shall be punishable with rigorous imprisonment for a term which may extend to one
direction under    year or with fine equal to a sum calculated at a rate which shall not be less than fifty rupees or more
this Code.         than one hundred rupees for every day during which the default continues, or with both.


                   268. If a person makes a statement in any verification under this Code or under any rule made             False statement
                   thereunder, or delivers an account or statement which is false, and which he either knows or believes     in verification.
                   to be false, or does not believe to be true, he shall be punishable, --
                                 (i) in a case where the amount of tax which would have been evaded if the statement
                                     or account had been accepted as true exceeds twenty five lakh rupees, with
                                     rigorous imprisonment for a term which shall not be less than six months but
                                     which may extend to seven years and with fine which shall not be less than fifty
                                     thousand rupees but which may extend to five lakh rupees;
                                 (ii) in any other case, with rigorous imprisonment for a term which shall not be less
                                      than three months but which may extend to two years and with fine which shall
                                      not be less than twenty-five thousand rupees but which may extend to three lakh
                                      rupees.


                   269. (1) If any person (herein referred to as the first person) wilfully and with intent to enable any    Falsification of
                   other person (herein referred to as the second person) to evade any tax or interest or penalty            books         of
                   chargeable or imposable under this Code, makes or causes to be made any entry or statement which          account       or
                   is false and which the first person either knows to be false or does not believe to be true, in any       documents.
                   books of account or other document relevant to or useful in any proceedings against the first person

                                                                  184
or the second person, under this Code, the first person shall be punishable with rigorous
imprisonment for a term which shall not be less than three months, but which may extend to two
years and with fine which shall not be less than twenty-five thousand rupees but which may extend
to three lakh rupees.
     (2) For the purposes of establishing the charge under this section, it shall not be necessary to
prove that the second person has actually evaded any tax, penalty or interest chargeable or
imposable under this Code.


270. (1) If a person abets or induces in any manner another person to make and deliver an account        Abetment      of
or a statement or declaration relating to any tax bases chargeable to tax which is false and which he    false return.
either knows to be false or does not believe to be true or to commit an offence under sub-section (1)
of section 264, he shall be punishable, --
              (i )    in a case where the amount of tax, penalty or interest which would have been
                     evaded, if the declaration, account or statement had been accepted as true, or
                     which is wilfully attempted to be evaded exceeds twenty five lakh rupees, with
                     rigorous imprisonment for a term which shall not be less than six months but
                     which may extend to seven years and with fine which shall not be less than fifty
                     thousand rupees but which may extend to five lakh rupees;
              (ii) in any other case, with rigorous imprisonment for a term which shall not be less
                   than three months but which may extend to two years and with fine which shall
                   not be less than twenty-five thousand rupees but which may extend to three lakh
                   rupees.


271. (1) Where an offence under this Code has been committed by a company, every person who,             Offences     by
at the time the offence was committed, was in charge of, and was responsible to, the company for         companies, etc.
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.
      (2) Nothing in sub-section (1) shall render any such person liable to any punishment if he
proves that the offence was committed without his knowledge or that he had exercised all due
diligence to prevent the commission of such offence.
      (3) Notwithstanding anything in sub-section (1), where an offence under this Code 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.
       (4) Where an offence under this Code has been committed by a person, being a company,
and the punishment for such offence is imprisonment and fine, then, without prejudice to sub-
section (1) or sub-section (3), such company shall be punished with fine and every person, referred
to in sub-section (1), or the director, manager, secretary or other officer of the company referred to
in sub-section (3), shall be liable to be proceeded against and punished in accordance with the
provisions of this Code.
      (5) In this section --
        (a)    "company" means a body corporate, and includes --
              (i) an unincorporated body;
              (ii) a Hindu undivided family;
        (b) "director", in relation to --
              (i) an unincorporated body, means a participant in the body;


                                                185
                                 (ii) a Hindu undivided family, means an adult member of the family; and
                                 (iii) a company, means a whole-time director, or where there is no such director, any
                                      other director or manager or officer, who is in charge of the affairs of the
                                      company.


Proof      of       272. (1) The entries in the records, or other documents, in the custody of an income- tax authority
entries    in       shall be admitted in evidence in any proceeding for the prosecution of any person for an offence
records    or       under this Chapter.
documents.
                          (2) The entries referred to in sub-section (1) may be proved by the production of--
                             (a) the records or other documents (containing such entries) in the custody of the income-
                                 tax authority; or
                             (b) a copy of the entries certified by that authority under its signature, as true copy of the
                                 original entries contained in the records or other documents in its custody.


Presumption         273. (1) Where during the course of any search made under section 145, any material has been
as to assets,       found in the possession or control of any person and such material is tendered by the prosecution in
and books of        evidence against such person, or against such person and the person referred to in section 270, for
account,       in   an offence under this Code, the provisions of section 316 shall, so far as may be, apply in relation to
certain cases.      such material.
                          (2) Where any material taken into custody, from the possession or control of any person, is
                    delivered to the requisitioning officer under section 146 and such material is tendered by the
                    prosecution in evidence against such person, or against such person and the person referred to in
                    section 270, for an offence under this Code, the provisions of section 316 shall, so far as may be,
                    apply in relation to such material.


Presumption         274. (1) In any prosecution for any offence under this Code which requires a culpable mental state
as to culpable      on the part of the accused, the court shall presume the existence of such mental state but it shall be a
mental state.       defence for the accused to prove the fact that he had no such mental state with respect to the act
                    charged as an offence in that prosecution.
                          (2) In this section --
                             (a) "culpable mental state" includes intention, motive or knowledge of a fact or belief in,
                                 or reason to believe, a fact;
                             (b) a fact is said to be proved only when the court believes it to exist beyond reasonable
                                 doubt and not merely when its existence is established by a preponderance of
                                 probability.


                    275. (1) A person shall not be proceeded against for an offence under sections 259 to 270 (both            Prosecution to
                    inclusive) except with the previous sanction of the Commissioner or the Commissioner (Appeals),            be at instance of
                    as the case may be.                                                                                        Chief
                                                                                                                               Commissioner
                           (2) The Chief Commissioner may issue such instructions, or directions, to the income-tax
                                                                                                                               or
                    authorities referred to in sub-section (1) as he may think fit for the institution of proceedings under
                                                                                                                               Commissioner.
                    this section.
                          (3) The Chief Commissioner may compound, either before, or after the institution of
                    proceedings (with permission of the Court), any offence under this Chapter, under the circumstances
                    and for the amount, as may be prescribed.


                                                                   186
                       (4) The power of the Board to issue orders, instructions or directions under this Code shall
                 include the power to issue orders, instructions or directions (including instructions or directions to
                 obtain its previous approval) to other income-tax authorities for the proper composition of offences
                 (including an authorisation to file and pursue complaints by one or more Inspectors of Income-tax)
                 under this section.
                     (5) An offence in relation to which a punishment has been awarded by a court shall not be
                 compounded.
                       (6) Where any proceeding has been taken against any person under sub-section (1), any
                 statement made or account or other document produced by such person before any income-tax
                 authority, other than an Inspector, shall not be inadmissible as evidence for the purpose of such
                 proceedings merely on the ground that such statement was made or such account or other document
                 was produced in the belief that the offence, in respect of which such proceeding was taken, would
                 be compounded.


                 276.     If any person convicted of an offence under sections 263, 264, 265, 266, 268, 269 and           Punishment for
                 section 270 is again convicted of an offence under any of the aforesaid provisions, he shall be          second     and
                 punishable for the second and every subsequent offence with rigorous imprisonment for a term             subsequent
                 which shall not be less than six months, but which may extend to seven years and with fine which         offences.
                 shall not be less than fifty thousand rupees, but which may extend to five lakh rupees.


2 of 1974        277. Notwithstanding anything in the Code of Criminal Procedure, 1973, any offence punishable            Offences to be
                 under this Chapter shall be deemed to be non-cognizable within the meaning of that Code.                 non-cognizable


                 278. (1) If a public servant furnishes any information or produces any document in contravention         Disclosure of
                 of the provisions of section 153, he shall be punishable with imprisonment for a term which may          information by
                 extend to six months, and with fine.                                                                     public servants.
                      (2) No prosecution shall be instituted under this section except with the previous sanction of
                 the Central Government, which may be accorded only after giving such public servant an
                 opportunity of being heard.


Special Courts   279. (1) The Central Government, in consultation with the Chief Justice of the High Court, may,
                 for trial of offences punishable under this Chapter, by notification, designate one or more courts of
                 Magistrate of the first class as Special Court for such area or areas or for such cases or class or
                 group of cases as may be specified in the notification.
                      (2) While trying an offence under this Code, a Special Court shall also try an offence, other
                 than an offence referred to in sub-section (1), with which the accused may, under the Code of
                 Criminal Procedure, 1973, be charged at the same trial.
                      (3) For the purposes of this section High Court refers to the High Court of the State in which a
2 of 1974        Magistrate of first class designated as Special Court was functioning immediately before such
                 designation.


Offences         280. Notwithstanding anything contained in the Code of Criminal Procedure, 1973,--                       2 of 1974
triable     by
                         (a) the offences punishable under this Chapter shall be triable only by the Special Court, if
Special Courts
                             so designated, for the area or areas or for cases or class or group of cases, as the case
                             may be, in which the offence has been committed; or
                         (b) a court competent to try offences under section 313, --

                                                               187
                              (i)    which has been designated as a Special Court, shall continue to try the offences
                                     before it or offences arising under this Code after such designation;
                              (ii)     which has not been designated as a Special Court may continue to try such
                                     offence pending before it till its disposal;
                          (c) a Special Court may, upon a complaint made by an authority authorised in this behalf
                              under this Code, take cognizance of the offence for which the accused is committed for
                              trial.


Trial      of    281. Notwithstanding anything contained in the Code of Criminal Procedure, 1973, the Special             2 of 1974
offences   as    Court, shall try an offence under this Chapter punishable with imprisonment not exceeding two
summons case     years or with fine or with both as a summons case, and the provisions of that Code as applicable in
                 the case of trial of summons case shall apply accordingly.



Application of   282. (1) Save as otherwise provided in this Code, the provisions of the Code of Criminal Procedure,      2 of 1974
Code        of   1973 (including the provisions as to bails or bonds), shall apply to the proceedings before a Special
Criminal         Court and the person conducting the prosecution before the Special Court, shall be deemed to be a
Procedure,       Public Prosecutor.
1973        to
                   (2) The Central Government may also appoint for any case or class or group of cases a Special
proceedings
                 Public Prosecutor.
before Special
Court              (3) A person shall not be qualified to be appointed as a Public Prosecutor or a Special Public
                 Prosecutor under this section unless he has been in practice as an advocate for not less than seven
                 years, requiring special knowledge of law.
                   (4) Every person appointed as a Public Prosecutor or a Special Public Prosecutor under this
                 section shall be deemed to be a Public Prosecutor within the meaning of clause (u) of section 2 of
                 the Code of Criminal Procedure, 1973 and the provisions of that Code shall have effect accordingly.




                                                           CHAPTER XVIII
                                             ADVANCE RULINGS AND DISPUTE RESOLUTION

                                                                                                                          Scope of ruling and
                       283. An applicant or appellant, specified in column (2) of the Table given below, may seek a       dispute resolution.
                 ruling or, as the case may be, a resolution of dispute on matters specified in the corresponding
                 entry of column (3) of the said Table:
                                                                TABLE
                 Serial     Applicant/Appellant             Scope of ruling and dispute
                 number                                     resolution
                 (1)                (2)                                         (3)
                 1.    Non-resident.                        A determination in relation to a transaction which has
                                                            been undertaken, or is proposed to be undertaken, by the
                                                            applicant, and such determination shall include the
                                                            determination of any question of law, or of fact, specified
                                                            in the application.
                 2.    Resident.                            A determination in relation to the tax liability of a non-
                                              
 
 
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