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TMI BlogAmendments at a glance, Amendments to Income-tax Act , Amendments to Wealth-tax Act , Amendments to Gift-tax Act , Amendments to Companies (Profits) Surtax ActX X X X Extracts X X X X X X X X Extracts X X X X ..... exemption of remuneration of foreign technicians 5 10(15)(iv)(d), (e) Tax exemption of interest payable by financial institutions, etc., on loans raised in foreign countries 6 10(17A) Tax exemption of certain awards for literary, scientific and artistic work or attainment or for proficiency in sports and games 7 10(17B) Tax exemption of certain rewards 8 32(1)(vi), Initial depreciation allowance in respect of machinery 34(2)(ii) or plant installed in selected industries 9-17 35(1)(i), (2A), Tax concessions for promoting research and development 18-20 Expln. 35B(1)(a), Prov. Tax concessions for promoting exports 21-22 80HH Tax concessions for industrial undertakings and hotels set up in specified backward areas 23-31 271(1)(i) Penalty for delay or default in furnishing return of income 32-33 295(4) Power of the Board to give retrospective effect to subordinate legislation beneficial to taxpayers 34 Wealth-tax Act 46(3) Power of the Board to give retrospective effect to subordinate legislation beneficial to taxpayers 35 Gift-tax Act 17(1)(i) Penalty for delay or default in furnishing return of gift-tax 37 46(4) Powers of the Board to give retrospective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally those raised by industrial undertakings, enjoy exemption from income-tax over a large area. The Amending Act has enlarged the area of this tax concession with a view to exempting from income-tax interest payable to foreign parties in the following circumstances : 1. Where interest is payable by the Industrial Finance Corporation of India, the Industrial Development Bank of India and Industrial Credit and Investment Corporation of India, on loans, raised by them in foreign countries, such interest will be exempt to the extent of the rate approved by the Central Government. 2. Where interest is payable on loans raised in any foreign country by any other financial institution or by a banking company to which the Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act) and the loan has been raised for the purpose of making advances to industrial undertakings in India for purchase of raw materials and capital plant and machinery or for the import of essential supplies, such interest will be exempt to the extent of the rate approved by the Central Government. Tax exemption in such cases will be available only if the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest. This amendment has come into force with effect from 1-4-1973 and is, accordingly, applicable in relation to the assessment year 1973-74 and subsequent years. [Section 10(c) (Part) of the Amending Act] Tax concessions for encouraging industries in selected sectors/backward areas as also for promotion of research and development and export Direct Taxes (Amendment) Act, 1974 Initial depreciation allowance in respect of machinery or plant installed in selected industries 9. In May 1971, the Central Government had issued a notification providing for the withdrawal of development rebate in respect of ships acquired or machinery or plant installed after 31-5-1974. In view of the need for continued encouragement of industries in certain selected sectors, the Amending Act has inserted a new clause (vi) in sub-section (1) of section 32 providing for initial depreciation allowance in respect of machinery or plant installed in certain selected industries after 31-5-1974. The initial depreciation allowance will be available in respect of the following categories of machinery and plant : 1. New ships and aircraft acquired by a taxpayer engaged in the business of operation of shi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of articles or things specified in the new Ninth Schedule. An industrial undertaking will be regarded as a small-scale industrial undertaking, if the aggregate value of machinery and plant installed therein, as on the last day of the relevant previous year, does not exceed Rs. 7.5 lakhs. For this purpose, the value of the machinery or plant owned by the taxpayer shall be the actual cost thereof to the taxpayer and the value of machinery or plant hired by the taxpayer shall be the actual cost to the owner thereof. Direct Taxes (Amendment) Act, 1974 10. Initial depreciation allowance in respect of the aforesaid ships aircraft, machinery or plant will be allowed at the rate of 20 per cent of their actual cost. The initial depreciation allowance will not be deductible in computing the written down value of the asset in subsequent years. This will, however, be taken into account in the year in which the asset is sold or demolished or destroyed or in the year in which normal depreciation tends to exceed 80 per cent of the cost. In other words initial depreciation allowance will be taken into account in calculating the balancing charge or determining the profits under section 41(2) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried forward indefinitely while unabsorbed development rebate can be carried forward only for a period of eight years. Further, where a taxpayer is entitled to set off of both depreciation and development rebate, the current depreciation as also unabsorbed depreciation of earlier years is deducted first and the unabsorbed development rebate carried forward from earlier years can be set off only against the balance of the income remaining after such deduction. In view of this position, enterprises having large unabsorbed development rebate may not like to avail of initial depreciation allowance until such development rebate is set off against profits for the assessment year 1975-76 or subsequent years. As the provision for the grant of initial depreciation allowance is intended to help the industrial undertakings and not to work to their disadvantage by depriving them of their right to development rebate the Amending Act provides that a taxpayer may, at his option, declare and choose not to avail of the proposed benefit of initial depreciation allowance. The assessee may exercise his option before the expiry of the time allowed under section 139(1) or section 139(2) (whether fixed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of ships, aircraft, machinery or plant, which qualify for development rebate, the Amending Act has specifically provided that initial depreciation will not be allowed in respect of ships, aircraft, machinery and plant in respect of which development rebate is admissible, even though such ships or aircraft may be acquired or such machinery or plant installed after 31-5-1974. Direct Taxes (Amendment) Act, 1974 16. The Amending Act has also made a consequential change in section 34 in order to secure that no initial depreciation allowance will be allowed in cases where any ship, aircraft, machinery or plant is sold in the previous year in which it was acquired or installed, or in the year in which it is first put to use. Opportunity has also been taken to make a similar amendment in relation to initial depreciation allowance admissible under section 32(1)(v) in respect of new hotel buildings erected by approved hotels. Direct Taxes (Amendment) Act, 1974 17. These amendments will take effect from 1-4-1975 and will, accordingly, apply in relation to the assessment year 1975-76 and subsequent assessment years. [Sections 3, 4 and 16 of the Amending Act] Direct Taxes (Ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (5) of section 40A during the pre-investment period will not be allowed as a deduction in computing the employer's income. In other words, the expenditure incurred by the employer during the pre-investment period on providing (i) residential accommodation to research personnel, free of cost or on concessional basis; (ii) any benefit or amenity granted free of cost or at concessional rate; (iii) any payment by the employer of any sum in respect of any obligation which, but for such payment would have been payable by the employee; and (iv) any payment of any sum, whether directly or through a fund, other than a recognized provident fund or an approved superannuation fund, to effect an assurance on the life of employee or to effect a contract for an annuity will not be allowed as deduction in computing the employer's income. 2. A new sub-section (2A) has been inserted in section 35 under which a weighted deduction equal to one and one-third times the actual expenditure incurred by a taxpayer after 31-5-1973 on sponsored research in approved laboratories will be allowed. It is not necessary that the sponsored research should be related to the taxpayer's business but the weig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side India; maintenance of foreign branches and agencies; preparation and submission of tenders, etc. In order to encourage development of export markets, the Amending Act has made a provision in section 35B(1)(a) so as to increase the amount of deduction to one and one-half times the amount of actual expenditure incurred after 28-2-1973 by companies in which the public are substantially interested. It should be noted that the enhanced weighted deduction will be applicable only in the case of domestic companies in which the public are substantially interested and will not be available in the case of other categories of taxpayers. Direct Taxes (Amendment) Act, 1974 22. This amendment has come into force with effect from 1-4-1973 and is, accordingly, applicable in relation to the assessment year 1973-74 and subsequent assessment years. [Section 6 of the Amending Act] Direct Taxes (Amendment) Act, 1974 Tax concessions for industrial undertakings and hotels set up in specified backward areas 23. The Amending Act has inserted a new section 80HH under which all categories of taxpayers will be entitled to a deduction equal to 20 per cent of the profits derived by them from new i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill qualify for the new tax concession, even though the earlier business was situated in any specified backward area. 2. The industrial undertaking should not have been formed by the transfer to a new business of machinery or plant previously used for any purpose in any backward area specified in the Eighth Schedule. In a case where any machinery or plant or any part thereof previously used in any backward area is transferred to a new business in that area or in any other backward area and the total value of the machinery or plant or part so transferred does not exceed 20 per cent of the total value of the machinery or plant used in the business, this condition shall be deemed to have been fulfilled. In this connection, it may be noted that, unlike the provision in section 80J, it is not necessary under the new section 80HH that the industrial undertaking should have been set up in a new building. 3. It employs 10 or more workers in a manufacturing process carried on with the aid of power or employs 20 or more workers in a manufacturing process carried on without the aid of power. Direct Taxes (Amendment) Act, 1974 25. The new tax concession will be available in the case of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... small and medium industries and financial institutions provide concessional finance to industries set up in these areas. The backward areas for the purposes of the new tax concession are the same as qualify for the grant of concessional finance by financial institutions, subject to the modification that the areas notified as the proposed site for the city of New Bombay have been excluded from the list. The list of backward areas has been specified in the Eighth Schedule and consists of the following areas: Name of State or Union territory Backward areas 1 2 Andhra Pradesh The districts of Anantapur, Chittoor, Cuddapah, Karimnagar, Khammam, Kurnool, Mahbubnagar, Medak, Nalgonda, Nellore, Nizamabad, Ongole, Srikakulam and Warangal. Assam The districts of Cachar, Goalpara, Kamrup, Lakhimpur, Mikir Hills, North Cachar Hills and Nowgong Bihar The districts of Bhagalpur, Darbhanga, East Champaran, Madhubani, Muzaffarpur, Palamau, Purnea, Saharsa, Samastipur, Santhal Parganas, Saran, Sitamarhi, Siwan, Vaishali and West Champaran. Gujarat The districts of Amreli, Banaskantha, Bharuch, Bhavnagar, Junagadh, Kutch, Mehasana, Panch Mahals, Sabarkantha and Surendranagar Haryana T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nki, Basti, Budaun, Bulandshahr, Chamoli, Deoria, Etah, Etawah, Faizabad, Farrukhabad, Fatehpur, Garhwal, Ghazipur, Gonda, Hamirpur, Hardoi, Jalaun, Jaunpur, Jhansi, Mainpuri, Mathura, Moradabad, Pilibhit, Pithoragarh, Pratapgarh, Rae Bareli, Shahjahanpur, Sitapur, Sultanpur, Tehrigarhwal, Unnao and Uttarkashi West Bengal The districts of Bankura, Birbhum, Burdwan, Cooch Behar, Darjeeling, Hooghly, Jalpaiguri, Malda, Midnapore, Murshidabad, Nadia, Purulia and West Dinajpur. Andaman and Nicobar Islands The whole of the Union territory. Arunachal Pradesh The whole of the Union territory. Dadra and Nagar Haveli The whole of the Union territory. Goa, Daman and Diu The whole of the Union territory. Lakshadweep The whole of the Union territory. Mizoram The whole of the Union territory. Pondicherry The whole of the Union territory. Direct Taxes (Amendment) Act, 1974 29. Various districts specified in the list of backward areas are liable to be reorganised or to undergo a change in nomenclature. Since such reorganisation or change in nomenclature by the State Governments could have the effect of enlarging or limiting the scope of the new tax concession to industries in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of demand issued as a result of assessment order. In other words, in computing the quantum of penalty, not only the tax deducted at source and the advance tax paid during the financial year immediately preceding the assessment year should be deducted from the gross demand, but a deduction should also be made on account of the tax paid on self-assessment or otherwise after furnishing of the return. The Amending Act has specifically provided that the penalty exigible for delay or default in furnishing the return of income shall be calculated with reference to the quantum of assessed tax, that is to say, tax payable on the total income as reduced by the sum, if any, deducted at source under Chapter XVIIB or paid in advance under Chapter XVIIC. This amendment has come into force retrospectively from 1-4-1962 and is, accordingly, applicable in respect of all past proceedings under the Income-tax Act. Direct Taxes (Amendment) Act, 1974 33. With a view to giving sanctity to the decisions of the Supreme Court, the Amending Act has specifically excluded, from the operation of the amendment, cases in which the Court has given a ruling adverse to the Revenue before 3-9-1973, that is, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterpretation of corresponding provision which was on the statute book during the period 1-4-1965 to 31-3-1969. The Amending Act has accordingly made an independent provision with a view to providing that the expression "the tax" occurring in the aforesaid provision during the period referred to above shall mean the wealth-tax chargeable under the provisions of that Act. The effect of this provision will be that the quantum of penalty for delay or default in furnishing returns of net wealth for any assessment year governed by the provisions of section 18(1)(i), as these stood during the period 1-4-1965 to 31-3-1969, will be determined with reference to the gross amount of wealth-tax determined on assessment without making any deduction on account of the wealth-tax paid on provisional assessment or self-assessment. [Section 23 of the Amending Act] Amendments to Gift-tax Act Direct Taxes (Amendment) Act, 1974 Provisions relating to imposition of penalty for delay or default in furnishing returns of gift-tax 37. The ruling of the Supreme Court in the case of CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 will, mutatis mutandis, apply in relation to gift-tax as it applies in re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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