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The Business Profits Act, 1947.

2. Interpretation.

In this Act, unless there is anything repugnant in the subject or context, -

  1. "abatement" means, in respect of any chargeable accounting period, a sum which bears to a sum equal to-

  1. in the case of a company, not being a company deemed for the purposes of section 9 to be a firm, six per cent. of the capital of the company on the first day of the said period computed in accordance with Schedule II, or one lakh of rupees, whichever is greater, or

  2. in the case of a firm having -

  1. not more than two working partners one lakh of rupees, or

  2. three working partners, one and a half, lakhs of rupees, or

  3. four or more working partners, two lakhs of rupees, or

  1. in the case of a Hindu undivided family two lakhs of rupees, or

  2. in any other case, one lakh of rupees, - the same proportion as the said period bears to the period of one year;

  1. "accounting period" in relation to any business means any period which is or has been determined as the previous year for that business for the purposes of the Indian Income-tax Act, 1922;

  2. "business" includes any trade, commerce or manufacture, or any adventure in the nature  of trade, commerce or manufacture, or any profession or vocation the profits of which are  chargeable according to the provisions of section 10 of the Indian Income- tax Act, 1922:

Provided that where the functions of a company or of a society incorporated by or under any enactment consist wholly or mainly in the holding of investments or other property, the  holding of the investments or property shall be deemed for the purposes of this definition to be

a business carried on by such company or society:

Provided further that all businesses to which this Act applies carried on by the same person  shall be treated as one business for the purposes of this act;

  1. "chargeable accounting period" means-

  1. any accounting period falling wholly within the term beginning on the first day of April, 1946, and ending on the thirty-first day of March, 1947;

  2. where any accounting period falls partly within and partly without the said term, such part of that accounting period as falls within the said term;

  1. "Company" means a company as defined in the Indian Companies Act, 1913, or formed in pursuance of an Act of Parliament or of Royal Charter or Letters Patent, or of an Act of the Legislature of a British possession or of a law of an Indian State, and includes any foreign association, whether incorporated or not, which the Central Board of Revenue may, by general or special order, declare to be a company for the purposes of this Act.

  2. "control of company" means control direct or indirect of more than one-half of the voting  power attached to the total issued paid-up share capital of the company or control vested by its Memorandum and Articles of Association otherwise than by reference to such voting power:

Provided that the voting power attached to shares held by a nominee or trustee for any person shall be deemed for the purpose of this definition to be held by that person;

  1. "deficiency of profits" means-

  1. where profits have been made in any chargeable accounting period, the amount by which such profits fall short of the abatement in respect of that period;

  2. where a loss has been made in any chargeable accounting period, the amount of the loss added to the abatement in respect of that period;

  1. "director" includes any person occupying the position of a director by whatever name called and also includes any person who-

  1. is a manager of the company or concerned in the management of the business, and

  2. is remunerated out of the funds of the business, and

  3. is the beneficial owner of not less than twenty per cent. of the ordinary share capital of the company;

  1. "dividend" has the same meaning as in section 2 of the Indian Income-tax Act, 1922;

  2. "firm", "partner" and "partnership" have the same meanings respectively as in the Indian Partnership Act, 1932;

  3. "fixed rate" in relation to dividends on share capital other than ordinary share capital, includes a rate fluctuating in accordance with the maximum rate of income-tax;

  4. "loss" means a loss computed in the same manner as, for the purposes of this act, profits are to be computed;

  5. "ordinary share capital", in relation to a company, means all the issued share capital (by whatever name called) of the company, other than capital the holders whereof have a right to a dividend at a fixed rate but have no other right to share in the profits of the company;

  6. "person" includes a Hindu undivided family;

  7. "prescribed" means prescribed by rules made under this Act;

  8. "profits" means profits as determined in accordance with Schedule1;

  9. "taxable profits" means the amount by which the profits during a chargeable accounting period exceed the abatement in respect of that period;

  10. "working partner" of a firm means a partner thereof who is required by the terms of the contract of partnership to devote substantially the whole of his time to the business of the  firm.



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