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Report No. 12

Chapter XVIII

Collection and Recovery of Tax

Notes to clause 199

This clause is new and is intended to make it clear that there is some kind of liability to pay tax in cases where tax is deductible at source or payable in advance1. Such "charge" of tax, which is implied in the obligation to pay tax in advance etc., has been brought out more directly in this clause.

1. See also notes to clause 3.

Notes to clause 200

This clause brings together the provisions relating to direct payment of income-tax and of super-tax respectively, contained in existing sections 19 and 58(2).

Notes to clause 201


The scheme adopted in the draft is to deal in separate clauses with deductions in respect of the various classes of income, such as salary, interest, dividends, etc. The substantive provision for deduction has been placed in the first few clauses, while incidental provisions like certificate, etc., and consequences of deduction like credit, payment of tax by the person deducting etc., have been placed after those clauses.

Sub-clause (1).- The existing words "at a rate representing the average of the rates applicable" have been replaced in the draft by the words "average rate of income-tax and average rate of super-tax respectively, in force for the financial year in which the payment is made". This change has been made for the sake of precision. Further, the existing words "applicable to the estimated total income under this head" are slightly unhappy; the expression "total income" should be reserved for the total income from all sources in the previous year. The draft, therefore, uses the words "income of the assessee under this head for that financial year".

Sub-clause (2).- The existing provision to the effect that the person paying salary shall deduct income-tax at the maximum rate and also super-tax under section 17(1)(b) has been replaced in the draft, by the shorter expression "tax in accordance with" existing section 17(1).

Sub-clause (3).- Does not need any comments, since the drafting changes made are only consequential.

Sub-clause (4).- This is new and is intended merely to point to the deduction in respect of tax on accumulated balance paid to an employee participating in a recognised provident fund.

Sub-clause (5).- This is also new and is intended to point to the deduction of tax in the case of amounts paid to an employee participating in an approved superannuation fund.

Sub-clause (6).- This embodies the latter part of section 18(2A). The earlier part of that sub-section does not seem to serve any useful purpose; salary is now taxable wherever paid, and it does not seem necessary to make a special mention of the deduction in respect of salary payable to the assessee out of India by the Government.

Notes to clause 202

The provision for deducting the tax in respect of interest on securities has been embodied in this clause with the following drafting changes:-

(i) the deduction in respect of income-tax and that in respect of super-tax have been stated in separate sub-clause for the sake of clarity;

(ii) as regards deduction of super-tax in respect of companies, it has been made clear that the rate applicable is that in force for a company which has not made the arrangements referred to in existing section 18(3D). This will remove the uncertainty at present experienced as to the exact rate applicable in such cases. (This clarification is not necessary in the case of deduction from salaries, since the situation of a company which receives salary is not likely to arise).

Notes to clause 203

The drafting changes made follow the lines of those made in existing section 18(3A)1.

1. See notes to clause 202.

Notes to clause 204

The following drafting changes have been made-

(i) The position regarding income-tax and super-tax has been treated in separate sub-clauses;

(ii) in the case of a company, the rate applicable has been stated more precisely as in the case of deductions under the head "Interest on securities or on dividends"1;

(iii) the concluding words of existing sectionl8(3C) provide that the Income-tax Officer may determine the appropriate proportion of any sum chargeable to tax, and upon such determination tax shall be deducted "therefrom". The word "therefrom" does not clearly give out the sense that the deduction is to be limited to the proportion of the sum so determined. Suitable drafting changes have been made to make this clear.

Notes to clause 205

The provision authorising the Income-tax Officer to issue a certificate for deduction of tax at a lower rate, which has been repeated in the existing Act in the provisos to various sub-sections of section 18, has been embodied in this clause, which is applicable for all kinds of income. The drafting changes made are consequential on the scheme adopted in the draft. It has also been made clear that the Income-tax Officer can issue a certificate not only authorising the deduction at a lower rate but also authorising no deduction.

That part of existing section 18(2B), Proviso, which relates to an order by the Income-tax Officer requiring deduction at a particular rate, has been omitted in the draft as unnecessary. In cases where a person desires deduction at a lower rate than the maximum, he can apply to the Income-tax Officer and obtain a certificate. Deduction at a higher rate is not contemplated, since the rate applicable for deduction is in most cases the maximum rate. (In the case of salary, it is only the rate applicable to the income under that head and deduction at any other rate is not contemplated).

Income-Tax Act, 1922 Back

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