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TMI BlogAmendments at a glance , Rate structure , Amendments to Income-tax Act , Amendments to Wealth-tax Act , Amendments to Unit Trust of India Act , Amendments to Companies (Profits) Surtax ActX X X X Extracts X X X X X X X X Extracts X X X X ..... blic charitable and religious trusts 18-23 (Expln.)/(2)/ (3)/(4), 13, 139(4A), 80G, Expln. 2 16(iv) Standard deduction for expenditure on travelling in the case of salaried employees 43-44 35B(1)(b)(iii) Export markets development allowance 51 36(1)(viii) Deduction of profits transferred to special reserve account in case of certain financial corporations 52-53 37(2A), (2B) Entertainment expenditure in businesses and professions 33-34 37(4) Guest houses maintained in businesses and professions 35-37 80C(2)(g) Married couples governed by the concept of "community of property" in the Union territories of Dadra and Nagar Haveli and Goa, Daman and Diu 45-47 80L Deduction of income from certain categories of investments 12-15 80MM(1) Income derived by companies from transfer or servicing of technical know-how 54-55 164 Charge of tax in the case of private discretionary trusts 24-28 193(iia), Exemption from deduction of tax at source of interest on 194A(3)(vi)/ Certain small savings schemes and bank deposits 16-17 (vii) 195(3) Payment of income to non-residents without deduction of tax at source in certain cases 48 212(3A), Extension of time fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e total income of the taxpayer consists only of income under the head "Salaries" from which tax has been correctly deducted at source during the financial year 1969-70, it will not be necessary to raise any additional demand or grant any refund on completion of the assessment for the assessment year 1970-71. Finance Act, 1970 Rates for deduction of tax at source from "salaries" and for computation of "advance tax" during the financial year 1970-71 3. The Finance Act, 1970 follows the principle adopted in the Finance Acts of the preceding years that, in prescribing the rates of tax and in making new provisions in the taxation laws, measures which have the effect of bringing about a change in the tax liability or which provide a tax incentive or disincentive in any sphere should apply prospectively to current incomes falling due for assessment in the next following assessment year, and not retrospectively to incomes earned in the past, except where there are special circumstances justifying the retrospective operation of any particular provision. In conformity with this principle, changes in the rate schedule of income-tax, which were considered necessary or desirable, have been m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00), the rates are, respectively, 50 per cent and 60 per cent; in the next higher slab covering a span of Rs. 30,000 (Rs. 70,001—Rs. 1,00,000), the rate is 65 per cent; in the next higher slab covering a span of Rs. 1,50,000 (Rs. 1,00,001—Rs. 2,50,000), the rate is 70 per cent; and on income in the slab above Rs. 2,50,000, the rate is 75 per cent. Finance Act, 1970 5. From the tax as computed at these rates, certain deductions are made, at present, in the case of resident individuals and Hindu undivided families only, so as to afford them some relief according to their personal circumstances. Thus, in the case of a resident unmarried individual, the deduction from the tax is Rs. 125, which is calculated on a personal allowance of Rs. 2,500 at the rate of 5 per cent, being the rate of tax applicable, under the rate schedule, to income in the initial slab of Rs. 5,000. The deduction in the case of a resident married individual, who does not have any dependent child, as also in the case of a resident Hindu undivided family having no minor coparcener is Rs. 200 (5 per cent of Rs. 4,000) which is made up of the allowance for an unmarried individual, namely, Rs. 125, and the allowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mits" are not applicable in the case of non-resident taxpayers. Even in the case of resident taxpayers, the "small income exemption limit" of Rs. 4,000 is significant only in the case of unmarried individuals and also unregistered firms, associations of persons, etc. In the case of married individuals and also Hindu undivided families, the effect of the deduction on account of personal allowances, as stated in the preceding paragraph, is to exempt the first Rs. 4,000 or a higher amount (depending upon the number of children or minor coparceners) from tax altogether. Finance Act, 1970 7. Position applicable to current incomes - With a view to bringing about an increase in the level of personal taxation at higher income levels, while providing some relief at lower levels (particularly in the case of unmarried individuals), and in the interest of simplification of tax calculations in the case of non-corporate taxpayers, generally, the Finance Act, 1970 has made the following changes in the rate schedule of basic income-tax in the case of individuals, Hindu undivided families, unregistered firms, etc.: 1. The rate of tax in the initial income slab of Rs. 5,000 has been prescribed at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the generality of cases of resident non-corporate taxpayers, has been dropped altogether. The prescription of a nil rate of tax on income in the initial slab of Rs. 5,000 as stated at (1) above, secures that no tax will be payable by a non-corporate taxpayer unless his income exceeds Rs. 5,000. The pre-existing special exemption limit of Rs. 7,000 in the case of resident Hindu undivided families satisfying certain conditions, however, continues. [Paragraph A of Part III of the First Schedule to the Finance Act] Finance Act, 1970 8. Co-operative societies, registered firms, local authorities, the Life Insurance Corporation of India and companies - In the case of these categories of taxable entities, the rates of income-tax specified, respectively, in Paragraphs B, C, D, E and F of Part III of the First Schedule to the Finance Act, 1970, for the purpose of computation of the advance tax payable by them during the financial year 1970-71 are the same as the rates of income-tax specified, respectively, in Paragraphs B, C, D, E and F of Part I of the First Schedule for incomes assessable for the assessment year 1970-71. The Union surcharge at 10 per cent of the basic income-tax, prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axpayer from investments in certain categories of financial assets enjoyed exemption from tax. These exemptions were : a. income up to Rs. 1,000 received on units in the Unit Trust of India; b. income up to Rs. 1,000 by way of dividends on shares in Indian companies; c. the whole of the interest on— i. Treasury Savings Deposits Certificates; ii. Post Office Cash Certificates; iii. Post Office National Savings Certificates; iv. National Plan Certificates; v. 12-Year National Plan Savings Certificates; vi. 10-Year Defence Deposit Certificates; vii. 12-Year National Defence Certificates; viii. Government of India Defence Certificates; ix. Premium Prize Bonds, 1963; x. Deposits in Post Office Savings Banks, including deposits in cumulative time deposits accounts in such banks. (The bonus on deposits in C.T.D. Accounts is also exempt firm tax); xi. 5-Year Fixed Deposits under the Government Savings Certificates (Fixed Deposits) Rules, 1968 and the Post Office (Fixed Deposits) Rules, 1968. [The interest on the investments specified at (c) above is entitled to exemption only to the extent to which the amounts of such Certificates or Deposits do not exceed, in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to the assessment year 1971-72. Finance Act, 1970 15. Under a consequential amendment to section 80M, it has been provided that in the case of a company deriving income by way of dividends from an Indian company, the deduction under that section (in respect of inter-corporate dividends) will be allowed only in respect of the dividends remaining after the deduction under section 80L. For this purpose, the deduction under section 80L will be attributed to the dividend income only if, and to the extent that, the income other than dividends qualifying for the deduction under that section is insufficient to absorb the deduction of Rs. 3,000 under section 80L. The effect of this provision may be illustrated as under : Rs. 1. Income by way of dividends from Indian companies included in the "gross total income" of the company receiving the dividend 10,000 2. Income by way of interest on securities, interest on bank deposits, etc., included in the "gross total income" 2,500 Deduction under section 80L : 3. Deduction against income by way of interest on securities, interest on bank deposits, etc. 2,500 4. Deduction against income by way of dividends from Indian companies 500 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k) or any other institution or authority, which may be notified by the Central Government for the purpose of this exemption; 3. Deposits under any scheme framed by the Central Government and notified by it in the Official Gazette. Further, in the context of Government's policy of extending significantly the coverage of banking to rural areas, interest payable by banks to their constituents, which is otherwise subject to deduction of tax at source, has also been exempted from this requirement. This exemption covers interest credited or paid in respect of deposits with banking companies, co-operative banks, land mortgage banks and land development banks. Deposits with non-banking companies, etc., will continue to be subject to deduction of tax at source as at present. [Section 193 and section 194A as amended by sections 22 and 23 respectively of the Finance Act] Finance Act, 1970 17. Exemption from tax of the interest on small savings schemes recently instituted by the Central Government - As stated in the preceding paragraph the Central Government has recently instituted a variety of small savings schemes so as to make these attractive to investors in different income groups. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exemption is lost and tax becomes chargeable on the accumulated income. Finance Act, 1970 19. These tax concessions have facilitated accumulation of tax-exempt funds with charitable and religious trusts and such funds are often used for acquiring control over industry and business. Further, although the law already provides for forfeiture of the exemption in a case where the income of a charitable trust or institution enures, or the income or property of the trust or institution is used or applied, for the benefit of the author of the trust or founder of the institution or any substantial contributor to the trust or institution or their relatives, these provisions have not been effective in preventing indirect benefits being provided to such author, founder, etc., out of the trust funds in a variety of ways. With a view to checking these abuses and reducing the scope for the use of tax-exempt funds of charitable and religious trusts and institutions to acquire control of industry and business, the Finance Act, 1970 has made certain changes in the provisions relating to the exemption from tax of the income of charitable and religious trusts, as explained in the following paragra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Such moneys may also be deposited in an account with any financial corporation which is engaged in providing long-term finance for industrial development in India and which is approved by the Central Government under section 36(1)(viii). 3. Sub-section (3) of section 11 has been amended to provide that if in any year the income which is accumulated for the specified purpose or purposes of the trust is applied to purposes other than charitable or religious purposes or ceases to be accumulated or set apart for application to such purposes, it will become chargeable to tax as the income of that year. Further, if, in any year, the accumulations cease to remain invested in Government securities or other approved securities or deposited in any account in the Post Office Savings Bank or with a banking company, co-operative bank, etc., or with a financial corporation as stated above, then also the income so accumulated will become chargeable to tax as the income of that year. It is further provided that if the accumulations are not utilised for the specified purposes during the period of accumulation or in the year immediately following the expiry of that period, then, the accumulations, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he individual. Under new Explanation 3 to section 13, a person will be deemed to have a substantial interest in a concern if, where the concern is a company, equity shares carrying not less than 20 per cent of the voting power are, at any time during the previous year, owned beneficially by such person or partly by such person and partly by one or more of the other persons mentioned in sub-section (3); in the case of a concern other than a company, the test will be that such person by himself or jointly with one or more of the other persons mentioned in sub-section (3) is entitled at any time during the previous year to not less than 20 per cent of the profits of the concern. 3. In the case of a trust or institution created or established after 31-3-1962, the exemption from tax will be forfeited also where the trust income or property is used or applied during the relevant year for the direct or indirect benefit of the author of the trust and other persons mentioned in sub-section (3). This provision applies also in the case of a trust or institution created or established prior to 1-4-1962, but in such cases, it is specifically provided that this shall not lead to forfeiture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the trust income or property for the benefit of the specified persons in relation to any period before 1-6-1970. If any such transaction entered into before that date continues inforce on or after that date, it will result in the forfeiture of the exemption. For instance, if a house property belonging to a charitable trust created before 1-4-1962, is let out on a concessional rent to the author of the trust (without there being any mandatory term in the trust deed in this behalf) and such concessional letting continues to be in force after 31-5-1970, the case would fall within the scope of the provision referred to in (b) above and the trust will forfeit the exemption from tax on the whole of its income. [It may, however, be noted that the exclusion of transactions securing the use or application of the trust income or property in relation to any period before 1-6-1970 from leading to forfeiture of the exemption, does not apply in the case of charitable trusts or institutions created or established after 31-3-1962. In the case of such trusts and institutions, the provisions of section 13 (prior to the amendments made by the Finance Act, 1970) already prohibited any such use or appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such lending by way of debentures or loans for adequate security and on adequate interest, that would nullify the provision in clause (a) and render it otiose. Such an interpretation will not be a harmonious interpretation of the provisions in clause (a) and clause (h), and cannot, therefore, be sustained. Finance Act, 1970 22. The amendments to sections 11 and 13 as stated in the preceding paragraphs 20 and 21 will take effect from 1-4-1971 and will, accordingly, be operative for and from the assessment year 1971-72. With effect from the same assessment year, persons in charge of charitable or religious trusts or institutions will be under a statutory obligation to furnish a return of income of the trust in all cases where the total income of the trust as computed without availing of the exemption under section 11(1) exceeds the maximum amount which is not chargeable to tax. This has been secured by the insertion of a new sub-section (4A) in section 139. The return of income in such cases is to be furnished in a form to be laid down for this purpose in the Income-tax Rules and verified in the prescribed manner and should also set forth such other particulars as may be prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income arising to it from any investment in a concern in which the author, founder or any of the specified persons has substantial interest, where the aggregate of the funds invested by it in such a concern does not exceed 5 per cent of the capital of that concern. It may be noted that where such investment exceeds 5 per cent of the capital of the concern, the trust will forfeit the exemption from tax on the whole of its income and, in that event, donations to such a trust will fail to qualify for tax relief under section 80G. [Section 80G as amended by section 13 of the Finance Act] Explained in - In Trustees of Watumull Foundation (I) v. Asstt. Director of Inspection [1994] 48 ITD 239 (Bom.-Trib.) the above circular was explained with the following observations : "It transpires from the perusal of the above circular that section 13(2)(h) will cover only those cases in which investments are made by the assessee-trust in the capital of the concerns to which section 13(3) applies. It further indicates that in the case of lendings by trust, the provisions of section 13(2)(a) will apply and not section 13(2)(h) and any contrary interpretation would not be a harmonious interpretatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons. Under these circumstances, even if the shares of the beneficiaries had been specified, the tax chargeable on the trust income would have been lower than the tax chargeable if the income of the trust is treated as a single unit and taxed as the total income of an association of persons. In judging whether the beneficiaries of the trust had any other income chargeable to income-tax, no account will be taken of their agricultural income which is exempt from Central taxation altogether. 2. Similarly, where the trust was created under a will, the flat rate of 65 per cent will not apply to its income, and tax will be charged only at the progressive rates of tax applicable in the case of an association of persons. This is based on the consideration that the trust comes into effect only after the death of the testator and, therefore, estate duty would have been paid on the property passing on his death (except where the death occurred before the Estate Duty Act came into force, i.e., 15-10-1953). Even otherwise, a person who creates a discretionary trust under his will may not be considered as doing this for the purpose of evading tax liability. The trust would, ordinarily, be cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this connection that under section 10(25)(ii) and (iii), the income received by the trustees on behalf of a recognised provident fund or an approved superannuation fund is completely exempt from taxation. In the case of other provident funds and superannuation funds and also gratuity funds, pension funds and other funds for the benefit of employees of a business or profession, the income will be chargeable to tax at the rates of tax applicable to an association of persons, which is already the existing position. Finance Act, 1970 27. Section 164 as substituted includes certain ancillary provisions which make it clear that in respect of income derived from property held under trust wholly for charitable or religious purposes, so much of such income as is not entitled to exemption under section 11 will be chargeable to tax as if it were the income of an association of persons. Where property is held under trust in part only for charitable or religious purposes, and the income which is applicable to other purposes is receivable on behalf of beneficiaries whose shares are indeterminate or unknown, the tax chargeable would be the greater of either (a) or (b) hereinbelow : a. the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is included in the taxable income. This proportion is 55 per cent where the gains relate to lands and buildings and 35 per cent where they relate to other assets. Finance Act, 1970 30. Prior to the amendment made by the Finance Act, 1970, the definition of the term "capital asset" in section 2(14) excluded from its scope, inter alia, agricultural land in India. Accordingly, no liability to tax arose on gains derived from transfer of agricultural land in India. This exemption of agricultural land from the scope of levy of tax on capital gains has a historical origin and is not due to any bar in the Constitution on the competence of Parliament to legislate for such levy. Agricultural land situated in municipal and other urban areas is essentially similar to non-agricultural land in such areas in its potentialities for use due to the progress of urbanisation and industrialisation. The Finance Act, 1970 has, accordingly, amended the relevant provisions of the Income-tax Act so as to bring within the scope of taxation capital gains arising from the transfer of agricultural land situated in certain areas. For this purpose, the definition of the term "capital asset" in section 2(14) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s immediately preceding the date of transfer was being used by the assessee or a parent of his for agricultural purposes, and the assessee has, within a period of two years after that date purchased any other land (whether in the same area or elsewhere) for being used for agricultural purposes, then the capital gain will not be charged to tax to the extent that it has been utilised for acquiring the fresh land. Where the amount of the capital gain exceeds the cost of acquisition of the fresh land, only the excess will be chargeable to tax. The concession will, however, be forfeited if the assessee transfers the fresh land acquired by him within a period of three years from the date of its purchase. [Section 2(14) as amended by section 3(a) of the Finance Act; sections 47 and 54B as amended by section 11 of the Finance Act] · Finance Act, 1970 · Entertainment expenditure incurred in businesses and professions 33. Under section 37, prior to its amendment by the Finance Act, 1970, entertainment expenses incurred in businesses and professions, including expenditure incurred through grant of entertainment allowances to directors or employees or through "expense accounts" operated by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itate liaison with the Reserve Bank of India. Accommodation hired or reserved in a hotel for a period of more than six months during the year is treated as a guest house for the purposes of the rule. Finance Act, 1970 36. These provisions have been found to be of little effect in curbing proliferation of guest houses. In order to place an effective check on lavish expenditure on maintenance of guest houses, the Finance Act, 1970 has inserted a new sub-section (4) in section 37, under which expenditure incurred after 28-2-1970, on the maintenance of guest houses other than "holiday homes", will be disallowed altogether in computing the profits and gains of business or profession. This provision will cover not only the establishment and other charges for running the guest house but also depreciation on the building where this is owned by the assessee, and rent paid for the accommodation where this is taken on hire or lease. Depreciation on assets, such as air-conditioners, refrigerators, cooking ranges, furniture and fittings, etc., in the guest house will also be disallowed under the proposed provision. Where any charges are recovered from persons using the guest house, these will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Commissioners on a lower scale of pay, to take over some of the statutory and non-statutory functions of Commissioners of Income-tax and thereby release senior officers for more important administrative and managerial duties. The Finance Act, 1970 has, accordingly, amended the relevant provisions of the Income-tax Act so as to include Additional Commissioners among the categories of income-tax authorities, and particularly within the term "Commissioners" as defined in section 2(16). These Additional Commissioners will have the same status and functions under the statute as Commissioners of Income-tax. The Income-tax Act already allows distribution and allocation of work among Commissioners of Income-tax on the functional basis. Under section 121, the Central Board of Direct Taxes has the power to assign to more than one Commissioner (which expression will hereafter include Additional Commissioner) concurrent jurisdiction over the same area or persons or classes of persons or incomes or classes of income or cases or classes of cases, and to distribute and allocate the work among these Commissioners (including Additional Commissioners) on the functional basis. By an amendment of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in implementing the housing programmes of Government for the common good. As these Boards are serving an important public purpose and do not exist for private profit, the Finance Act, 1970 has made a specific provision in a new clause (20A) of section 10 exempting the income of such Boards from tax altogether. This provision exempts from tax any income of an authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both. This provision has been made with effect from 1-4-1962 that being the date of commencement of the Income-tax Act. [Section 10(20A) inserted by section 4(a) of the Finance Act] Finance Act, 1970 Hospitals and other medical institutions 42. Hitherto, universities and other educational institutions existing solely for educational purposes and not for purposes of profit have enjoyed complete exemption from tax on their incomes. However, in the case of hospitals and similar other institutions for treatment of illness, there has been no specific exemption from tax, unlike in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... travelling for purposes of employment, the Finance Act, 1970 has amended section 16(iv) so as to allow a standard deduction of Rs. 35 per month (Rs. 420 for the year) to all salaried taxpayers other than those who own and use a motor car or a motor cycle, a scooter or other moped for the purpose of their employment. The standard deduction for a motor cycle, scooter or other moped has been increased from Rs. 50 to Rs. 60 per month. The standard deduction for a motor car has been prescribed in a uniform amount of Rs. 200 per month irrespective of the gross salary level, as against Rs. 250 per month for those having gross yearly salary exceeding Rs. 25,000 and Rs. 200 for others hitherto. The standard deduction of Rs. 35 per month will be admissible to those who do not own any conveyance, as also to those who own a bicycle or any other conveyance, not being a motor car, motor cycle, scooter or other moped. No proof of actual expenses incurred will be required to be furnished in the case of any salaried taxpayer. The amended provisions will apply from 1-4-1971, i.e., for and from the assessment year 1971-72, and will accordingly be applicable in relation to salary incomes of the financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em out of their income chargeable to tax by way of: (i) premiums paid on policies of insurance or contracts for deferred annuities on the life of either spouse or on the life of any child of either spouse ; (ii) deposits in a 10-year or 15-year account under the Post Office Savings Bank (Cumulative Time Deposits) Rules, 1959; and (iii) contributions to the Public Provident Fund set up by the Central Government. Savings in these forms will qualify for tax relief up to 30 per cent of the gross total income of the association or body, or Rs. 15,000, whichever is less, as in the case of individuals. The tax relief will be allowed by deducting 60 per cent of the first Rs. 5,000 and 50 per cent of the balance of the qualifying amount of savings in computing the taxable income of the association or body. Finance Act, 1970 47. The amendment, as stated in the preceding paragraph, will come into effect on 1-4-1971, and will, accordingly, apply for and from the assessment year 1971-72. In regard to the period up to and including the assessment year 1970-71, similar relief has been allowed to such married couples in these Union territories by the issue of a Removal of Difficulties Order by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertificate, or if it is cancelled by the Income-tax Officer earlier, till such cancellation. [Section 195 as amended by section 24 of the Finance Act] Finance Act, 1970 Extension of time for payment of final instalment of advance tax in certain cases 49. The Finance Act, 1969 made certain changes in the scheme of payment of advance tax under the Income-tax Act with a view to making the scheme more effective. Under the provisions as amended, advance tax is payable during the financial year 1969-70 and subsequent years by all categories of persons in three equal instalments, as against four instalments in certain categories of cases and three in others under the earlier law. These instalments are due on 15th June, 15th September and 15th December of the financial year in the case of a person deriving 75 per cent or more of his total income from a source or sources for which he closes his accounts on 31st December or earlier. In other cases, the instalments are due on 15th September, 15th December and 15th March. Another change made in 1969 placed a statutory obligation on the taxpayer to make an estimate of his current income and pay advance tax thereon if such tax exceeds the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orate taxpayers, incurring expenditure under specified heads for development of export markets for Indian goods on a long-term basis, are entitled to an export markets development allowance in the computation of their taxable profits. This allowance consists of a weighted deduction in an amount equal to one and one-third times the amount of the qualifying expenditure. One of the heads of expenditure specified in the relevant provision as qualifying for the weighted deduction is that incurred on "distribution, supply or provision outside India" of the goods, services or facilities dealt in or provided by the taxpayer in the course of his business. This provision is susceptible of the interpretation that expenditure incurred by an exporter on payment of ocean freight, insurance, etc., in connection with sale of goods to a foreign purchaser on the c.i.f. basis, would qualify for the weighted deduction. As this is not the intention underlying the provision, the Finance Act, 1970 has amended section 35B so as to make it clear that expenditure on "distribution, supply or provision outside India" of goods, services or facilities will not include expenditure incurred in India in connection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Bill, 1966. In such a case, the financial corporation can appropriate the additional amount of 15 per cent to the special reserve only in the accounts of the following year. In order to remove any doubts about the applicability of the amended provision for the allowance of deduction up to 25 per cent of the total income in the case of such a corporation for the assessment year 1966-67, the Finance Act, 1970 has made a clarificatory amendment to section 36(1)(viii). The amendment makes it clear that where the amount carried to the special reserve in the previous year relevant to the assessment year 1966-67 by such a financial corporation falls short of 25 per cent of its total income, it will nevertheless be entitled to the deduction up to 25 per cent of its total income if it transfers a further amount to such reserve in the immediately following year over and above the amount in respect of which it is entitled to the deduction for the assessment year 1967-68. [Section 36(1)(viii) as amended by section 9 of the Finance Act] Finance Act, 1970 Income derived by Indian companies from transfer or servicing of technical "know-how" 54. The Finance Act, 1969 introduced a new provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance Act, 1960, and has not been revived. In the case of individuals and Hindu undivided families, the rates of ordinary wealth-tax for the assessment year 1970-71 range from 0.5 per cent in the lowest slab of net wealth (after the initial exemption of Rs. 1 lakh in the case of individuals and Rs. 2 lakhs in the case of Hindu undivided families), to a maximum of 3 per cent on net wealth in the slab over Rs. 20 lakhs. As a measure for bringing about socio-economic equality and reducing concentration of wealth, the Finance Act, 1970 has increased the rates of ordinary wealth-tax in the case of individuals and Hindu undivided families with effect from 1-4-1971, i.e., for and from the assessment year 1971-72. The revised rates are: 1 per cent in the lowest slab of net wealth (following the initial exemption of Rs. 1 lakh in the case of individuals and Rs. 2 lakhs in the case of Hindu undivided families as at present) up to Rs. 5,00,000; 2 per cent on net wealth in the slab Rs. 5,00,001 — Rs. 10,00,000 ; 3 per cent in the slab Rs. 10,00,001 — Rs. 15,00,000; 4 per cent in the slab Rs. 15,00,001 — Rs. 20,00,00; and 5 per cent on the net wealth in excess of Rs. 20,00,000. Finance Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al exemption of the value of lands and buildings (other than business premises) in "urban areas" is fixed in a uniform amount of Rs. 5 lakhs, regardless of the population of the place where these assets are situate. On the excess of the value of such lands and buildings over Rs. 5 lakhs, additional wealth-tax will be charged at the rate of 5 per cent in the slab Rs. 5,00,001 — Rs. 10,00,000, and 7 per cent in the slab over Rs. 10,00,000. Finance Act, 1970 61. Where the net wealth of the assessee includes the value of his interest as a partner in a firm or as a member of an association of persons, and the assets of such firm or association include lands and buildings (other than business premises) situated in "urban areas" then, the interest of the assessee in such firm or association shall be regarded as partaking of the character of lands and buildings in "urban areas" to a proportionate extent. For this purpose, the ratio of the value of such "urban assets" possessed by the firm or association to the net wealth of the firm or association will be ascertained, and such ratio will be applied to the value of the assessee's interest in the firm or association to determine the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the levy of wealth-tax in the case of individuals and Hindu undivided families was extended to the value of agricultural property, with effect from 1-4-1970, i.e., from the assessment year 1970-71. Parliament's competence to legislate for the extension of the levy of wealth-tax to agricultural property is derived from article 248 of the Constitution (relating to the residuary powers of legislation) and entry 97 of the Union List in the Seventh Schedule to the Constitution. However, article 248 and entry 97 of the Union List, in the form in which they apply to the State of Jammu and Kashmir, do not cover taxes on the capital value of assets being agricultural land. In view of this position under the Constitution, the relevant provision in the Wealth-tax Act has now been amended to make it clear that the extension of the levy of wealth-tax to agricultural property under the amendment made in 1969 will not apply in relation to agricultural land in the State of Jammu and Kashmir. [Section 2(e) as amended by section 26(a) of the Finance Act] Finance Act, 1970 Amendment of the provision relating to exemption of one residential house from wealth-tax 65. The Wealth-tax Act, at present, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition that such building or group of buildings is on or in the immediate vicinity of agricultural land and is required by the owner, by reason of his connection with the land, for use as a dwelling house, store-house or out-house. [Section 5(1)(ivb) as inserted by section 26(b) of the Finance Act] Finance Act, 1970 Exemption from wealth-tax of Government securities, shares in companies, units in the Unit Trust of India, debentures issued by certain institutions or authorities and bank deposits, subject to certain limits 67. The Wealth-tax Act already provides for the exemption of investments in several small savings and other schemes of Government in computing the net wealth of individuals and Hindu undivided families. These cover (a) 5-Year Fixed Deposits with the Central Government in the State Bank of India or in Post Offices, (b) investments in specified small savings certificates to the extent of the maximum amount permitted to be invested or deposited therein, and (c) deposits in Post Office Savings Banks Accounts and Cumulative Time Deposits in Post Office Savings Banks. An individual can currently invest in the deposits and small savings schemes of the Central Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 31-3-1964, will also be outside the purview of the above-mentioned limit. Investments in the newly instituted 7-Year National Savings Certificate (II Issue), (III Issue) and (IV Issue), 3-Year Fixed Deposits1 with the Central Government in the State Bank of India or in Post Offices and the schemes of Recurring Deposits and Time Deposits in Post Offices,2 will also be exempt from wealth-tax, subject to the overall limit of Rs. 1,50,000 mentioned above. It will be open to the investor to make investments in any one or more of the above-mentioned categories of assets at his choice and qualify for the exemption up to Rs. 1,50,000. Finance Act, 1970 70. The exemption of investments in the above-mentioned categories of financial assets up to an aggregate value of Rs. 1,50,000 will be available only in respect of such of these investments as are held by the assessee for a period of at least six months ending with the valuation date. In the case of shares in Indian companies, these will qualify for the exemption if they are held by the assessee from the date of their first issue or for six months ending with the valuation date whichever period is shorter. Finance Act, 1970 71. As in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he return, and the Wealth-tax Officer is authorised to allow such extension in deserving cases. Where the net wealth of an assessee includes the value of assets held in a business or profession for which the accounts are closed after 31st December preceding the assessment year, the furnishing of the return of wealth by 30th June causes inconvenience to him. This is because until the accounts have been closed and the balances ascertained (which takes a few months) the assessee will not be in a position to ascertain the value of his business assets for inclusion in his return of wealth. Under the corresponding provisions of the Income-tax Act, such an assessee is allowed time up to 6 months from the close of the accounting year to furnish his return of income. Finance Act, 1970 75. In order to avoid inconvenience to the assessees in the above-mentioned types of cases, the Finance Act, 1970 has made a specific provision in section 14 under which the assessee will be allowed time for furnishing the return of his net wealth up to the date by which he is required to furnish the return of income in respect of such business or profession under the Income-tax Act, where the time for furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under a trust declared by a will. 2. Where the assets are held under a trust created by a non-testamentary instrument before 1-3-1970, and the Wealth-tax Officer is satisfied, having regard to all the circumstances existing at the relevant time that the trust was created, bona fide, exclusively for the benefit of the dependent relatives of the settlor, and where the settlor is a Hindu undivided family, exclusively for the benefit of the dependent members of the family. 3. Where the assets are held by the trustees on behalf of a provident fund, superannuation fund, gratuity fund, pension fund or any other fund created bona fide by a person carrying on a business or profession exclusively for the benefit of persons employed in such business or profession. In these categories of cases, the net wealth of the trust will be chargeable to wealth-tax at the rates applicable in the case of an individual. Finance Act, 1970 78. The provision, as stated above, will be effective from 1-4-1971, i.e., for the assessment year 1971-72 and subsequent years. [Section 21(4) as amended by section 26(e) of the Finance Act] Amendments to Gift-tax Act Finance Act, 1970 Revision of the rate struc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the Central Board of Direct Taxes. In the context of the creation of a cadre of the Additional Commissioners of Income-tax to take over some of the functions of the Commissioners and with a view to enabling the distribution and allocation of the work on the functional basis among Commissioners and Additional Commissioners for the purpose of the Gift-tax Act as well, the Finance Act, 1970 has made a specific provision in new section 11A. Under the new section, in a case where two or more Commissioners (including Additional Commissioners) have been vested with concurrent jurisdiction over any assessee, the Commissioner competent to perform any function under the Gift-tax Act will be the Commissioner (or Additional Commissioner) who is empowered to perform such functions under the orders made by the Board under the existing provisions for distribution and allocation of the work among them. [Section 11A inserted by section 27(b) of the Finance Act] Amendments to Unit Trust of India Act Finance Act, 1970 Increase in the amount of income on units exempt from deduction of tax at source in the case of non-residents 81. Section 32 of the Unit Trust of India Act, before its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er than co-operative societies), bodies of individuals and artificial juridical persons Rates of income-tax (exclusive of surcharge on income-tax) On total income— (1) not exceeding Rs. 5,000 5 per cent of the total income ; (2) exceeding Rs. 5,000 but not exceeding Rs. 10,000 Rs. 250 plus 10 per cent of the excess over Rs. 5,000 ; (3) exceeding Rs. 10,000 but not exceeding Rs. 15,000 Rs. 750 plus 17 per cent of the excess over Rs. 10,000 ; (4) exceeding Rs. 15,000 but not exceeding Rs. 20,000 Rs. 1,600 plus 23 per cent of the excess over Rs. 15,000 ; (5) exceeding Rs. 20,000 but not exceeding Rs. 25,000 Rs. 2,750 plus 30 per cent of the excess over Rs. 20,000 ; (6) exceeding Rs. 25,000 but not exceeding Rs. 30,000 Rs. 4,250 plus 40 per cent of the excess over Rs. 25,000 ; (7) exceeding Rs. 30,000 but not exceeding Rs. 50,000 Rs. 6,250 plus 50 per cent of the excess over Rs. 30,000 ; (8) exceeding Rs. 50,000 but not exceeding Rs. 70,000 Rs. 16,250 plus 60 per cent of the excess over Rs. 50,000 ; (9) exceeding Rs. 70,000 but not exceeding Rs. 1,00,000 Rs. 28,250 plus 65 per cent of the excess over Rs. 70,000 ; (10) exceeding Rs. 1,00,000 but not exceeding Rs. 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal allowances, up to the respective amounts specified in the following table : Amount of tax relief Rs. Unmarried individual 125 Married individual who has no child mainly dependent on him, or a Hindu undivided family which has no minor coparcener 200 Married individual who has one child mainly dependent on him, or a Hindu undivided family which has one minor coparcener mainly supported from the income of such family 220 Married individual who has more than one child mainly dependent on him, or a Hindu undivided family which has more than one minor coparcener mainly supported from the income of such family 240 In the case of a married individual whose spouse has an independent taxable income exceeding Rs. 4,000, the amount of tax relief will be Rs. 125, Rs. 145, Rs. 165, respectively, instead of Rs. 200, Rs. 220 and Rs. 240. Where the total income of a resident individual exceeds Rs 10,000 but does not exceed Rs. 20,000 and he has incurred expenditure on the maintenance of a dependent parent or grandparent, the tax chargeable is limited by way of marginal relief, to the tax which would have been payable by him if his total income had been Rs. 10,000 [i.e., after t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) On that part of its total income which consists of profits and gains from life insurance business 52.5 per cent (ii) On the balance, if any, of the total income The rate of income-tax Applicable under item (2) below to the total income of a domestic company which is a company in which the public are substantially interested. Note : In the case of a company other than the Life Insurance Corporation of India, whose total income includes profits and gains from life insurance business, the rate of tax on such profits is also 52.5 per cent ; the balance, if any, of the total income is chargeable to tax at the rates applicable under item (2) below to the total income of the company. 2. Companies other than the Life Insurance Corporation of India Rates of income-tax I. In the case of domestic company— (1) where the company is a company in which the public are substantially interested,— (i) in a case where the total income does not exceed Rs. 50,000 45 per cent of the total income; (ii) in a case where the total income exceeds Rs. 50,000 55 per cent of the total income ; (2) where the company is not a company in which the public are substantially interested,— (i) in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t are as follows : (a) in respect of "long-term" capital gains relating to lands or buildings or any rights therein 40 per cent of the amount of such capital gains; (b) in respect of "long-term" capital gains other than those referred to in (a) above 30 per cent of the amount of such capital gains. "Short-term" capital gains (i.e., capital gains arising from the transfer of a capital asset held by the taxpayer for not more than 24 months before the date of the transfer) are chargeable to income-tax at the rates of income-tax applicable to the total income of the company. Annexure II Rates of income-tax for deduction of tax at source from "salaries" and retirement annuities and for computing "advance tax" payable during the financial year 1970-71 A. Taxpayers other than companies 1. Individuals, Hindu undivided families, unregistered firms, associations of persons (other than co-operative societies), bodies of individuals and artificial juridical persons Rates of income-tax (exclusive of surcharge on income tax) On total income— (1) not exceeding Rs. 5,000 Nil ; (2) exceeding Rs. 5,000 but not exceeding Rs. 10,000 10 per cent of the excess over Rs. 5,000 (3) exceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax (exclusive of surcharge on income-tax) On total income— (1) not exceeding Rs. 10,000 Nil; (2) exceeding Rs. 10,000 but not exceeding Rs. 25,000 4 per cent of the excess over Rs. 10,000; (3) exceeding Rs. 25,000 but not Rs. 50,000 Rs. 600 plus 6 per cent of the excess over exceeding Rs. 25,000; (4) exceeding Rs. 50,000 but not exceeding Rs. 1,00,000 Rs. 2,100 plus 12 per cent of the excess over Rs. 50,000; (5) exceeding Rs. 1,00,000 Rs. 8,100 plus 20 per cent of the excess over Rs. 1,00,000. Surcharges on income-tax (1) Ordinary surcharge on income-tax Rate of surcharge (a) a registered firm whose total income to the extent of 51 per cent thereof or more, consist of income derived from a profession carried on by the firm 10 per cent of the amount of income tax; (b) any other registered firm 20 per cent of the amount of income-tax. (2) Special surcharge. The rate of this surcharge is 10 per cent of the amount of income-tax as increased by the ordinary surcharge on income-tax referred to in (1) above. 4. Local authorities Rate of income-tax (exclusive of surcharge on income-tax) On the whole of total income - 50 per cent. Surcharge on income-tax Surchar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company which is mainly engaged in the generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining. A company is deemed to be mainly engaged in such a business if the income attributable to any one or more of the aforesaid activities included in its gross total income for the previous year is not less than 51 per cent of such total income. II. In the case of a company other than a domestic company— (i) on so much of the total income as consists of,— (a) royalties received from an Indian concern in pursuance of an agreement made by it with the Indian concern after the 31st March, 1961, or (b) fees for rendering technical services received from an Indian concern in pursuance of an agreement made by it with the Indian concern after the 29th February, 1964 and where such agreement has, in either case, been approved by the Central Government - 50 per cent; (ii) on the balance, if any, of the total income - 70 per cent. C. Special provisions regarding computation of tax on "long-term" capital gains (i.e., capital gains other than "short-term" capital gains) in the case of companies ..... 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