(1) This Act may be called the Finance Act, 1976.

(2) Save as otherwise provided in this Act Sections 2 to 30 and Section 43 shall be deemed to have come into force on the 1st day of April, 1976.

Rates of Income-Tax

Subject to the provisions of sub-sections (2), (3) and (4) for the assessment year commencing on the 1st day of April, 1976, income-tax shall be charged at the rates specified in Part I of the First Schedule and shall be increased,

(a) in the cases to which Paragraphs A, B, C and D of the Part apply, by a surcharge for purposes of the Union; and

(b) in the cases to which Paragraph E and F of that Part apply, by a surcharge,

calculated in each case in the manner provided therein.

(2) In the cases to which Sub-Paragraph I or Sub-Paragraph II of Paragraph A of part I of the First Schedule applies, where the assessee has, in the previous year, any net agricultural income, in addition to total income, and the total income exceeds eight thousand rupees, then,

(a) the net agricultural income shall be taken into account, in the manner provided in clause (b) (that is to say, as if the net agricultural income were comprised in the total income after the first eight thousand rupees of the total income but without being liable to tax), only for the purpose of charging income-tax in respect of the total income; and

(b) the income-tax chargeable shall be calculated as following:

(i) the total income and the net agricultural income shall be aggregated and the amount of income-tax shall be determined in respect of the aggregate income at the rates specified in Sub-Paragraph I or, as the case may be, Sub-Paragraph II of the said Paragraph A, as if such aggregate income were the total income;

(ii) the net agricultural income shall be increased by a sum of eight thousand rupees and the amount of income-tax shall be determined in respect of the net agricultural income as so increased at the rates specified in Sub-Paragraph I or, as the case may be, Sub-Paragraph II of the said Paragraph A, as if the net agricultural income as so increased were the total income;

(iii) the amount by which income-tax determined in accordance with sub-clause (i) exceeds the amount of income-tax determined in accordance with sub-clause (ii) shall be the income-tax chargeable in respect of the total income.

(3) Where in the case of a company, other than the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956, the total income includes any profits and gains from life insurance business, the income-tax payable by it shall be the aggregate of the income-tax calculated

(i) on the amount of profits and gains from life insurance business so included, at the rate applicable in the case of the Life Insurance Corporation of India, in accordance with Paragraph E of Part I of the First Schedule, to that part of its total income which consists of profits and gains from life insurance business; and

(ii) on the remaining part of its total income, at the rate applicable to the company on its total income.

(4) In cases to which the provisions of Chapter XII or Section 164 of the Income-tax Act, 1961 (hereinafter referred to as the Income-tax Act) apply, the tax chargeable shall be determined as provided in that Chapter or that section, and with reference to the rates imposed by sub-section (1) or the rates as specified in that Chapter or section, as the case may be.

(5) In cases in which tax has to be deducted under Sections 193, 194, 194-A, 194-B, 194-D and 195 of the Income-tax Act at the rates in force, the deduction shall be made at the rates specified in Part II of the First Schedule.

(6) Subject to the provisions of sub-section (7), in cases in which income-tax has to be calculated under the first proviso to sub-section (5) of Section 132 of the Income-tax Act or charged under sub-section (4) of Section 172 or sub-section (2) of Section 174 or Section 175 or sub-section (2) of Section 176 of the said Act or deducted under Section 192 of the said Act from income chargeable under the head Salaries or deducted under sub-section (9) of Section 80-E of the said Act from any payment referred to in the said sub-section (9) or in which the advance tax payable under Chapter XVII-C of the said Act has to be computed, at the rate or rates in force, such income-tax or, as the case may be, advance tax shall be so calculated, charged, deducted or computed at the rate or rates specified in Part III of the First Schedule:

Provided that in cases to which the provisions of Chapter XII or Section 164 of the Income-tax Act apply, advance tax shall be computed with reference to the rates imposed by this sub-section or the rates as specified in that Chapter or section, as the case may be:

Provided further that an assessee, being a company, may, in lieu of payment of surcharge on income-tax at the rat specified in Paragraph E of Part III of the First Schedule, make a deposit under the scheme framed under sub-section (8) before the last instalment of advance tax is due in its case, and where it does so,

(i) in a case where the amount of the deposit so made is equal to or exceeds the amount of surcharge on income-tax payable by it, the amount of surcharge on income-tax payable by it shall be nil;

(ii) in a case were the amount of the deposit so made falls short of the amount of surcharge on income-tax payable by it, the amount of surcharge on income-tax payable by it shall stand reduced by the amount of the deposit; and

(iii) any order made by the Income-tax Officer under Section 210 of the Income-tax Act and the notice of demand issued in pursuance thereof shall have effect as if the amount of surcharge on income-tax specified therein had been reduced to nil or, as the case may be, by the amount of the deposit.

(7) in the cases to which Sub-Paragraph I or Sub-Paragraph II of Paragraph-A of Part III of the First Schedule applies, where the assessee has, in the previous year or, if by virtue of any provision of the Income-tax Act, income-tax is to be charge in respect of the income of a period other than the previous years, in such other period, any net agricultural income, in addition to total income, and the total income exceeds eight thousand rupees, then, in calculating income-tax under the first proviso to sub-section (5) of Section 132 of the Income-tax Act or in charging income-tax under sub-section (2) of Section 174 or sub-section (2) of Section 176 of the said Act or in computing the advance tax payable under Chapter XVII-C of the said Act, at the rate or rates in force,

(a) the net agricultural income shall be taken into account, in the manner provided in clause (b) (that is to say, as if the net agricultural income were comprised in the total income after the first eight thousand rupees of the total income but without being liable to tax), only for the purpose of calculating, charging or computing such income-tax or, as the case may be, advance tax in respect of the total income; and

(b) such income-tax or, as the case may, be, advance tax shall be so calculated, charge or computed as follows:

(i) the total income and the net agricultural income shall be aggregated and the amount of income-tax or advance tax shall be determined in respect of the aggregate income at the rates specified in Sub-Paragraph I or, as the case may be, Sub-Paragraph II of the said Paragraph A as if such aggregate income were the total income;

(ii) the net agricultural income shall be increased by a sum of eight thousand rupees and the amount of income-tax or advance tax shall be determined in respect of the net agricultural income as so increased at the rates specified in Sub-Paragraph I or, as the case may be, Sub-Paragraph II of the said Paragraph A, as if the net agricultural income as so increased were the total income;

(iii) the amount by which income-tax or, as the case may be, advance tax determined in accordance with sub-clause (i) exceeds the amount of income-tax or advance tax determined in accordance with sub-clause (ii) shall be the income-tax or advance tax in respect of the total income.

(8) Where an assessee, being a company, makes, during the financial year commencing on the 1st day of April, 1976, any deposit with the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964) under any such scheme as the Central Government may, by notification in the Official Gazette, frame in this behalf, then, the surcharge on income-tax payable by the company for the assessment year commencing on the 1st day of April, 1977,

(i) in a case where the amount of deposit so made is equal to or exceeds the amount of surcharge on income-tax payable by it, shall be nil; and

(ii) in a case where the amount of the deposit so made falls short of the amount of surcharge on income-tax payable by it, shall be reduced by the amount of the deposit.

(9) For the purposes of this section and the First Scheduled,

(a) company in which the public are substantially interested means a company which is such a company which is such a company as is referred to in Section 108 of the Income-tax Act;

(b) domestic company means an Indian company, or any other company which, in respect of its income liable to income-tax under the Income-tax Act for the assessment year commencing on the 1st day of April, 1976, has made the prescribed arrangements for the declaration and payment within India of the dividends (including dividends on preference shares) payable out of such income in accordance with the provisions of Section 194 of that Act;

(c) industrial company means a company which is mainly engaged in the business of generation or distribution of electricity or any form of power or in the construction of ships or in the manufacture or processing of goods or in mining.

Explanation. For the purposes of this clause, a company shall be deemed to be mainly engaged in the business of 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, if the income attributable to any one or more of the aforesaid activities included in its total income of the previous year (as computed before making any deduction under Chapter VI-A of the Income-tax Act) is not less than fifty-one per cent. of such total income;

(d) insurance commission means any remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business (including business relating to the continuance, renewal of policies of insurance);

(e) net agricultural income , in relation to a persons, means the total amount of agricultural income, from whatever source derived, of that person computed in accordance with the rules contained in Part IV of the First Schedule;

(f) tax-free security means any security of the Central Government issued or declared to be income-tax free, or any security of a State Government issued income-tax free, the income-tax whereon is payable by the State Government;

(g) all other words and expressions used in this section or in the First Schedule but not defined in this sub-section and defined in the Income-tax Act shall have the meanings, respectively, assigned to them in that Act.

Directs Taxes

In the Income-tax Act, in Section 2, with effect from the 1st day of June, 1976,

(a) after clause (28), the following clause shall be inserted, namely:

(28A) interest means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service free or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised;

(b) in clause (37A), in sub-clause (i),

(i) for the words and figures in a case not falling under Section 164 , the words, figures and letters in a case not falling under Section 115-A or Section 115-B or Section 164 shall be substituted;

(ii) for the words and figures in a case falling under Section 164, the rate specified in that section, the words, figures and letters in a case falling under Section 115-A or Section 115-B or Section 164, the rate or rates specified in Section 115-A or Section 115-B or, as the case may be, Section 164 shall be substituted.

In the Income-tax Act, in Section 9, in sub-section (1), with effect from the 1st day June, 1976,

(a) in clause (i), the words or through or from any money lent at interest and brought into India in cash or in kind shall be omitted;

(b) after clause (iv), the following clauses shall be inserted, namely:

(v) income by way of interest payable by

(a) the Government; or

(b) a person who is a resident, except where the interest is payable in respect of any debt incurred, or moneys borrowed and used, for the purposes of a business or profession carried on by such person outside India or for the purposes of making or earning any income form any source outside India; or

(c) a persons who is a non-resident, where the interest in payable in respect of any debt incurred, or moneys borrowed and used, for the purposes of a business or profession carried on by such person in India;

(vi) income by way of royalty payable by

(a) the Government; or

(b) a person who is a resident, except where the royalty is payable in respect of any right, property or information used or services utililsed for the purposes of a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India; or

(c) a person who is a non-resident, where the royalty is payable in respect of any right, property or information used or services utilised for the purposes of a business or profession carried on by such person in India or for the purposes of making or earning any income form any source in India;

Provided that nothing contained in this clause shall apply in relation to so much of the income by way of royalty as consists of lump sum consideration for the transfer outside India of, or the imparting of information outside India in respect of, any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process or trade mark or similar property, if such income is payable in pursuance of an agreement made before the 1st day of April, 1976 and the agreement is approved by the Central Government.

Explanation 1. For the purposes of the foregoing proviso, an agreement made on or after the 1st day of April, 1976 shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date; so; however, that, where the recipient of the income by way of royalty is a foreign company, the agreement shall not be deemed to have been made before that date unless, before the expiry of the time allowed under sub-section (1) or sub-section (2) of Section 139 (whether fixed originally or on extension) for furnishing the return of income for the assessment year commencing on the 1st day of April, 1977, or the assessment year in respect of which such income first becomes chargeable to tax under this Act, whichever assessment year is later, the company exercises an option by furnishing a declaration in writing to the Income-tax Officer (such option being final for that assessment year and for every subsequent assessment year) that the agreement may be regarded as an agreement made before the 1st day of April, 1976.

Explanation 2. For the purposes of this clause, royalty means consideration (including any lump sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head Capital gains ) for

(i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model design, secret formula or process or trade mark or similar property;

(ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or trade mark or similar property;

(iii) the use of any patent, invention, model, design, secret formula or process or trade mark or similar property;

(iv) the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill;

(v) the transfer of all or any rights (including the granting of a lecence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films; or

(vi) the rendering of any services in connection with the activities referred to in sub-clause (i) to (v);

(vii) income by way of fees for technical services payable by

(a) the Government; or

(b) a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India; or

(c) a person who is a non-resident, where the fees are payable in respect of services utilised in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India.

Explanation. For the purposes of this clause, fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not included consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head Salaries . .

In Section 10 of the Income-tax Act,

(a) in clause (6), after sub-clause (x), the following sub-clause shall be inserted, namely:

(xi) the remuneration received by him as an employee of the Government of a foreign State during his stay in India in connection with his training in any establishment or office of, or in any undertaking owned, by,

(i) the Government; or

(ii) any company in which the entire paid up share capital is held by the Central Government, or any State Government or Governments, or partly by the Central Government and partly by one or more State Governments; or

(iii) any company which is a subsidiary of a company referred to in Item (ii); or

(iv) any corporation established by or under a Central State of Provincial Act; or

(v) any society registered under the Societies Registration Act, 1860 (14 of 1860) or under any other corresponding law for the time being in force and wholly financed by the Central Government, or any State Government or State Governments, or partly by the Central Government and partly by one or more State Governments; ;

(b) in clause (15), after Item (e) of sub-clause (iv), the following item shall be inserted with effect from the 1st day of June, 1976, namely:

(f) by an industrial undertaking in India on any moneys borrowed by it in foreign currency from sources outside India under a loan agreement approved by the Central Government having regard to the need for industrial development in India, to the extent to which such interest does not exceed the amount of interest calculated at the rate approved by the Central Government in this behalf, having regard to the terms of the loan and its repayment.

Explanation. For the purposes of this item, the expression foreign currency shall have the meaning assigned to it in the Foreign Exchange Regulation Act, 1973 (46 of 1973); ;

(c) in clause (17), for the words any Committee thereof; , the words, brackets and figures any Committee thereof or nay allowance received by a member of either House of Parliament under the Members of Parliament (Additional Facilities) Rules, 1975; shall be substituted.

In Section 13 of the Income-tax Act, in sub-section (5) [as directed to be inserted by clause (iii) of Section 5 of the Taxation Laws (Amendment) Act, 1975] (41 of 1975), for clause (a) (iii), the following clause shall be substituted with effect from the 1st day of April, 1977, namely:

(iii) deposit in any account with the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955) or any subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959) or any nationalised bank, that is to say, any corresponding new bank constituted under Section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970); .

In Section 32 of the Income-tax Act, in sub-section (1),

(1) in clause (iv), for the words seven thousand five hundred rupees , the words ten thousand rupees shall be substituted with effect from the 1st day of April, 1977;

(2) in clause (vi),

(a) for the words any one or more of the articles or things specified in the list in the Ninth Schedule, the words, figures and brackets any one or more of the articles or things specified in Items 1 to 24 (both inclusive) in the list in the Ninth Schedule shall be substituted;

(b) in the second proviso,

(i) in clause (a), the words and shall be omitted;

(ii) in clause (b), the word and shall be inserted at the end;

(iii) after clause (b), the following clause shall be inserted, namely:

(c) any ship or aircraft acquired after 31st day of March, 1976 or any machinery or plant installed after that date. .

After Section 32 of the Income-tax Act, the following section shall be inserted, namely:

32-A Investment allowance. (1) In respect of a ship or an aircraft or machinery or plant specified in sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction, in respect of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed or, if the ship, aircraft, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, of a sum by way of investment allowance equal to twenty-five per cent. of the actual cost of the ship, aircraft, machinery or plant to the assessee:

Provided that no deduction shall be allowed under this section in respect of

(a) any machinery or plant installed in any office premises or any residential accommodation, including any accommodation in the nature of a guest-house;

(b) any office appliances or road transport vehicles;

(c) any ship, machinery or plant in respect of which the deduction by way of development rebate is allowable under Section 33; and

(d) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head Profits and gains of business or profession of any one previous year.

(2) The ship or aircraft or machinery or plant referred to in sub-section (1) shall be the following, namely:

(a) a new ship or new aircraft acquired after the 31st day of March, 1976 by an assessee engaged in the business of operation of ships or aircraft;

(b) any new machinery or plant installed after the 31st day of March, 1976

(i) for the purposes of business of generation or distribution of electricity or any other form of powers; or

(ii) for the purposes of business of construction, manufacture or production of any one or more of the articles or things specified in the list in the Ninth Schedule; or

(iii) in a small-scale industrial undertaking for the purposes of business of manufacture or production of any other articles or things.

Explanation. For the purposes of this sub-section and sub-section (4),

(1) new ship or new aircraft or new machinery or plant shall have the same meanings as in the Explanation to clause (vi) of sub-section (1) of Section 32;

(2) an industrial undertaking shall be deemed to be a small-scale industrial undertaking, if the aggregate value of the machinery and plant (other than tools, jigs, dies and moulds) installed, as on the last day of the previous year, for the purposes of the business of the undertaking does not exceed ten lakh rupees; and for this purposes the value of any machinery or plant shall be,

(a) in the case of any machinery or plant owned by the assessee, the actual cost thereof to the assessee; and

(b) in the case of any machinery or plant hired by the assessee, the actual cost thereof as in the case of the owner of such machinery or plant.

(3) Where the total income of the assessee assessable for the assessment year relevant to the previous year in which the ship or aircraft was acquired or the machinery or plant was installed, or, as the case may be, the immediately succeeding previous year [the total income for this purpose being computed after deduction of the allowances under Section 33 and Section 33-A, but without making any deduction under sub-section (1) of this section or any deduction under Chapter VI-A] is nil or is less than the full amount of investment allowance,

(i) the sum to be allowed by way of investment allowance for that assessment year under sub-section (1) shall be only such amount as is sufficient to reduce the said total income to nil; and

(ii) the amount of the investment allowance, to the extent to which it has not been allowed as aforesaid, shall be carried forward to the following assessment year, and the investment allowance to be allowed for the following assessment year shall be such amount as is sufficient to reduce the total income of the assessee assessable for that assessment year, computed in the manner aforesaid, to nil, and the balance of the investment allowance, if any, still outstanding shall be carried forward to the following assessment year and so on, so, however, that no portion of the investment allowance shall be carried forward for more than eight assessment years immediately succeeding the assessment year relevant to the previous year in which the ship or aircraft was acquired or the machinery or plant was installed or, as the case may be, the immediately succeeding previous year.

Explanation. Where for any assessment year, investment allowance is to be allowed in accordance with the provisions of this sub-section in respect of any ship or aircraft acquired or any machinery or plant installed in more than one previous year, and the total income of the assessee assessable for that assessment year [the total income for this purpose being computed after deduction of the allowances under Section 33 and Section 33-A, but without making any deduction under sub-section (1) of this section or any deduction under Chapter VI-A] is less than aggregate of the amounts due to be allowed in respect of the assets aforesaid for that assessment year, the following procedure shall be followed, namely:

(a) the allowance under clause (ii) shall be made before any allowance under clause (i) is made; and

(b) where an allowance has to be made under clause (ii) in respect of amounts carried forward from more than one assessment year, the amount carried forward from an earlier assessment year shall be allowed before any amount carried forward from a later assessment year.

(4) The deduction under sub-section (1) shall be allowed only if the following conditions are fulfilled, namely:

(i) the particulars prescribed in this behalf have been furnished by the assessee in respect of the ship or aircraft or machinery or plant;

(ii) an amount equal to seventy-five per cent of the investment allowance to be actually allowed is debited to the profit and loss account of the previous year in respect of which the deduction in to be allowed and credited to a reserve account (to be called the Investment Allowance Reserve Account ) to be utilised,

(a) for the purposes of acquiring, before the expiry of a period of ten years next following the previous year in which the ship or aircraft was acquired or the machinery or plant was installed, a new ship or a new aircraft or new machinery or plant [other than machinery or plant of the nature referred to in clauses (a), (b) and (d) of the proviso to sub-section (1)] for the purposes of the business of the undertaking; and

(b) until the acquisition of a new ship or a new aircraft or new machinery or plant as aforesaid, for the purposes of the business of the undertaking other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India:

Provided that this clause shall have effect in respect of a ship as if for the word seventy-five , the words fifty had been substituted.

Explanation. Where the amount debited to the profit and loss account and credited to the Investment Allowance Reserve Account under this sub-section is not less than the amount required to be so credited on the basis of the amount of deduction in respect of investment allowance claimed in the return made by the assessee under Section 139, but a higher deduction in respect of the investment allowance is admissible on the basis of the total income as proposed to be computed by the Income-tax Officer under Section 143, the Income-tax Officer shall, by notice in writing in this behalf, allow the assessee an opportunity to credit within the time specified in the notice or within such further time as the Income-tax Officer may allow, a further amount to the Investment Allowance Reserve Account out of the profits and gains of the previous year in which such notice is served on the assessee or of the immediately preceding previous year, if the accounts for that year have not been made up; and, if the assessee credits any further amount to such account within the time aforesaid the amount so credited shall be deemed to have been credited to the Investment Allowance Reserve Account of the previous year in which the deduction is admissible and such amount shall not be taken into account in determining the adequacy of the reserve require to be credited by the assessee in respect of the previous year in which such further credit is made:

Provided that such opportunity shall not be allowed by the Income-tax Officer in a case where the difference in the total income as proposed to be computed by him and the total income as returned by the assessee arises out of the application of the proviso to sub-section (1) of Section 145 or sub-section (2) of that section or the mission by the assessee to disclose his income fully and truly.

(5) Any allowance made under this section in respect of any ship, aircraft, machinery or plant shall be deemed to have been wrongly made for the purposes of this Act

(a) if the ship, aircraft, machinery or plant is sold or otherwise transferred by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired or installed; or

(b) if at any time before the expiry of ten years from the end of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed, the assessee does not utilise the amount credited to the reserve account under sub-section (4) for the purposes of acquiring a new ship or a new aircraft or new machinery or plant [other than machinery or plant or the nature referred to in clauses (a), (b) and (d) of the proviso to sub-section (1)] for the purposes of the business of the undertaking; or

(c) if at any time before the expiry of the ten years aforesaid, the assessee utilised the amount credited to the reserve account under sub-section (4) for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any assets outside India or for any other purpose which is not a purpose of the business of the undertaking,

and the provisions of sub-section (4-A) of Section 155 shall apply accordingly:

Provided that nothing in clause (a) shall apply

(i) where the ship, aircraft, machinery or plant is sold or otherwise transferred by the assessee to the Government, a local authority, a corporation established by a Central, State or Provincial Act or a Government company as defined in Section 617 of the Companies Act, 1956 (1 of 1956); or

(ii) where the sale or transfer of the ship, aircraft, machinery or plant is made in connection with the amalgamation or succession, referred to in sub-section (6) or sub-section (7).

(6) Where in a scheme of amalgamation, the amalgamating company sells or otherwise transfers to the amalgamated company any ship, aircraft, machinery or plant, in respect of which investment allowance has been allowed to the amalgamating company under sub-section (1),

(a) the amalgamated company shall continue to fulfil the conditions mentioned in sub-section (4) in respect of the reserve created by the amalgamating company and in respect of the period within which such ship aircraft, machinery or plant shall not be sold or otherwise transferred and in default of any of these conditions, the provisions of sub-section (4-a) of Section 155, shall apply to the amalgamated company as they would have applied to the amalgamating company had it committed the default; and

(b) the balance of investment allowance, if any, still outstanding to the amalgamating company in respect of such ship, aircraft, machinery or pant, shall be allowed to the amalgamate company in accordance with the provisions of sub-section (3), so, however, that the total period for which the balance of investment allowance shall be carried forward in the assessments of the amalgamating company and the amalgamated company shall not exceed the period of eight years specified in sub-section (3) and the amalgamated company shall be treated as the assessee in respect of such ship, aircraft, machinery or plant for the purposes of this section.

(7) Where a firm is succeeded to by a company in the business carried on by it as a result of which the firm sells or otherwise transfers to the company any ship, aircraft, machinery or plant, the provisions of clauses (a) and (b) of sub-section (6) shall, so far as may be, apply to the firm and the company.

Explanation. The provisions of this sub-section shall apply only where

(i) all the property of the firm relating to the business immediately before the succession becomes the property of the company;

(ii) all the liabilities of the firm relating to the business immediately before the succession become the liabilities of the company; and

(iii) all the shareholders of the company were partners of the firms immediately before the succession.

(8) The Central Government, if it considers necessary or expedient so to do, may, by notification in the Official Gazette, direct that the deduction allowable under this section shall not be allowed in respect of any ship or aircraft acquired or any machinery or plant installed after such date, not being earlier than three year from the date of such notification, as may be specified therein.

(9) For the removal of doubts, it is hereby declared that the deduction under sub-section (1) shall not be denied by reason only that the amount debited to the profit and loss account of the relevant previous year and credited to the Investment Allowance Reserve Account exceeds the amount of the profit of such previous year (as arrived at without making the debit aforesaid), in accordance with the profit the and loss account. .

In Section 37 of the Income-tax Act,

(a) in sub-section (2-A).

(i) in clause (i), for the words, figures and letter Section 33 or Section 33-A , the words, figures and letters Section 32-A or Section 33 or Section 33-A shall be substituted:

(ii) in the explanation, the words, brackets, figure and letter and sub-section (2-B) shall be omitted with effect from the 1st day of April, 1977;

(b) sub-section (2-B) shall be omitted with effect from the 1st day of April, 1977.

In the Income-tax Act, in Chapter IV-D, after Section 44-B, the following sections shall be inserted, with effect from the 1st day of June, 1976, namely:

44-C. Deduction of head office expenditure in the case of non-residents. Notwithstanding anything to the contrary contained in Section 28 to 43-A, in the case of an assessee, being a non-resident, no allowance shall be made, in computing the income chargeable under the head Profits and gains of business of profession , in respect of so much of the expenditure in the nature of head office expenditure as is in excess of the amount computed as hereunder, namely:

(a) an amount equal to five per cent of the adjusted total income; or

(b) an amount equal to the average head office expenditure; or

(c) the amount of so much of the expenditure in the nature of head office expenditure incurred by the assessee as in attributable to the business or profession of the assessee in India,

whichever is the least:

Provided that in a case where the adjusted total income of the assessee is a loss, the amount under clause (a) shall be computed at the rate of five per cent. of the average adjusted total income of the assessee.

Explanation. For the purposes of this section,

(i) adjusted total income means the total income computed in accordance with the provisions of this Act, without giving effect tot he allowance referred to in this section or in sub-section (2) of Section 32 or the deduction referred to in Section 32-A or Section 33 or Section 33-A or the first proviso to clause (ix) of sub-section (1) of Section 36 or any loss carried forward under sub-section (1) of Section 72 or sub-section (2) of Section 73 or sub-section (1) of Section 74 or sub-section (3) of Section 74-A or the deductions under Chapter VI-A;

(ii) average adjusted total income means,

(a) in a case where the total income of the assessee is assessable for each of the three assessment years immediately preceding the relevant assessment year, one-third of the aggregate amount of the adjusted total income in respect of the previous year relevant to the aforesaid three assessment years;

(b) in a case where the total income of the assessee is assessable only for two of the aforesaid three assessment years, one-half of the aggregate amount of the adjusted total income in respect of the previous years relevant to the aforesaid two assessment years;

(c) in a case where the total income of the assessee is assessable only for one of the aforesaid three assessment years, the amount of the adjusted total income in respect of the previous year relevant to that assessment year;

(iii) average head office expenditure means,

(a) in a case where any expenditure in the nature of head office expenditure has been allowed as a deduction in computing the income of the assessee chargeable under the head Profits and gains of business or profession in respect of each of the three previous years relevant to the assessment years commencing on the 1st day of April, 1974, the 1st day of April, 1975 and the 1st day of April, 1976, one-third of the aggregate amount of the expenditure so allowed;

(b) in a case where such expenditure has been so allowed only in respect of two of the aforesaid three previous years, one-half of the aggregate amount of the expenditure so allowed;

(c) in a case where such expenditure has been so allowed only in respect of one of the aforesaid three previous years, the amount of the expenditure so allowed;

(iv) head office expenditure means executive and general administration expenditure incurred by the assessee outside India, including expenditure incurred in respect of

(a) rent, rates, taxes, repairs or insurance of any premises outside India used for the purposes of the business or profession;

(b) salary, wages, annuity, pension, fees, bonus, commission, gratuity, perquisites or profits in lieu of or in addition to salary, whether paid or allowed to any employee or other person employed in, or managing the affairs of, any office outside India;

(c) travelling by any employee or other person employed in, or managing the affairs of, any office outside India; and

(d) such other matters connected with executive and general administration as may be prescribed.

44-D. Special provisions for computing income by way of royalties, etc., in the case of foreign companies.

(a) the deductions admissible under the said sections in computing the income by way of royalty or fees for technical services received from an Indian concern in pursuance of an agreement made by the foreign company with the Indian concern before the 1st day of April, 1976, shall not exceed in the aggregate twenty per cent. of the gross amount of such royalty or fees as reduced by so much of the gross amount of such royalty as consists of lump sum consideration for the transfer outside India of, or the imparting of information outside India in respect of, any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process or trade mark or similar property;

(b) no deduction in respect of any expenditure or allowance shall be allowed under any of the said sections in computing the income by way of royalty or fees for technical services received from an Indian concern in pursuance of an agreement made by the foreign company with the Indian concern after the 31st day of March, 1976.

Explanation. For the purposes of this section,

(a) fees for technical services shall have the same meaning as in the Explanation to clause (vii) of sub-section (1) of Section 9;

(b) foreign company shall have the same meaning as in Section 80-B;

(c) royalty shall have the same meaning as in the Explanation to clause (vi) of sub-section (1) of Section 9;

(d) royalty received from an Indian concern in pursuance of any agreement made by a foreign company with the Indian concern after the 31st day of March, 1976 shall be deemed to have been received in pursuance of an agreement made before the 1st day of April, 1976 if such agreement is deemed, for the purposes of the proviso to clause (vi) of sub-section (1) of Section 9, to have been made before the 1st day of April, 1976.;.

In Section 47 of the Income-tax Act, after clause (viii), the following clause shall be inserted with effect from the 1st day of April, 1977, namely:

(ix) any transfer of a capital asset, being any work of art, archacological, scientific or art collection, book, manuscript, drawing, painting, photograph or print, to the Government or a University or the National Museum, National Art Gallery, National Archives or any such other public museum or institution as may be notified by the Central Government in the Official Gazette to be of national importance or to be of renown throughout any State or States.

Explanation. For the purposes of this clause, University means a University established or incorporated by or under a Central, State or Provincial Act and includes an instituted declared under Section 3 of the University Grants Commission Act, 1956 (3 of 1956) to be a University for the purposes of that Act. .

Section 54-C of the Income-tax Act shall be omitted.

13. Amendment of Section 57. In Section 57 of the Income-tax Act, the following proviso and Explanation shall be inserted at the end, with effect from the 1st day of June, 1976, namely:

Provided that nothing contained in clause (i) or clause (iii) shall apply in computing the income by way of dividends in the case of an assessee, being a foreign company.

Explanation. For the purposes of this section and Section 58, foreign company shall have the same meaning as in Section 80-B. .

In Section 58 of the Income-tax Act, after sub-section (2), the following sub-section shall be inserted, with effect from the 1st day of June, 1976, namely:

(3) In the case of an assessee, being a foreign company, the provisions of Section 44-D shall, so far as may be, apply in computing the income chargeable under the head Income from other sources as they apply in computing the income chargeable under the head Profits and gains of business or profession . .

In Section 80-A of the Income-tax Act, after sub-section (3), the following sub-section shall be inserted with effect from the 1st day of April, 1977, namely:

(4) Notwithstanding anything contained in sub-section (1), no deduction under Section 80-GG or Section 80-HH or Section 80-J or Section 80-L or Section 80-QQ shall be allowed in computing the total income of an assessee, being a Hindi undivided family which at any time during the previous year has at least one members whose total income of the previous year exceeds the maximum amount not chargeable to tax. .

In Section 80-C of the Income-tax Act, in clause (d) of sub-section (2), for the words eight thousand rupees , the words ten thousand rupees shall be substituted with effect from the 1st day of April, 1977.

In Section 80-G of the Income-tax Act,

(a) for sub-section (1), the following sub-section shall be substituted with effect from the 1st day of April, 1977, namely:

(1) In computing the total income of an assessee, there shall be deducted, in accordance with and subject to the provisions of this section,

(i) in a case where the aggregate of the sums specified in sub-section (2) includes any sum specified in sub-clause (vii) of clause (a) thereof, an amount equal to the whole of such sum plus fifty per cent. of the balance of such aggregate; and

(ii) in any other case, an amount equal to fifty per cent. of the aggregate of the sums specified in sub-section (2). ;

(b) in clause (a) of sub-section (2), with effect from the 1st day of April, 1977,

(i) in sub-clause (v), for the words for any charitable purpose; , the words for any charitable purpose other than the purpose of promoting family planning; or shall be substituted;

(ii) after sub-clause (v), the following sub-clauses shall be inserted, namely:

(iv) any authority referred to in clause (20-A) of Section 10; or

(vii) the Government or to any such local authority, institution or association as may be approved in this behalf by the Central Government, to be utilised for the purpose of promoting family planning; ;

(c) in sub-section (4), for the words, brackets and figures sub-clauses (iv) and (v), the words, brackets and figures sub-clauses (iv), (v), (vi) and (vii) shall be substituted with effect from the 1st day of April, 1977;

(d) after Explanation 4, the following Explanation shall be inserted, namely:

Explanation 5. For the removal of doubts, it is hereby declared that no deduction shall be allowed under this section in respect of any donation unless such donation is of a sum of money. .

In Section 80-M of the Income-tax Act, for sub-section (1), the following sub-section shall be substituted with effect from the 1st day of April, 1977, namely:

(1) Where the gross total income of an assessee, being a domestic company, includes any income by way of dividends from a domestic company, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction form such income by way of dividends of an amount equal to

(a) in respect of such income by way of the whole of such income;

dividends from a company formed and registered under the Companies Act, 1956 after the 28th day of February, 1975 and engaged exclusively or almost exclusively in the manufacture or production of any one or more of the articles or things specified in Items 2 and 3, Item 4 (excluding alloy, malleable and S.G. iron castings), Items 7 to 15 (both inclusive), Items 17 and 18, Item 23 (excluding refractories) and Items 24, 26, 27 and 29 and 29 in the list in the Ninth Schedule

(b) in respect of such income by way of sixty per cent. of such income. .

dividends other than the dividends referred to in clause (a)

In Section 115 of the Income-tax Act, in clause (i) with effect from the 1st day of April, 1977,

(a) in sub-clause (a) (1), for the words forty-seven per cent. , the words forty per cent. shall be substituted;

(b) in sub-clause (a) (2), for the words fifty-five per cent. , the words fifty per cent. shall be substituted; and

(c) in sub-clause (b), for the words forty-five per cent. , the words forty per cent. shall be substituted.

In the Income-tax Act, after Section 115, the following sections shall be inserted with effect from the 1st day of June, 1976, namely:

115-A. Tax on dividends royalty and technical service fees in the case of foreign companies. (1) Subject to the provisions of sub-section (2), where the total income of an assessee, being a foreign company, includes any income by way of

(a) dividends; or

(b) royalty or fees for technical services received from an Indian concern in pursuance of an agreement made by the foreign company with the Indian concern after the 31st day of March, 1976 and approved by the Central Government,

the income-tax payable shall be the aggregate of

(i) the amount of income-tax calculated on the amount of income by way of dividends, if any, included in the total income, at the rate of twenty-five per cent.;

(ii) the amount of income-tax calculated on the income by way of royalty, if any, included in the total income

(1) on so much of the amount of such income as consists of lump sum consideration for the transfer outside India of, or the imparting of information outside India in respect of, any data, documentation, drawing or specification relating to any patent, invention, model, design, secret formula or process or trade mark or similar property, at the rate or twenty per cent;

(2) on the balance of such income, if any at the rate of forty per cent.;

(iii) the amount of income-tax calculated on the income by way of fees for technical services, if any, included in the total income, at the rate of forty per cent.; and

(iv) the amount of income-tax with which it would have been chargeable had its total income been reduced by the amount of income referred to in clause (a) and clause (b).

Explanation. For the purposes of this section,

(a) fees for technical services shall have the same meaning as in the Explanation to clause (vii) of sub-section (1) of Section 9;

(b) foreign company shall have the same meaning as in Section 80-B;

(c) royalty shall have the same meaning as in the Explanation to clause (vi) of sub-section (1) of Section 9.

(2) Nothing contained in sub-section (1) shall apply in relation to any income by way of royalty received by a foreign company from as Indian concern in pursuance of an agreement made by it with the Indian concern after the 31st day of March, 1976 if such agreement is deemed, for the purposes of the proviso to clause (vi) of sub-section (1) of Section 9, to have been made before the 1st day of April, 1976; and the provisions of the annual Finance Act for calculating, charging, deducting or computing income-tax shall apply in relation to such income as if such income had been received in pursuance of an agreement made before the 1st day of April, 1976.

115-B. Tax on profits and gains of life insurance business. Where the total income of an assessee includes any profits and gains from life insurance business, the income-tax payable shall be the aggregate of

(i) the amount of income-tax calculated on the amount of profits and gains of the life insurance business included in the total income, at the rate of twelve and one-half per cent.; and

(ii) the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the amount of profits and gains of the life insurance business. .

In Section 155 of the Income-tax Act, after sub-section (4), the following sub-section shall be inserted, namely:

(4-A) Where an allowance by way of investment allowance has been made wholly or partly to an assessee in respect of a ship or an aircraft or any machinery or plant in any assessment year under Section 32-A and subsequently

(a) at any time before the expiry of eight years from the end of the previous year in which the ships or aircraft was acquired or the machinery or plant was installed, the ship, aircraft, machinery or plant is sold or otherwise transferred by the assessee to any person other than the Government, a local authority a corporation established by a Central, State or Provincial Act or a Government company as defined in Section 617 of the Companies Act, 1956, (1 of 1956) or in connection with any amalgamation or succession referred to in sub-section (6) or sub-section (7) of Section 32-A; or

(b) at any time before the expiry of ten years from the end of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed, the assessee does not utilize the amount credited to the reserve account under sub-section (4) of Section 32-A for the purposes of acquiring a new ship or a new aircraft or new machinery or plant [other than machinery or plant of the nature referred to in clauses (a), (b) and (d) of the proviso to sub-section (1) of Section 31-A] for the purposes of the business of the undertaking; or

(c) at any time before the expiry of the ten years referred to in clause (b), the assessee utilises the amount credited to the reserve account under sub-section (4) of Section 32-A

(i) for distribution by way of dividends or profits; or

(ii) for remittance outside India as profits or for the creation of any asset outside India; or

(iii) for any other purpose which is not a purpose of the business of the undertaking,

the investment allowance originally allowed shall be deemed to have been wrongly allowed, and the Income-tax Officer may, notwithstanding anything contained in this Act, recompute the total income of the assessee for the relevant previous year and make the necessary amendment, and the provisions of Section 154 shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) of that section being reckoned,

(i) in a case referred to in clause (a), from the end of the previous year in which the sale or other transfer took place;

(ii) in a case referred to in clause (b), from the end of the ten years referred to in that clause;

(iii) in a case referred to in clause (c), from the end of the previous year in which the amount was utilised.

Explanation. For the purposes of clause (b), new ship or new aircraft or new machinery or plant shall have the same meanings as in the Explanation to clause (vi) of sub-section (1) of Section 32. .

In the Income-tax Act, in Section 195, in sub-section (2), for the words other than interest including interest on securities , the words other than interest on securities shall be substituted with effect from the 1st day of June, 1976.

In the First Schedule to the Income-tax Act, with effect from the 1st day of April, 1977,

(a) for rule 2, the following rule shall be substituted, namely:

2. Computation of profits of life insurance business. The profits and gains of life insurance business shall be taken to be the annual average of the surplus arrived at by adjusting the surplus or deficit disclosed by the actuarial valuation made in accordance with the Insurance Act, 1938, in respect of the last inter-valuation period ending before the commencement of the assessment year, so as to exclude from it any surplus or deficit included therein which was made in any earlier inter-valuation period. ;

(b) rule 3 shall be omitted;

(c) in rule 7, in sub-rule (1), clause (i), clauses (i) and (iii) shall be omitted.

In the Eighth Schedule to the Income-tax, Act,

(a) against Bihar in column (1), for the existing areas specified in column (2), the following shall be substituted, namely:

The districts of Aurangabad, Begusarai, Bhagalpur, Bhojpur, Darbhanga, East Champaran, Gaya, Madhubani, Monghyr, Muzaffarpur, Nalanda, Nawadah, Palamau, Purnea, Saharsa, Samastipur, Santal Parganas, Saran, Sitamarhi, Siwan, Vaishall and West Champaran. ;

(b) against Punjab in column (1), for the existing areas specified in column (2), the following shall be substituted, namely:

The district of Bhatinda; so much of the district of Faridkot as formed part of the district of Bhatinda on the 31st day of July, 1972; the districts of Ferozepur, Gurdaspur, Hoshiarpur and Sangrur. ;

(c) after Rajasthan in column (1) and the entries relating thereto, the following shall be inserted, namely:

Sikkim The whole of the State. ;

(d) against Uttar Pradesh in column (1), for the existing areas specified in column (2), the following shall be substituted, namely:

The districts of Almora, Azamgarh, Baharaich, Ballia, Banda, Bara Banki, Basti, Budaum, Bulandshahr, Chamoli, Deoria, Etah, Etawah, Faizabad, Farrukhabad, Fatehpur, Garhwal, Ghazipur, Gonda, Hamirpur, Hardoi, Jalaun, Jaunpur, Jhanshi, Mainpuri, Mathura, Moradabad, Pilibhit, Pithoragarh, Pratapgarh, Rae Bareli, Rampur, Shahjahanpur, Sitapur, Sultanpur, Tehri-Garhwal, Unnao and Uttarkashi. ;

(e) for the Explanation, the following Explanation shall be substituted, namely:

Explanation. Save as otherwise expressly provided, reference to any district in this Schedule shall be construed,

(i) in the case of the districts of Aurangabad, Begusaraj, Bhojpur, Gaya, Monghyr, Nalanda and Nawadah in the State of Bihar; the district of Ferozepur in the State of Punjab; and the district of Rampur in the State of Uttar Pradesh, as a reference to the areas comprised in the district concerned on the 15th day of March, 1976, being the date of introduction of the Finance Bill, 1976 in the House of the People; and

(ii) in the case of any other district, as a reference to the areas comprised in that district on the 3rd day of September, 1973, being the date of introduction of the Direct Taxes (Amendment) Bill, 1973 in the House of the People. .

In the Ninth Schedule to the Income-tax Act,

(a) for Item 4, the following item shall be substituted, namely:

4. Steel castings and forgings and alloy, malleable and S.G. iron castings. ;

(b) after Item 24 and before the Explanation, the following items shall be inserted, namely:

25. Carbon and graphite products.

26. Inorganic heavy chemicals (other than soda ash and caustic soda mentioned in Items 12 and 13 respectively.)

27. Organic heavy chemicals.

28. Synthetic rubber and rubber chemicals (including carbon black).

29. Industrial explosives.

30. Basic drugs.

31. Industrial sewing machines.

32. Finished leather and leather goods (including footwear made wholly or mainly of leather.) .

The following amendments (being amendments of a consequential nature) shall be made in the Income-tax Act, namely:

(a) in Section 45, the figures and letter, 54-C shall be omitted;

(b) in clause (iv) of sub-section (2) of Section 141-A, for the words, brackets and figures the deduction referred to in clause (ii) of sub-section (2) of Section 33 , the words, brackets, figures and letter the deduction referred to in clause (ii) of sub-section (3) of Section 32-A or clause (ii) of sub-section (2) of Section 33 shall be substituted;

(c) in sub-clause (iv) of clause (b) of sub-section (1) of Section 143, for the words, brackets and figures the deduction referred to in clause (ii) of sub-section (2) of Section 33 , the words, brackets, figures and letter the deduction referred to in clause (ii) of sub-section (3) of Section 32-A or clause (ii) of sub-section (2) of Section 33 shall be substituted;

(d) in clause (i) of sub-section (1) of Section 160, the words, brackets and figure clause (i) of shall be omitted with effect from the 1st day of June, 19 76;

(e) in the Ninth Schedule, for the brackets, words and figures [See Section 32(1)(vi)] , the brackets, words, figures and letters [See Section 32(1)(vi) and Section 32-A(2)(b)(ii)] shall be substituted.

(1) in Section 3, for the words at the rate or rates specified in the Schedule , the words and figure at the rate or rate specified in Schedule I shall be substituted with effect from the 1st day of April, 1977;

(2) in Section 5, in sub-section (1),

(a) after clause (iv-b), that following clause shall be inserted with effect from the 1st day of April, 1977, namely:

(iv-c) one or more dwelling units (each such dwelling unit having a plinth area not exeeding eighty square metres) and the land appurtenant thereto, belonging to the assessee, where the construction of such dwelling unit or units is begun on or after the 1st day of April, 1976;

Provided that this exemption shall apply in respect of any dwelling unit or units and the land appurtenant thereto only for a period of five successive assessment years next following the date on which the construction of such dwelling unit or units is completed.

Explanation. For the purposes of this clause,

(a) dwelling unit means a unit of accommodations used solely for the purpose of residence;

(b) land appurtenant , in relation to any dwelling unit or units comprising a building, means,

(i) in an area where there is any law in force providing for the minimum extent of land contiguous to the land occupied by any building to be kept as open space for the enjoyment of such building, the minimum extent of land contiguous to the land occupied by the building comprising such dwelling unit or units required to be kept as open space under such law;

(ii) in any other area, an extent of land not exceeding one-third of the plinth area of the building comprising the dwelling unit or units at the ground level contiguous to the land occupied by such building; ;

(b) after clause (x), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1975, namely:

(x-a) the amount of any fee due to the assessee in respect of services rendered by him as a legal practitioner within the meaning of the Advocates Act, 1961 (25 of 1961); ;

(c) after clause (xxx), the following clause shall be inserted, namely:

(xxx-a) the value of any building belonging to the assessee, where the building is used solely for the purpose of residence of persons employed by the assessee in any plantation or industrial undertaking belonging to the assessee and the income of each such person chargeable under the head Salaries under the Income-tax Act is ten thousand rupees or less; ;

(d) in the Explanation to clause (xxx-i),

(i) for the words this clause , the words, brackets, figures and letter clause (xxx-a), this clause shall be substituted;

(ii) for the words, brackets and figures and clause (xxxii) , the words, brackets and figures clause (xxxii) and clause (xxxiv) shall be substituted with effect from the 1st day of April, 1977;

(e) after clause (xxxii), the following clauses shall be inserted with effect from the 1st day of April, 1977, namely:

(xxxiii) in the case of an assessee, being a person of Indian Origin who was ordinarily residing in a foreign country and who, on leaving such country, has returned t India with the intention of permanently residing therein, moneys and the value of assets brought by him into Indian and the value of the assets acquired by him out of such moneys:

Provided that this exemption shall apply only for a period of seven successive assessment years commencing with the assessment year next following the data on which such person returned to India.

Explanation. A person shall be deemed to be of Indian origin if he, or either of his parents or any of his grandparents, was born in undivided India;

(xxxiv) in the case of an individual, being a citizen of India, who is not resident in India during the year ending on the valuation date, the value of nay equity shares in any company of the type referred to in clause (d) of Section 45 which is engaged in the business of manufacture or production of any one or more of the articles or things specified in Schedule II or which is certified by the prescribed authority to have undertaken the export of such percentage of its total production as may be specified in this behalf by the prescribed authority, where such shares form part of the initial issue of the equity share capital made by the company after the 31st day March, 1976 or where such shares form part of an issue of equity share capital which is certified by the prescribed authority to have been made by the company after the 31st day of March, 1976 for the purposes of expansion or diversification of its industrial undertaking.

Explanation. An individual shall be deemed to be not resident in India during the year ending on the valuation date if in respect of that year the individual is not resident in India within the meaning of the Income-tax Act. ;

(3) in Section 7,

(a) in sub-section (3), for the words the valuation date , the words, brackets and figure the valuation date, or, in the case of an asset being a house referred to in sub-section (4), the valuation date referred to in that sub-section shall be substituted;

(b) after sub-section (3), the following sub-section shall be inserted, namely:

(4) Notwithstanding anything contained in sub-section (1), the value of a house belonging to the assessee and exclusively used by him for residential purposes throughout the period of twelve months immediately preceding the valuation date may, at the option of the assessee, be taken to be the price which, in the opinion of the Wealth-tax Officer, it would fetch if sold in the open market on the valuation date next following the date on which he became the owner of the house, or on the valuation date relevant to the assessment year commencing on the 1st day of April, 1971, whichever valuation date is later:

Provided that where more than one house belonging to the assessee is exclusively use by him for residential purposes, the provisions of this sub-section shall apply only in respect of one of such houses which the assessee may, at his option, specify in this behalf in the return of net wealth.

Explanation. For the purposes of this sub-section

(i) where the house has been constructed by the assessee, he shall be deemed to have become the owner thereof on the date on which the construction of such house was completed;

(ii) house includes a part of a house, being an independent residential unit. ;

(4) in Section 21, in sub-section (4), for the words the Schedule at both the places where they occur, the word and figure Schedule I shall be substituted with effect from the 1st day April, 1977;

(5) in Section 21-A, in clause (a), for the words the Schedule , the word and figure Schedule I shall be substituted with effect from the 1st day of April, 1977;

(6) the Schedule shall be numbered as Schedule I with effect from the 1st day of April, 1977 and with effect from that date

(a) in the Schedule as so numbered, for Part I, the following Part shall be substituted, namely:

Part I

(1) In the case of every individual or Hindu undivided family, not being a Hindu undivided family to which Item (2) of this Paragraph applies,

Provided that for the purposes of this item,

(i) no wealth-tax shall be payable where the net wealth does not exceed Rs. 1,00,000;

(ii) the wealth-tax payable shall, in no case, exceed 5 per cent. of the amount by which the net wealth exceeds Rs. 1,00,000.

(2) In the case of every Hindu undivided family has at least one member whose net wealth assessable for the assessment year exceeds Rs. 1,00,000,

Provided that for the purposes of this item,

(i) no wealth-tax shall be payable where the net wealth does not exceeds Rs. 1,00,000;

(ii) the wealth-tax payable shall, in no case, exceed 5 per cent. of the amount by which the net wealth exceeds Rs. 1,00,000. ;

(b) after the Schedule as so numbered, the following Schedule shall be inserted, namely:

Schedule II

[See Section 5(1)(xxxiv)]

1. Ferro alloys; steel castings and forgings; special steels; and nonferrous metals and their alloys.

2. Boilers and Steam Generating Plants.

3. Prime Movers (other than Electrical Generators), being industrial turbines or internal combustion engines.

4. Equipment for transmission and distribution of electricity; electrical motors; electrical furnaces; X-ray equipment; and electronic components and equipment.

5. Mechanised sailing vessels up to 1000 DWT; ship ancillaries; and commercial vehicles.

6. Industrial machinery.

7. Machine tools.

8. Agricultural machinery, being tractors or power tillers.

9. Earth-moving machinery.

10. Industrial instruments, being indicating, recording and regulating devices for pressure, temperature, rate of flow, weights, levels and the like.

11. Scientific instruments.

12. Nitrogenous and phosphatic fertilisers falling under (1) Inorganic fertilisers mentioned under the heading 18. Fertilisers in the First Schedule to the Industries (Development and Regulation) Act, 1951 (65 of 1951).

13. Chemicals (other than fertilisers), namely:

1. Inorganic heavy chemicals

2. Organic heavy chemicals.

3. Fine chemicals including photographic chemicals.

4. Synthetic resins and plastics.

5. Synthetic rubbers.

6. Man-made fibres.

7. Industrial explosives.

8. Insecticides, fungicides, weedicides and the like.

9. Synthetic detergents.

10. Miscellaneous chemical (for industrial use only).

14. Drugs and pharmaceuticals.

15. Paper and pulp including paper products.

16. Automobile tyres and tubes.

17. Plate glass.

18. Ceramics, being refractories or furnace lining bricks acidic, basic and neutral.

19. Cement products, being portland cement or asbestos cement. .

In Section 5 of the Gift-tax Act, 1958, in clause (iv) of sub-section (1), after the words local authority , the words, brackets, figures and letter or any authority referred to in clause (20-A) of Section 10 of the Income-tax Act shall be inserted with effect from the 1st day of April, 1977.

In the Companies (Profits) Surtax Act, 1964,

(a) in Section 2, in clause (8), for the words ten per cent. , at both the places where they occur, the words fifteen per cent. shall be substituted with effect from the 1st day of April, 1977;

(b) in the First Schedule, in rule 3, for the portion beginning with the words by the aggregate of and ending with the brackets, figures and words (ii) any expenditure , the words by the amount of any expenditure shall be substituted with effect from the 1st day of April, 1977;

(c) in the Second Schedule,

(i) in rule 1

(1) in clause (ii), for the words, brackets and figures sub-section (3) of Section 34 , the words, brackets, figures and letter sub-section (4) of Section 32-A, or sub-section (3) of Section 34 shall be substituted with effect from the 1st day of April, 1977; and

(2) clauses (iv) and (v) shall be omitted with effect from the 1st day of April, 1977;

(ii) after rule 1, the following rule shall be inserted, and shall be deemed to have been inserted with effect from the 1st day of April, 1975, namely:

1-A Where a company has not made any credit in any account in its books as on the first day of the previous year relevant to the assessment year which is of the nature of Item (8) or Item (9) under the heading CURRENT LIABILITIES AND PROVISIONS in the column relating to LIABILITIES in the FORM OF BALANCE-SHEET , given in Part I of Schedule VI to the Companies Act, 1956, (1 of 1956) or where the Income-tax Officer is of opinion that the amount credited in such account falls short of the amount which should have reasonably been credited by it, the amount of its capital as computed under rule 1 shall be reduced by the amount which has not been so credited or, as the case may be, the amount of such shortfall.

Explanation. For the purposes of this rule, the amount of credit which should have reasonably been made by a company in relation to any account of the nature of Item (9) aforesaid, means the amount of dividend declared or paid by the company, on or after the first day of the previous year relevant to the assessment year, for the previous year immediately preceding the first mentioned previous year. ;

(iii) in rule 2, in clause (i), the brackets, words and figures [other than the debentures referred to in clause (iv) or moneys referred to in clause (v) of rule 1] shall be omitted with effect from the 1st day of April, 1977;

(iv) in rule 3, for the words, brackets and figures or issue of the debentures referred to in clause (iv), or borrowing of any moneys referred to in clause (v), of rule 1 or is reduced by any amount on account of reduction of paid-up share capital or redemption of such debentures or repayment of any such moneys, the words or is reduced by any amount on account of reduction of paid-up share capital, shall be substituted with effect from the 1st day of April, 1977.

In Section 2 of the Interest-tax Act, 1974, in clause (7), with effect from the 1st day of April, 1977,

(a) in sub-clause (i), the word and shall be omitted;

(b) in sub-clause (ii), the words and shall be inserted at the end;

(c) after sub-clause (ii), the following sub-clause shall be inserted, namely:

(iii) interest on moneys lent for the creation of a capital asset in India where the agreement under which such moneys are lent provides for the repayment thereof during a period of not less than seven years; .

Indirect taxes

The Indian Tariff Act, 1934 (hereinafter referred to as the Tariff Act) shall be amended in the manner specified in the Second Schedule.

(1) In the case of goods mentioned in the First Schedule to the Tariff Act, or in that Schedule as amended from time to time, there shall be levied and collected as an auxiliary duty of customs an amount equal to twenty per cent. of the value of the goods as determined in accordance with the provisions of Section 14 of the Customs Act, 1962 (52 of 1962) (hereinafter referred to as the Customs Act):

Provided that on and from the date on which the Customs Tariff Act, 1975 comes into force, this sub-section shall have effect subject to the modification that for the words First Schedule to the Tariff Act, the words and figures First Schedule to the Customs Tariff Act, 1975 (51 of 1975) shall be substituted.

(2) Sub-section (1) shall cease to have effect after the 30th day of June, 1977, except as respects things done or omitted to be done before such cesser, and Section 6 of the General Clauses Act, 1897, (10 of 1897) shall apply upon such cesser as if the said sub-section had then been repealed by a Central Act.

(3) The auxiliary duties of customs referred to in sub-section (1) shall be in addition to any duties of customs chargeable on such goods under the Customs Act, or any other law for the time being in force.

(4) The provisions of the Customs Act, and the rules and regulations made thereunder, including those relating to refunds and exemptions from duties, shall, as far as may be, apply in relation to the levy and collection of the auxiliary duties of customs leviable under this section in respect of any goods as they apply in relation to the levy and collection of the duties of customs on such goods under that Act or those rules and regulations, as the case may be.

In the Indian Tariff (Amendment) Act, 1949, in Sections 4 and 5, for the figures 1976 , the figures 1977 shall be substituted.

The Customs Tariff Act, 1975 (hereinafter referred to as the Customs Tariff Act), shall be amended in the manner specified in the Third Schedule.

The Central Excises and Salt Act, 1944 (hereinafter referred to as the Central Excises Act), shall be amended in the manner specified in the Fourth Schedule.

(1) In the case of goods mentioned in the First Schedule to the Central Excises Act, or in that Schedule as amended from time to time, there shall be levied and collected as an auxiliary duty of excise an amount equal to twenty per cent. of the value of the goods as determined in accordance with the provisions of Section 4 of the Central Excises Act.

(2) Sub-section (1) shall ceases to have effect after the 30th day of June, 1977, except as respects things done or omitted to be done before such cesser, and Section 6 of the General Clauses Act, 1897 (10 of 1897), shall apply upon such cesser as if the said such-section had then been repealed by a Central Act.

(3) The auxiliary duties of excise referred to in sub-section (1) shall be in addition to any duties of excise chargeable on such goods under the Central Excises Act, or any other law for the time being in force.

(4) The auxiliary duties of excise leviable under sub-section (1) in the financial year 1975-76 shall be for the purposes of the Union and the proceeds thereof shall not be distributed among the States.

(5) The provisions of the Central Excises Act and the rules made thereunder, including those relating to refunds and exemptions from duties, shall, as far as may be, apply in relation to the levy and collection of the auxiliary duties of excise leviable under this section in respect of any goods as they apply in relation to the levy and collection of the duties of excise on such goods under that Act or those rules, as the case may be.

The Additional Duties of Excise (Goods of Special Importance) Act, 1957 (hereinafter referred to as the Additional Duties of Excise Act), shall be amended in the manner specified in the Fifth Schedule.

38. Discontinuance of salt duty. For the year beginning on the 1st day of April, 1976, no duty under the Central Excises Act or the Tariff Act of the Customs Tariff Act shall be levied in respect of salt manufactured in, or imported into, India.

In the Medicinal and Toilet Preparations (Excise Duties) Act, 1955,

(a) for the words opium, Indian hemp or other narcotic drug or narcotic , wherever they occur, the words narcotic drug or narcotic shall be substituted;

(b) in Section 2,

(i) after clause (a), the following clauses shall be inserted, namely:

(aa) coca derivative menas

(i) crude cocaine, that is, any extract of coca leaf which can be used, directly or indirectly, for the manufacture of cocaine;

(ii) ecgonine, that is, laevo-ecgonine having the chemical formula C₉H₁₅No₃H₂O, and all the derivatives of laevo-ecgonine from which it can be recovered; and

(iii) cocaine, that is, methyl-benzoly-laevo-ecgonine having the chemical formula C₁₇ H₂₁ NO₄, and its salts;

(ab) coca leaf means

(i) the leaf and young twigs of any coca plant, that is, of the Erythroxylon coca (Lamk) and the Erythroxylon novo-granatense (Hiern). and their varieties, and of any other species of this genus which the Central Government may, by notification in the Official Gazette, declare to be coca plants for the purposes of this Act; and

(ii) any mixture thereof, with or without neutral materials; ;

(ii) after clause (b), the following clause shall be inserted, namely:

(bb) derivative of opium means

(i) medicinal opium, that is, opium which has under gone the processes necessary to adapt it for medicinal use;

(ii) prepared opium, that is, any product of opium obtained by any series of operations designed to transform opium into an extract suitable for smoking, and the dross or other residue remaining after opium is smoked;

(iii) morphine, that is, the principal alkaloid of opium having the chemical formula C₁₇H₁₉NO₃, and its salt, and its derivatives; ;

(iii) for clause (e), the following clause shall be substituted namely:

(e) Indian hemp means

(i) the leaves, small stalks and flowering or fruiting tops of the Indian hemp plant (cannabis sativa L.), including all forms knowns as bhang, siddhi or ganga;

(ii) charas, that is, the resin obtained from the Indian hemp plant, which has not been submitted to any manipulations other those necessary for packing and transport;

(iii) any mixture, with or without neutral materials, of any of the above forms of Indian hemp or any drink prepared therefrom; and

(iv) any extract or tincture of any of the above forms of Indian hemp; ;

(iv) for clause (h), the following clause shall be substituted, namely:

(h) narcotic drug or narcotic means a substance which is coca leaf, or coca derivative, or opium, or derivative of opium, of Indian hemp and shall include any other substance, capable of causing or producing in human beings dependence, tolerance and withdrawal syndromes and which the Central Government may, by notification in the Official Gazette, declare to be a narcotic drug or narcotic; ;

(c) the Schedule shall be amended in the manner specified in the Sixth Schedule.

Miscellaneous

In the Indian Stamp Ac, 1899, in Schedule I, in the column headed Proper Stamp-duty , with effect from the 1st day of June, 1976,

(a) in article No. 37, for the words Fifteen naye paise , the words One rupee shall be substituted;

(b) in article No. 52, for the words Fifteen naye paise , the words Thirty paise shall be substituted;

(c) in article No. 53, for the words Ten naye paise , the words Twenty paise shall be substituted.

After Section 43 of the Life Insurance Corporation Act, 1956, the following section shall be inserted with effect from the 1st day of June, 1976, namely:

43A. Deduction of income-tax not to be made on interest or dividend. Notwithstanding anything contained in Section 193 or Section 194 of the Income-tax Act, 1961 (42 of 1961), no deduction of income-tax shall be made on any interest or dividend payable to the Corporation in respect of any securities or shares owned by it or in which it has full beneficial interest. .

In Section 32 of the Unit Trust of India Act, 1963, in clause (b) of sub-section (1), for sub-clause (ii), the following sub-clause shall be substituted with effect from the 1st day of April, 1977, namely:

(ii) a Hindu undivided family, not being a Hindu undivided family which at any time during the previous year has at least one member whose total income of the previous year exceeds the maximum amount not chargeable to income-tax under the Income-tax Act, 1961 (43 of 1961), or .

In the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974,

(a) in Section 3, in sub-section (1), for the words, figures and letters and the assessment year commencing on the 1st day of April, 1976. , the words, figures and letters, the assessment year commencing on the 1st day of April, 1976 and the assessment year commencing on the 1st day of April, 1977. shall be substituted;

(b) in Section 4, in sub-section (1), for the words a compulsory deposit for that assessment year at the rates specified in the Schedule. , the following shall be substituted, namely:

a compulsory deposit,

(i) for the assessment year commencing on the 1st day of April, 1975 and the assessment year commencing on the 1st day of April, 1976, at the rates specified in Paragraph A of the Schedule; and

(ii) for the assessment year commencing on the 1st day of April, 1977, at the rates specified in Paragraph B of the Schedule. ;

(c) in the Schedule,

(i) below the words Rates Of Compulsory Deposit the word and letter Paragraph A shall be inserted; and

(ii) for the provisos, the following shall be substituted, namely:

Paragraph B

Provided that in a case (whether falling under Paragraph A or Paragraph B)

(a) where the current income exceeds Rs. 15,000 but does not exceeds Rs. 15,620, the compulsory deposit shall in no case exceed the amount by which the current income exceeds Rs. 15,000;

(b) where the amount of compulsory deposit calculated in accordance with the foregoing provisions is less than Rs. 100, it shall not be necessary for the depositor concerned to make such deposit. .

Schedule I

(See Section 2)

Part 1

In the case of every individual or Hindu undivided family or unregistered firm or other association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of Section 2 of the Income-tax Act, not being a case to which Sub-Paragraph II of this Paragraph or any other Paragraph of this Part applies,

The amount of income-tax computed in accordance with the preceding provisions of this Sub-Paragraph shall be increased by a surcharge for purpose of the Union calculated at the rate of ten per cent. of such income-tax.

In the case of every Hindu undivided family which at any time during the previous year has at least one member whose total income of the previous year relevant to the assessment year commencing on the 1st day of April, 1976 exceeds Rs. 8,000,

The amount of income-tax computed in accordance with the preceding provisions of this Sub-Paragraph shall be increased by a surcharge for the purposes of the Union calculated at the rate of ten per cent. of such income-tax.

In the case of every co-operative society,

The amount of income-tax computed in accordance with the preceding provisions of this Paragraph shall be increased by a surcharge for purposes of the Union calculated at the rate or ten per cent of such income-tax.

In the case of every registered firm, not being a case to which Sub-Paragraph II of this Paragraph applies,

The amount of income-tax computed in accordance with the preceding provisions of this Sub-Paragraph shall be increased by a surcharge for purposes of the Union calculated at the rate of ten per cent. of such income-tax.

In the case of every registered firm whose total income includes income derived from a profession carried on by it and the income so included is not less than fifty-one per cent. of such total income,

The amount of income-tax computed in accordance with the preceding provisions of this Sub-Paragraph shall be increased by a surcharge for purposes of the Union calculated at the rate of ten per cent. of such income-tax.

Explanation. For the purposes of this Paragraph registered firm includes an unregistered firm assessed as a registered firm under clause (b) of Section 183 of the Income-tax Act.

In the case of every local authority,

The amount of income-tax computed at the rate hereinbefore specified shall be increased by a surcharge for purposes of the Union calculated at the rate of ten per cent. of such income-tax.

In the case of the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956),

The amount of income-tax computed in accordance with the preceding provisions of this Paragraph shall be increased by a surcharge calculated at the rate of five per cent. of such income-tax.

In the case of a company, other than Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956),

I. In the case of a domestic company,

(i) the income-tax payable by a domestic company, being a company in which the public are substantially interested, the total income of which exceeds Rs. 1,00,000, shall not exceed the aggregate of

(a) the income-tax which would have been payable by the company if its total income had been Rs. 1,00,000 (the income of Rs. 1,00,000 for the this purpose being computed as if such income included income from various sources in the same proportion as the total income of the company); and

(b) eighty per cent. of the amount by which its total income exceeds Rs. 1,00,000;

(ii) the income-tax payable by a domestic company, not being a company in which the public are substantially interested, which is an industrial company and the total income of which exceeds Rs. 2,00,000, shall not exceed the aggregate of

(a) the income-tax which would have been payable by the company if its total income had been Rs. 2,00,000 (the income of Rs. 2,00,000 for this purpose being computed as if such income included income from various sources in the same proportion as the total income of the company); and

(b) eighty per cent. of the amount by which its total income exceeds Rs. 2,00,000.

II. In the case of a company other than a domestic company

The amount of income-tax computed in accordance with the preceding provisions of this Paragraph shall be increased by a surcharge calculated at the rate of five per cent. of such income-tax.

Part II

In every case in which under the provisions of Sections 193, 194, 194-A, 194-B, 194-D, and 195 of the Income-tax Act, tax is to be deducted at the rates in force, deduction shall be made from the income subject to deduction at the following rates:

Part III

In case in which income-tax has to be calculated under the first proviso to sub-section (5) of Section 132 of the Income-tax Act or charged under sub-section (4) of Section 172 or sub-section (2) of Section 174 or Section 175 or sub-section (2) of Section 176 of the said Act or deducted under Section 192 of the said Act from income chargeable under the head Salaries or deducted under sub-section (9) of Section 80-E of the said Act from any payment referred to in the said sub-section (9) or in which the advance tax payable under Chapter XVII-C of the said Act has to be computed, at the rate or rates in force, such income-tax or, as the case may be, advance tax (not being advance tax in respect of any income chargeable to tax under Chapter XII or Section 164 of the Income-tax Act at the rates as specified in that Chapter or section), shall be so calculated, charged, deducted or computed at the following rate or rates:

In the case of every individual or Hindu undivided family or unregistered firm or other association of persons or body of individuals, whether incorporated or not, or every artificial juridical person referred to in sub-clause (vii) of clause (31) of Section 2 of the Income-tax Act, not being a case to which Sub-Paragraph II of this Paragraph or any other Paragraph of this Part applies,

The amount of income-tax computed in accordance with the preceding provisions of this Sub-Paragraph shall be increased by a surcharge for purposes of the Union calculated at the rate of ten per cent. of such income-tax.

In the case of every Hindu undivided family which at any time during the previous year has at least one member whose total income of the previous year relevant to the assessment year commencing on the 1st day of April, 1977 exceeds Rs. 8,000,

The amount of income-tax computed in accordance with the preceding provisions of this Sub-Paragraph shall be increased by a surcharge for purposes of the Union calculated at the rate of ten per cent. of such income-tax.

In the case of every co-operative society,

The amount of income-tax computed in accordance with the preceding previsions of this Paragraph shall be increase by a surcharge for purposes of the Union calculated at the rate of ten per cent. of such income-tax.

In the case of every registered firm, not being a case to which Sub-Paragraph II of this Paragraph applies,

The amount of income-tax computed in accordance with the preceding provisions of this Sub-Paragraph shall be increased by a surcharge for purposes of the Union calculated at the rate of ten per cent. of such income-tax.

In the case of every registered firm whose total income includes income derived from a profession carried on by it and the income so included is not less than fifty-one per cent. of such total income,

The amount of income-tax computed in accordance with the preceding provisions of this Sub-Paragraph shall be increased by a surcharge for purposes of the Union calculated at the rate of ten per cent. of such income-tax.

Explanation. For the purposes of this Paragraph, registered firm includes an unregistered firm assessed as a registered firm under clause (b) of Section 183 of the Income-tax Act.

In the case of every local authority,

The amount of income-tax computed at the rate hereinbefore specified shall be increased by a surcharge for purposes of the Union calculated at the rate of ten per cent. of such income-tax.

In the case of a company,

I. In the case of a domestic company,

Provided that

(i) the income-tax payable by a domestic company, being a company in which the public are substantially interested, the total income of which exceeds Rs. 1,00,000, shall not exceed the aggregate of

(a) the income-tax which would have been payable by the company if its total income had been Rs. 1,00,000 (the income of Rs. 1,00,000 for this purpose being computed as if such income included income from various sources in the same proportion as the total income of the company); and

(b) eighty per cent. of the amount by which its total income exceeds Rs. 1,00,000;

(ii) the income-tax payable by a domestic company, not being a company in which the public are substantially interested, which is an industrial company and the total income of which exceeds Rs. 2,00,000, shall not exceed the aggregate of

(a) the income-tax which would have been payable by the company if its total income had been Rs. 2,00,000 (the income of Rs. 2,00,000 for this purpose being computed as if such income included income from various sources in the same proportion as the total income of the company); and

(b) eighty per cent. of the amount by which its total income exceeds Rs. 2,00,000.

II. In the case of a company other than a domestic company,

The amount of income-tax computed in accordance with the preceding provisions of this Paragraph shall be increased by a surcharge calculated at the rate of five per cent. of such income-tax.

Part IV

[See Section 2(9)(e)]

Rule 1. Agricultural income of the nature referred to in sub-clause (a) of clause (1) of Section 2 of the Income-tax Act shall be computed as if it were income chargeable to income-tax under that Act under the head Income from other sources and the provisions of Section 57 to 59 of that Act shall, so far as may be, apply accordingly:

Provided that sub-section (2) of Section 58 shall apply subject to the modification that the reference to Section 40-A therein 40-A therein shall be construed as not including a reference to sub-section (3) and (4) of Section 40-A.

Rule 2. Agricultural income of the nature referred to in sub-clause (b) or sub-clause (c) of clause (1) of Section 2 of the Income-tax Act [other than income derived from any building required as a dwelling house by the receiver of the rent or revenue or the cultivator or the receiver of rent-in-kind referred to in the said sub-clause (c)] shall be computed as if it were income chargeable to income-tax under that Act under the head Profits and gains of business or profession and the provisions of Sections 30, 31, 32, 34, 36, 37, 38, 40, 40-A [other than sub-sections (3) and (4) thereof], 41, 43 and 43-A of the Income-tax Act shall, so far as may be, apply accordingly.

Rule 3. Agricultural income of the nature referred to in sub-clause (c) of clause (1) of Section 2 of the Income-tax Act, being income derived from any building required as a dwelling house by the receiver of the rent or revenue or the cultivator or the receiver of rent-in-kind referred to in the said sub-clause (c) shall be computed as if it were income chargeable to income-tax under that Act under the head Income from house property and the provisions of Sections 23 to 27 of that Act shall, so far as may be, apply accordingly:

Provided that sub-section (2) of the said Section 23 shall apply subject to the modifications that the references to total income therein shall be construed as references to net agricultural income and that the words figures and letter and before making any deduction under Chapter VI-A shall be omitted.

Rule 4. Notwithstanding anything contained in any other provisions of these rules, in a case where the assessee derives income from sale of tea grown and manufactured by him in India, such income shall be computed in accordance with rule 8 of the Income-tax Rules. 1962 and sixty per cent. of such income shall be regarded as the agricultural income of the assessee.

Rule 5. Where the assessee is a partner of a registered firm or an unregistered firm assessed as a registered firm under clause (b) of Section 183 of the Income-tax Act, which in the previous year any agricultural income, or is a partner of an unregistered firm which has not been assessed as a registered firm under clause (b) of the said Section 183 and which in the previous year has either no income chargeable to tax under the Income-tax Act or has total income not exceeding the maximum amount not chargeable to tax in the case of an unregistered firm but has any agricultural income, then, the agricultural income or loss of the firm shall be computed in accordance with these rules and his share in the agricultural income or loss of the firm shall be computed in the manner laid down in sub-section (1), sub-section (2) and sub-section (3) of Section 67 of the Income-tax Act and the share so computed shall be regarded as the agricultural income or loss of the assessee.

Rule 6. Where the assessee is a member of an association of persons or a body of individuals (other than a Hindu undivided family, a company or a firm) which in the previous year has either no income chargeable to tax under the Income-tax Act or has total income not exceeding the maximum amount not chargeable to tax in the case of an association of persons or a body of individuals (other than a Hindu undivided family, a company or a firm) but has any agricultural income, then, the agricultural income or loss of the association or body shall be computed in accordance with these rules and the share of the assessee in the agricultural income or loss so computed shall be regarded as the agricultural income or loss of the assessee.

Rule 7. Where the result of the computation for the previous year in respect of any source of agricultural income is a loss, such loss shall be set off against the income of the assessee, if any, for that previous year from any other source of agricultural income:

Provided that where the assessee is a partner of an unregistered firm which has not been assessed as a registered firm under clause (b) of Section 183 of the Income-tax Act or is a member of an association of persons or body of individuals and the share of the share of the assessee in the agricultural income of the firm, association of body, as the case may, be, is a loss, such loss shall not be set off against any income of the assessee from any other source of agricultural income.

Rule 8. Any sum payable by the assessee on account of any tax levied by the State Government on the agricultural income shall be deducted in computing the agricultural income.

Rule 9. (1) Where the assessee has, in the previous year relevant to the assessment year commencing on the 1st day of April, 1976, any agricultural income and the net result of the computation of the agricultural income of the assessee for the previous year relevant to the assessment year commencing on the 1st day of April, 1974 or the 1st day of April, 1975, or both, is a loss, then, for the purposes of sub-section (2) of Section 2 of this Act,

(i) the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 1974, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 1975, and

(ii) the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 1975.

shall be set off against the agricultural income of the assessee for the previous year relevant to the assessment year commencing on the 1st day of April, 1976.

(2) Where the assessee has, in the previous year relevant to the assessment year commencing on the 1st day of April, 1977 or, if by virtue of any provision of the Income-tax Act, income-tax is to be charged in respect of the income of a period other than that previous year, in such other period, any agricultural income and the net result of the computation of the agricultural income of the assessee for any one or more of the previous years relevant to the assessment year commencing on the 1st day of April, 1974 or the 1st day of April, 1975 or the 1st day of April, 1976, is a loss, then, for the purposes of sub-section (7) of Section 2 of this Act,

(i) the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 1974, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 1975 or the 1st day of April, 1976,

(ii) the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 1975, to the extent, if any, such loss has not been set off against the agricultural income for the previous year relevant to the assessment year commencing on the 1st day of April, 1976, and

(iii) the loss so computed for the previous year relevant to the assessment year commencing on the 1st day of April, 1976,

shall be set off against the agricultural income of the assessee for the previous year relevant to the assessment year commencing on the 1st day of April, 1977 or the period aforesaid.

(3) Where a change has occurred in the constitution of a firm, nothing in sub-rule (1) or sub-rule (2) shall entitle the firm to set off so much of the loss proportionate to the share of a retired or deceased partner computed in the manner laid down in sub-section (1), sub-section (2) and sub-section (3) of Section 67 of the Income-tax Act as exceeds his share of profits, if any, of the previous year in the firm, or entitle any partner to the benefit of any portion of the said loss (computed in the manner aforesaid) which is not apportionable to him.

(4) Where any person deriving any agricultural income from any source has been succeeded in such capacity by another person, otherwise than by inheritance, nothing in sub-rule (1) or sub-rule (2) shall entitle any person, other than the person incurring the loss, to have it set off under sub-rule (1), as the case may be, sub-rule (2).

(5) Notwithstanding anything contained in this rule, no loss which has not been determined by the Income-tax Officer under the provisions of these rules, contained in Part IV of the First Schedule to the Finance Act, 1974, (20 of 1974) or of the First Schedule to the Finance Act, 1975, (25 of 1975) shall be set off under sub-rule (1) or, as the case may be, sub-rule (2).

Rule 10. Where the net result of the computation made in accordance with these rules is a loss, the loss so computed shall be ignored and the net agricultural income shall be deemed to be nil.

Rule 11. The provisions of the Income-tax Act relating to procedure for assessment (including the provisions of Section 288-A relating to rounding off of income) shall, with the necessary modifications, apply in relation to the computation of the net agricultural income of the assessee as they apply in relation to the assessment of the total income.

Rule 12. For the purposes of computing the net agricultural income of the assessee, the Income-tax Officer shall have the same powers as he has under the Income-tax Act for the purposes of assessment of the total income.

Schedule II

(See Section 31)

Part I

In the First Schedule to the Tariff Act,

(i) in Item No. 47(2), for the entry in the fourth column, the entry 100 per cent. ad valorem plus Rs. 20.00 per kilogram shall be substituted;

(ii) in Item No. 63(20-A), for the figures 200 in the fourth column, the figures 300 shall be substituted;

(iii) in Item No. 64, for the figures 60 and 50 in the fourth and fifth columns, the figures 100 and 90 shall, respectively, be substituted;

(iv) in Item Nos. 64(1) and 64(2), for the figures 40 in the fourth column against each of them, the figures 100 shall be substituted;

(v) in Item Nos. 64(3) and 64(5), for the figures 50 and 60 in the fourth column against each of them, the figures 90 and 100 shall, respectively, be substituted;

(vi) in Item No. 64(4), for the figures 40 , 30 and 30 in the fourth, fifth and sixth columns, the figures 100 , 90 and 90 shall, respectively, be substituted.

Part II

Explanation I. This Item is to be taken to apply to the goods mentioned therein even though they may be covered by any other Item in this Schedule.

Explanation II. For the purposes of this Item, the expressions alloy steel and high carbon steel have the meanings respectively assigned to them in Note 1 (d) and 1 (e) of Chapter 73 of the Firs Schedule to the Customs Tariff Act, 1975 (51 of 1975).

Schedule III

[See Section 34]

Part I

In the First Schedule to the Customs tariff Act,

(i) in Heading No. 51.01/03, for the entry in column (3), the entry 100% plus Rs. 20 per kilogram shall be substituted;

(ii) in Heading No. 56.05/06, for the entry in column (3), the entry 100% plus Rs. 20 per kilogram shall be substituted;

(iii) in Heading No. 74.01/02, for the entry in column (3), the entry 100% shall be substituted:

(iv) in Heading No. 74.03,

(1) in sub-heading No. (1), for the entry in column (3), the entry 100% shall be substituted;

(2) in sub-heading No. (2), for the entries in columns (3) and (4), the entries 100% and 90% shall respectively, be substituted;

(v) in Heading Nos. 74.04/05 and 74.06, for the entry in column (3) against each of them, the entry 100% shall be substituted;

(vi) in Heading No. 74.07/08, in sub-heading No. (1), for the entry in column (3), the entry 100% shall be substituted;

(vii) in Heading No. 74.09/19, for the entry in column (3), the entry 100% shall be substituted.

Part II

Part III

In the Second Schedule to the Customs Tariff Act, in Heading No. 1, for the entry in column (3), the entry Rs. 300 per quintal shall be substituted.

Part IV

Schedule IV

[See Section 35]

Part I

In the First Schedule to the Central Excises Act,

(i) in Item No. 4, under II. Manufactured tobacco , for the entry in the third column against sub-item (1), the entry One hundred and fifty-five per cent. ad valorem. shall be substituted;

(ii) in Item No. 6, for the entry in the third column, the entry Two thousand two hundred rupees per kilolitre at fifteen degrees of Centigrade thermometer. shall be substituted;

(iii) in Item No. 8, for the entry in the third column against sub-item (a), the entry One thousand rupees per kilolitre at fifteen degrees of Centigrade thermometer. shall be substituted;

(iv) in Item No. 10, for the entry in the third column, the entry One hundred and fifty rupees per kilolitre at fifteen degrees of Centigrade thermometer. shall be substituted;

(v) in Item No. 11, for the entry in the third column against sub-item (1), the entry Two hundred rupees per metric tonne. shall be substituted;

(vi) in Item No. 11-A, for the entries in the third column against sub-items (3) and (4), the entries Twenty per cent. ad valorem plus six hundred rupees per metric tonne. and Twenty per cent. ad valorem plus two thousand rupees per metric tonne. shall, respectively, be substituted;

(vii) in Item No. 11-B, for the entry in the third column, the entry Twenty per cent. ad valorem plus two thousand rupees per metric tonne. shall be substituted;

(viii) in Item No. 14-E, for the entry in the third column, the entry Twelve and a half per cent ad valorem. shall be substituted;

(ix) in Item No. 18, after Explanation III, the following Explanation shall be inserted, namely:

Explanation IV. This item does not include mineral fibres and yarn. ;

(x) in Item No. 19, in the second column, for the words impregnated or coated , wherever they occur, the words impregnated, coated or laminated shall be substituted;

(xi) in Item No. 22,

(a) in the second column, for the words impregnated or coated , wherever they occur, the words impregnated, coated or laminated shall be substituted;

(b) the Explanation shall numbered as Explanation I. and after the Explanation as so numbered, the following Explanation shall be inserted, namely:

Explanation II. This item does not include glass fabrics. ;

(xii) in Item No. 22-B, in the second column, for the words IMPREGNATED OR COATED , the words IMPREGNATED, COATED OR LAMINATED shall be substituted;

(xiii) in Item No. 22-C, in the second column, for the words IMPREGANATION OR COATING , the words IMPREGNATION, COATING OR LAMINATION shall be substituted;

(xiv) in Item No. 33-A,

(a) for the entries in the third column against sub-items (2) and (3), the entries Four hundred rupees per set. and Four hundred rupees per set. shall, respectively, be substituted;

(b) for the entry in the second column against sub-item (3), the entry Radiograms (including radio or transistor sets with extra space in cabinet for fitting in record players or record changers) and combination sets of radios (including transistor sets) and tape recorders (including cassette recorders and tape decks) shall be substituted;

(xv) in Item No. 33-D, in the second column,

(a) the words and brackets COMPUTERS (INCLUDING CENTRAL PROCESSING UNITS AND PERIPHERAL DEVICES) shall be omitted;

(b) after the words ORUNASSEMBLED CONDITION the words NOT ELSEWHERE SPECIFIED shall be inserted;

(xvi) in Item No. 35, in the second column, for the words CYCLES, PARTS OR CYCLES , the words PARTS OF CYCLES shall be substituted;

(xvii) Item No. 45 shall be omitted.

Part II

Schedule V

[See Section 37]

In the First Schedule to the Additional Duties of Excise Act,

(i) in Item No. 4 under II. Manufactured tobacco , for sub-item (1), the following sub-item shall be substituted, namely:

(ii) in Item No. 19,

(a) in the second column, for the words impregnated or coated , wherever they occur, the words impregnated, coated or laminated shall be substituted;

(b) for the entries in the third column, against sub-items I(2)(a), I(2)(b), I(2)(c), I(2)(d), I(2)(e), I(2)(f), the entries Two and a half per cent. ad valorem. , Two and a half per cent. ad valorem. , Two per cent. ad valorem. , One per cent ad valorem, One-half per cent. ad valorem. , and Two and a half per cent. ad valorem. shall, respectively, be substituted;

(iii) in Item No. 22, in the second column, for the words impregnated or coated , wherever they occur, the words impregnated, coated or laminated shall be substituted.

Schedule VI

[See Section 39 (c)]

In the Schedule to the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, (16 of 1955) for the headings and the items and entries relating thereto, occurring before the Explanations, the following shall be substituted, namely:

1. Received the assent of the President on May 27, 1976, published in the Gazette of India, Extra., Part II, Section 1, dated 27th May, 1976, pp. 645-706.