Report No. 12
[Existing Section 35(5) may be compared.]
Existing Section 34(3). [Draft Clause 160, Explanations 2 and 3].-With reference to the provision that where a re-assessment etc. has to be made in consequence of an order passed on appeal or other proceedings in respect of the assessee or any other person, the time-limit for assessment would not apply, two Explanations have been added explaining the scope of the provision.
Existing Section 35(9). [Draft Clause 162(4)].-With reference to the provision that if a company does not pay the tax on its profits within three years after declaring the dividend the tax will be recovered from the share-holders, it has been provided that if the assessment of the company itself is delayed, a period of at least one year should have elapsed after the end of the year in which the company is assessed.
Existing Section 35. [Draft Clause 162(6)].-A new provision has been added empowering the Income-tax Officer to reopen an assessment, for the purpose of allowing bad debts, where the assessee claims deduction for a particular previous year but the Income-tax Officer is of opinion that the deduction should have been claimed for an earlier previous year. (As to the converse case, see under existing section 8).
Existing Section 37. [Draft Clause 136(2)].-It has been made clear that while exercising the power of the court with reference to the discovery of documents and examination of witnesses, the Income-tax authority should follow the same procedure as a civil court.
Existing Section 37. [Draft Clause 136(4)].-A new provision for return of documents produced by any person before an Income-tax authority has been added.
Existing Sections 40, 41 and 42. (Draft Clause 169 etc.).-The provisions relating to assessment of guardians, trustees, managers, Court of wards, Administrdtorgeneral, agent of a non-resident etc. have been combined under one topic, under the group of sections relating to "Representative assessees".
Existing Sections 40, 41 and 42. [Draft Clause 170(2)].-A new provision has been added limiting the liability of all "representative assessees" (i.e.. guardians, trustees, agents of non-residents etc.) to the extent of the assets in their possession. (Special remedies available against certain representative assessees have, of course, been saved).
Existing Sections 40, 41 and 42. [Draft Clause 170(3)].-A new provision has been added to the effect that a person liable to be assessed as a representative assessee (i.e., trustees, guardians, agents of non-residents etc.) would not be assessed under the general charging section (section 3) in respect of the income concerned.
Existing Sections 40, 41 and 42. [Draft Clause 171(1)].-A new provision has been added empowering a representative assessee to recover tax paid by him from the person represented by him.
Existing Sections 40, 41 and 42. [Draft Clause 172].-A provision has been made to the effect that a representative assessee who parts with the assets without payment of tax, is liable personally.
Existing Section 41(1), 1st proviso. [Draft Clause 174, paras. (a) and (b)].-The provision for mode of computing tax for income received by a Court of wards, trustee appointed under a deed in writing, Administrator-general etc., in cases where the income is not specifically receivable on behalf of any one person or where the individual shares are not known has been altered in two respects:-
(1) regarding income-tax, it has been provided that it should be charged as the income of an association of persons, or, if the income is received by a beneficiary, then at the rate, applicable to the beneficiary if the Income-tar. Officer so directs;
(2) as regards super-tax, it has been provided that it should be charged in all cases as if the income were the income of an association of persons.
Existing Section 44. [Draft Clauses 186(2) and 196(2)].-A new provision has been added allowing the Income-tax Officer to continue assessment proceedings, started before the dissolution etc. of a firm or association or the discontinuance of its business; against the persons who were partners or members.
Existing Section 44B. [Draft Clause 182(4)].-With reference to the provisions for charging tax in the case of shipping business, it has been made clear that the rate applicable is one in force for a company which has not made the arrangements for deduction of super-tax on dividends under existing section 18(3D).
Existing Section 44D(1). [Draft Clause 96(1)(a)].-The provision regarding income arising to a non-resident from a transfer etc. governed by section 44D has been slightly widened. Under the present provision, only income arising from the transfer is taxable under this section. Under the provision as proposed, any income of a non-resident which the transferor has power to enjoy will be covered by this section, (if the power to enjoy itself arises from the transfer).
Existing Section 44E(1). [Draft Clause 97(1)].-The existing provision, whereunder a sale of securities is disregarded where there is agreement to buy back such securities by the owner of the securities, has been widened by removing the requirement of an agreement to buy those securities. The provision as proposed will be applicable to all cases where the transaction of sale and repurchase of securities results in avoidance of tax. (The provision will not, of course, apply if there was no avoidance or if the avoidance was not systematic).
Existing Section 44F. [Draft Clause 97(3)].-Under the existing provision, where a person transfers securities before the declaration of the dividend, the income attributable to the period upto the transfer is deemed to be the transferor's income. Under the provision as proposed, however, the income for the whole year will be deemed to be the transferor's income if there is avoidance of tax. It has also been provided that the avoidance need not be of more than ten per cent. of the amount of the income-tax.
Existing Section 45. [Draft Clauses 229(2) and (4)].-A new provision authorising the Income-tax Officer to extend the time for payment of tax or to allow payment by instalments has been added. Consequential provision for failure to pay instalments etc. has also been added.
Existing Sections 46(1) and (1A). [Draft Clause 230(1)].-The present provision regarding the imposition of a penalty on an asseessee in default has been modified. Penalty has been replaced by penal interest at the rate of 10 per cent. per annum, which will run automatically from the date of default, and no express orders by the Income-tax Officer will be necessary. In consequence existing subsection (A) has been omitted.
Existing Section 46(2). (Draft Clause 231, read with the second Schedulel.-The various modes of recovery which a Collector can adopt when the Income-tax Officer sends a certificate to him have been listed in the draft clause, and detailed procedure to be followed by the Collector is sought to be embodied in the Schedule which will be a self-contained Code. A uniform system will thus be substituted in place of the existing procedure which applies the Revenue law of each State.
Existing Section 46(2). [Draft Clause 232].-It has been made clear that the Income-tax Officer can send a recovery certificate to the Collector within whose jurisdiction the assessee resides or carries on business etc. or has property. Further, it has been made clear that the certificate can be sent to the Collector of any district in any part of India.
Existing Section 46(2). (Draft Clause 233].-A provision debarring an assessee from challenging before the Collector the assessment which led to the issue of the recovery certificate has been added. Procedure for withdrawal or correction of the certificate by the Income-tax Officer has been laid down.
Existing Section 46(3). [Draft Clause 235(5)].-The provision authorising the Income-tax Officer, to recover tax by any process contained in any municipal law has been narrowed down, by limiting it to only one mode, namely, distraint and sale of movable property.
Existing Section 46(5). (Draft Clause 235(2) second para.].-The power of an Income-tax Officer to attach salary is sought to be limited to that portion of the salary which can be attached by a civil court.
Existing Section 46. [Draft Clause 235(4)].-A new provision has been added empowering the Income-tax Officer to apply to any court in which any money of the assessee is lying, for payment of the money of discharge tax due from the assessee.
Existing Section 46A. [Draft Clauses 241(4) and (5)].-A new provision has been added requiring the owner of ships or aircraft carrying passengers for destinations beyond India to submit periodically lists of such passengers.
Existing Section 48. [Draft Clause 249(1)].-A new provision has been added to the effect that a claim for refund should be made in the prescribed form and verified in the prescribed manner.
Existing Section 48. [Draft Clause 252].-A new provision has been added to the effect that if the Income-tax Officer does not dispose of a refund application within three months, the Government shall pay interest at the rate of 2 per cent per annum on the amount that is ultimately found to be refundable.
Existing Section 52. [Draft Clause 236].-The provision penalising a person who makes a false statement in a verification is sought to be extended so as to be applicable to verification under any provision of the Act.
Existing Section 54(2). [Draft Clause 141(3)(c)].-A new provision has been added authorising the disclosure by the Income-tax Officer of the substance of the material gathered by him for the purpose of a "best judgment" assessment.
Existing Section 54(2). [Draft Clause 141(3)(f)].-A new provision authorising the disclosure by an Income-tax Officer of accounts of assesees which are lying with him and are required by a court, has been added. Similarly, a provision allowing the disclosure of registered documents of which copies can be obtained under the Registration Act, or of documents like balance sheet, audit report etc. prepared under the Companies Act, has been added.
Existing Section 54(2). [Draft Clause 141(3)(n)].-A new provision authorising the disclosure of information required in connection with levy or realization of other Central taxes (for example Wealth Tax, Estate Duty Tax etc.) has been added.
Existing Section 54. [Draft Clause 142].-It has been made clear that the privilege conferred by existing section 54 can be waived by the assessee.
Existing Section 56A. [Draft Clause 108].-With reference to the exemption in respect of super-tax on dividends received from an Indian company engaged in certain industries, the conditions to be satisfied by the Indian Company paying the dividend have been set out in extenso, unlike the existing section which merely makes a cryptic reference to section 15C.
Existing Section 58B(1). [Draft Clause 289(1), Proviso (a)] -A new provision has been added authorising the Commissioner to relax the conditions for the recognition of a provident fund, in the case of provident funds established under the Employees' Provident Funds Act, 1952 and exempted from the operation of the scheme under section 17 of that Act.
Existing Sections 58A to 58K. [Draft Clause 293].-A new provision allowing the deduction of contributions paid by an employer towards a recognised provident fund has been added.
Existing Sections 58N to 58V. [Draft Clause 307(1)].-It has been made clear that an approved super-annuation fund should satisfy not only the conditions set out in the Act, but also the conditions to be imposed by rules made by the Central Government.
Existing Sections 58N to 58V. [Draft Clause 307(3)].-A new provision has been added to the effect that where there is a repugnancy between the rules of an approved superannuation fund and any provision of the Act, the latter shall prevail.
Existing Section 58S(1). [Draft Clause 312].-It has been made clear that, the provision for deduction of income-tax on contributions repaid to an employee from an approved superannuation fund applies not only to the employee's contributions but also to the employer's contributions. It has also been made clear that payment of contributions to an employee on death or termination of employment does not come within the scope of this section.
Existing Sections 58N to 58V. [Draft Clause 317].-A new provision has been added laying down elaborately the power of the Central Government to make rules in relation to approved superannuation funds.
Existing Section 59. [Draft Clause 329(2)].-A new provision has been added authorising the Central Board of Revenue to make rules relating to:-
(i) registration of income-tax practitioners who are not lawyers or accountants;
(ii) constitution of an authority to take disciplinary action against such income-tax practitioners;
Existing Sections 60(1) and 60(3). (Omitted in the draft).-Provisions relating to exemptions for tax etc. to be granted by notification by the Central Government are proposed to be deleted as obsolete.
Existing Section 60(2). [Draft Clause 90].-The power to grant relief in cases where salary is paid in arrears or in advance etc., which is at present confined to salary or profit in lieu of salary, has been extended to perquisites also.
Existing Section 61(2)(ii). [Draft Clause 324(2)(iii)].-The right of any lawyer to appear before an Income-tax authority is sought to be confined to legal practitioners entitled to appear in a civil court. (Persons actually in practice at present will not be affected.)
Existing Section 61(2)(iii)(iv). [Draft Clause 324(2), Expin. and 324(2)(v)].-It is proposed to exclude persons who are not Chartered Accountants or authorised to audit the accounts of companies under section 226(2) of the Companies Act, 1956, from the category of "accountants" entitled to appear before an Income-tax authority. (Persons actually in practice at present will not be affected.)
The category "Income-tax practitioner" is to be abolished for the future, except as regards persons already in practice.
Existing Section 61(3). (Draft Clause 324(4)].-The power to take disciplinary action against income-tax practitioners other than lawyers and accountants, which is vested in the Commissioner at present, is proposed to be transferred to an authority whose constitution would be laid down in the rules.
Existing (Reference Section 66, provisions). (Omitted in the draft].-Consequent on the proposed abolition of the Appellate Tribunal, provisions relating to references to the High Court have been omitted.
Existing Schedule, rule 6. (Draft Schedule, rule 5(a)].-With regard to the assessment of persons carrying on general insurance business, it has been made clear that deductions for depreciation must be allowed as entered in the accounts prepared under the Insurance Act, and cannot be questioned by the Income-tax Officer.
(New) Draft Clause 70.-Unexplained cash credits, appearing in the books of accounts of the assessee, have been made assessable as his income.
(New) Draft Clause 71.-Investments not appearing in the books of the Assessee and not explained satisfactorily have been made assessable for the financial year in which the investments were made.
(New) Draft Clause 178.-A new provision has been added laying down the position regarding liability of an executor to pay tax in respect of the income accruing after the death of the person whose estate is being administered.
(New) Draft Clause 199.-It has been made clear that in cases where tax is deductible at source or payable in advance, some kind of "charge" of tax is implied.
(New) Draft Clause 277.-Power has been conferred on the Supreme Court to make rules regulating the procedure to be followed by the High Court in disposing of appeals under the Act.
(New) Draft Clause 319.-A new provision has been added providing that income once charged to tax shall not be charged to tax again in the hands of the same person.
(New) Draft Clause 321(1).-A new provision for the service of notices after the partition of a Hindu family has been added.
(New) Draft Clause 323.-A new provision has been added requiring every Income-tax authority to endorse documents placed on the file and to refer to the documents in any order which is based on the document.