Report No. 12

Notes to clause 215

General

Existing section 18A is cumbersome and difficult to understand. The difficulty arises by reason of the fact that sub-section (1) combines a number of things which could be dealt with separately. For the sake of simplicity, therefore, the section has been split up in the draft, so as to deal separately with the following topics:-

(1) income subject to advance tax;

(2) conditions of liability to pay advance tax;

(3) mode of computation of tax;

(4) order by the Income-tax Officer, which fixes the liability;

(5) instalments;

(6) estimate made by the assessee;

(7) commission receipts;

(8) interest payable by Government or by assessee;

(9) other provisions.

Sub-clause (1).- Income subject to advance tax has been described here, and for the sake of accuracy it has also been made clear that capital gains are not included in that income. Though existing section 18A(12) has been retained in the draft1, it appears desirable to make this clarification at this stage also.

1. See draft clause 228.

Sub-clause (2).- This is new, but is intended merely to enable the use of the shorter expression "income subject to advance tax" and "advance tax" in the subsequent clauses.

Sub-clause (3).- This is new and is intended to provide that advance payment of tax will, so far dividends are concerned, apply only for super-tax. So far income-tax is concerned, it is the company which is deemed to have paid the tax, and advance payment should not apply for income tax on dividends.

Notes to clause 216

The concept that advance tax is payable where the total income of the assessee exceeded a certain limit, or is likely to exceed a certain limit, has been embodied in this clause; for the sake of comprehensiveness, the case dealt with in existing section 18A(3) has also been referred to here.

Notes to clause 217

The mode of computation of advance tax has been dealt with in this clause. For the sake of facilitating the proper understanding of the method to be adopted, the process has been divided in various steps. Thus, the first step is the ascertainment of the total income of the latest previous year assessed. This having been ascertained, the second step is to find out how much of that total income falls under the category of income subject to advance tax. That having been done, the next step is to actually compute the tax on the income subject to advance tax by applying the average rate of tax. The result arrived at is the amount of the advance tax.

There are, of course, two special situations, which require mention. One is, the situation where a non-resident chooses to adopt the method of taxation on the basis of the total world income. This is contained in existing section 18A(1)(a) main para, latter half, and has been embodied in the draft sub-clause (b). The second situation is that in which the assessee sends an estimate of his total income etc. Here the tax is calculated with reference to the total income so estimated. This follows from existing section 18A(2) and (3) and has been incorporated in sub-clause (3) in the draft.

Section 18A(1)(a), 2nd Proviso, has been incorporated in the Explanation.

Notes to clause 218

A portion of section 18A(1), dealing with the order of the Income-tax Officer, has been embodied in this clause. The words "where a person has been previously assessed "in the opening portion in the draft, merely state what is implied in the existing section.

Sub-clause (2) makes it clear that the instalments are to be mentioned in the notice of demand. That is the existing practice also.

The third proviso to existing section 18A(1)(a), under which the Income-tax Officer is authorised to issue an amended order in a case where an assessment of the assessee for a later previous year is completed in the meantime, has been embodied in sub-clause (3).

Notes to clause 219

The instalments of advance tax have been stated separately in this clause. The drafting changes made are consequential on the scheme adopted in the draft.

Notes to clause 220

The provision regarding estimate by the assessee is embodied here. The estimate should mention-

(i) the total income as estimated for the period concerned;

(ii) the income subject to advance tax as estimated for that period; and

(iii) the advance tax itself.

This has been made clear in the draft, in sub-clauses (1) & (2).

An assessee may desire to file an estimate under existing section 18A(2) when the estimated advance tax is less than the amount demanded by the Income-tax Officer, either because-

(i) the estimated total income is less, or

(ii) the estimated income subject to advance tax is less, than that assessed by the Income-tax Officer. This is made, clear in sub-clause (1).

Sub-clause (4).- Is new and is intended to provide that the estimate of advance tax will be filed in the prescribed form and in the prescribed manner.