Report No. 12

Notes to clause 206

This embodies existing section 18(4) and does not need any comments.

Notes to clause 207

Existing section 18(5) deals with two topics:-

(i) credit for tax deducted at source;

(ii) credit for tax in respect of dividends as grossed up under existing section 16(2).

For the sake of clarity, the first topic has been dealt with in this clause, while the second has been dealt with separately1. The Proviso to this sub-section has, therefore, been broken up in conformity with the scheme adopted in the draft.

1. See Chapter on Tax deemed to have been paid in dividends.

The first proviso to section 18(5) has been incorporated for simplicity in the main para, of the sub-clause.

The second proviso to section 18(5) has been incorporated in the 1st Proviso, and the words "or shareholders" have been added in order to cover a case where tax is deducted on dividends under existing section 18(3D). [The existing proviso does not make any specific mention of shareholders, presumably for the reason that existing section 44E(5) defines securities as including stock and shares.]

The third proviso has been embodied as the 2nd proviso.

The other drafting changes are consequential.

Notes to clause 208

This embodies existing section 18(6) with a small drafting change converting the passive voice used in the existing section into the active voice.

Notes to clause 209

Existing section 18(7) has been embodied in this clause with the following changes:-

(1) It has been made clear that in the case of deduction of tax on dividends under existing section 18(3D), the principal Officer as well as the company can be treated as in default. This clarification has been considered desirable in view of the fact that the existing section 18(3D) uses the expression "person".

(2) Since existing section 46(1) relating to the imposition of penalty by the order of the Income-tax Officer is in the draft proposed to be replaced by provision for automatic running of interest1, the proviso has been suitably altered.

1. See clause 230(1).

(3) Sub-clause (2) has been newly added for imposing a first charge upon the assets of the person deducting tax, if it is not paid into the treasury office after deduction. The intention is to ensure speedy transmission of the amount deducted so that the amount may not lie to the custody of the person deducting it1.

1. Cf. section 123(6) of the (Canadian) Income-Tax Act, 1948.

Notes to clause 210

Existing section 18(8) has been embodied here without any change.

Notes to clause 211

Existing section 18(9) has been embodied here without any change.

Notes to clause 212

Existing section 18 (Explanation) has been embodied here, with a small drafting change. Item (iii) has been amplified so as to cover all sums not chargeable as salary or interest on securities.

Notes to clause 213

Existing section 7(1), 2nd Proviso, provides that where tax is deductible at source under existing section 18, the assessee shall not be called upon to pay the tax himself unless he has received the salary without such deduction. This provision is at present confined to salary, but there seems to be no reason why it should not be extended to all kinds of income. It has, therefore, been incorporated in an extended form in this clause.

Notes to clause 214

This is new and is consequential on the breaking up of existing section 18(5).