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INCOME-TAX ACT 1995

ACT NO. 43 OF 1961

[date 13-9-1961]

Short title, extent and commencement. 1. Short title, extent and commencement

(1) This Act may be called the Income-tax Act, 1961.

(2) It extends to the whole of India.2

(3) Save as otherwise provided in this Act, it shall come into force on the 1st day of April, 1962.

Definitions. 2. Definitions In this Act, unless the context otherwise requires,-

3[(1) "advance tax" means the advance tax payable in accordance with the provisions of Chapter XVII-C;] 4[(1A)] "agricultural income" means- (a) any rent or revenue derived from land which is situated in India and is used for agricultural purposes; (b) any income derived from such land by- (i) agriculture; or (ii)the performance by a cultivator or receiver of rent- in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or ---------------------------------------------------------------------- 1.32 (iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii) of this sub-clause; (c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any process mentioned in paragraphs (ii) and (iii) of sub- clause (b) is carried on: 1[Provided that- (i) the building is on or in the immediate vicinity of the land, and is a building which the receiver of the rent or revenue or the cultivator, or the receiver of rent-in-kind, by reason of his connection with the land, requires as a dwelling house, or as a store-house, or other out-building, and (ii) the land is either assessed to land revenue in India or is subject to a local rate assessed and collected by officers of the Government as such or where the land is not so assessed to land revenue or subject to a local rate, it is not situated- (A) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or (B) in any area within such distance, not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (A), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification2 in the Official Gazette.] 3[Explanation.-For the removal of doubts, it is hereby declared that revenue derived from land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in item (a) or item (b) of sub-clause (iii) of clause

(14) of this section;] ---------------------------------------------------------------------- 1 Substituted by the Taxation Laws (Amendment) Act, 1970, w.r.e.f. 1-4-1962. 2 Inserted by the Finance Act, 1989 w.r.e.f. 1-4-1970. ----------------------------------------------------------------------- 1.33 1[2[(1B)] "amalgamation", in relation to companies, means the merger of one or more companies with another company or the merger of two or more companies to form one company (the company or companies which so merge being referred to as the amalgamating company or companies and the company with which they merge or which is formed as a result of the merger, as the amalgamated company) in such a manner that- (i) all the property of the amalgamating company or companies immediately before the amalgamation becomes the property of the amalgamated company by virtue of the amalgamation; (ii) all the liabilities of the amalgamating company or companies immediately before the amalgamation become the liabilities of the amalgamated company by virtue of the amalgamation; (iii) shareholders holding not less than nine-tenths in value of the shares in the amalgamating company or companies (other than shares already held therein immediately before the amalgamation by, or by a nominee for, the amalgamated company or its subsidiary) become shareholders of the amalgamated company by virtue of the amalgamation, otherwise than as a result of the acquisition of the property of one company by another company pursuant to the purchase of such property by the other company or as a result of the distribution of such property to the other company after the winding up of the first- mentioned company;]

(2) "annual value", in relation to any property, means its annual value as determined under section 23;

3[(3) Omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from 1 April, 1988.]

(4) "Appellate Tribunal" means the Appellate Tribunal constituted under section 252; ----------------------------------------------------------------------- 1 Inserted by the Finance (No. 2) Act, 1967 w.e.f. 1-4-1967. 2 Renumbered for "(1A)" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.

3 Prior to the omission, clause (3), as originally enacted, read as under:

"(3) "Appellate Assistant Commissioner" means a person appointed to be an Appellate Assistant Commissioner of Income-tax under sub-

section (1) of section 117;" ---------------------------------------------------------------------- 1.34

(5) "approved gratuity fund" means a gratuity fund which has been and continues to be approved by the 1[Chief Commissioner or Commissioner] in accordance with the rules contained in Part C of the Fourth Schedule;

(6) "approved superannuation fund" means a superannuation fund or any part of a superannuation fund which has been and continues to be approved by the 2[Chief Commissioner or Commissioner] in accordance with the rules contained in Part B of the Fourth Schedule;

(7) "assessee" means a person by whom 3[any tax] or any other sum of money is payable under this Act, and includes- (a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person; (b) every person who is deemed to be an assessee under any provision of this Act; (c) every person who is deemed to be an assessee in default under any provision of this Act; 4[(7A) "Assessing Officer" means the Assistant Commissioner or the Income-tax Officer who is vested with the relevant jurisdiction by

virtue of directions or orders issued under sub-section (1) or sub-

section (2) of section 120 or any other provision of this Act, and the Deputy Commissioner who is directed under clause (b) of sub-section

(4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act;]

(8) "assessment" includes reassessment;

(9) "assessment year" means the period of twelve months commencing on the 1st day of April every year; 5[(9A) "Assistant Commissioner" means a person appointed to be an

Assistant Commissioner of Income-tax under sub-section (1) of section 117;]

(10) "average rate of income-tax" means the rate arrived at by dividing the amount of income-tax calculated on the total income, by such total income;

6[(11) "block of assets" means a group of assets falling within a class of assets, being buildings, machinery, plant or furniture, in respect of which the same percentage of depreciation is prescribed;] ---------------------------------------------------------------------- 1 Substituted for 'Commissioner' by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 2 Ibid. 3 Substituted for "income-tax or super-tax" by the Finance Act, 1965, w.e.f. 1-4-1965. 4 Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-

5 Ibid. 6 Inserted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Earlier, the original clause was omitted by the Finance Act, 1965, w.e.f. 1-4-1965. ----------------------------------------------------------------------- 1.35

(12) "Board" means the 1[Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 19632 (54 of 1963)];

(13) "business" includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture;

(14) "capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include- (i) any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession; 3[(ii) 4 personal effects, that is to say, movable property (including wearing apparel and furniture, but excluding jewellery) held for personal use by the assessee or any member of his family dependent on him. Explanation.-For the purposes of this sub-clause, "jewellery" includes- (a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semiprecious stone, and whether or not worked or sewn into any wearing apparel; (b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel;] 5[(iii) agricultural land in India, not being land situate- (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or 6(b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette;] ---------------------------------------------------------------------- 1 Substituted for "Central Board of Revenue constituted under the Central Board of Revenue Act, 1924 (4 of 1924)" by the Central Boards of Revenue Act, 1963, w.e.f. 1-1-1964. 2 Substituted by the Finance Act, 1972, w.e.f. 1-4-1973. 3 Substituted for "(iii) agricultural land in India" by the Finance Act, 1970, w.e.f. 1-4-1970. ---------------------------------------------------------------------- 1.36 1[(iv) 6 1/2 per cent Gold Bonds, 1977, 2[or 7 per cent Gold Bonds, 1980,] 1[or National Defence Gold Bonds, 1980,] issued by the Central Government;] 4[(V) Special Bearer Bonds, 1991, issued by the Central Government;]

(15) 5 "charitable purpose" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility 6[* * *]; ---------------------------------------------------------------------- 1 Inserted by the Taxation Laws (Amendment) Act, 1962, w.e.f. 13-12-

2 Inserted by the Finance (No. 2) Act, 1965, w.e.f. 1-4-1965. 3 Inserted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1965, w.e.f. 4-12-1965. 4 Inserted by the Special Bearer Bonds (Immunities and Exemptions) Act, 1981, w.e.f. 12-1-1981. 5 The words 'not involving the carrying on of any activity for profit' omitted by the Finance Act, 1983, w.e.f. 1-4-1984. ---------------------------------------------------------------------- 1.37 1[(15A) "Chief Commissioner" means a person appointed to be a

Chief Commissioner of Income-tax under sub-section (1) of section 117;] 2[3[(15B)] "child", in relation to an individual, includes a step-child and an adopted child of that individual;]

4[(16) "Commissioner" means a person appointed to be a

Commissioner of Income-tax under sub-section (1) of section 117 5[* * *];] 6[(16A) "Commissioner (Appeals)" means a person appointed to be a

Commissioner of Income-tax (Appeals) under sub-section (1) of section 117;]

7[(17) "company" means- (i) any Indian company, or (ii) any body corporate incorporated by or under the laws of a country outside India; or (iii) any institution, association or body which is or was assessable or was assessed as a company for any assessment year under the Indian Income-tax Act, 1922 (11 of 1922), or which is or was assessable or was assessed under this Act as a company for any assessment year commencing on or before the 1st day of April, 1970, or (iv) any institution, association or body, whether incorporated or not and whether Indian or non-Indian, which is declared by general or special order of the Board to be a company: Provided that such institution, association or body shall be deemed to be a company only for such assessment year or assessment years (whether commencing before the 1st day of April, 1971, or on or after that date) as may be specified in the declaration;] ----------------------------------------------------------------------- 1 Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-

2 Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-

3 Renumbered for "(15A)" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 4 Substituted by the Finance Act, 1970, w.e.f. 1-4-1970. 5 The words " and includes a person appointed to be an Additional Commissioner of Income-tax under that sub-section" omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 6 Inserted by the Finance (No. 2) Act, 1977, w.e.f. 10-7-1978. 7 Substituted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1971. ---------------------------------------------------------------------- 1.38

(18) "company in which the public are substantially interested" -- a company is said to be a company in which the public are substantially interested-- 2[(a) if it is a company owned by the Government or the Reserve Bank of India or in which not less than forty per cent of the shares are held (whether singly or taken together) by the Government or the Reserve Bank of India or a corporation owned by that bank; or] 3[(aa) if it is a company which is registered under section 25 of the Companies Act, 19564 (1 of 1956); or (ab) if it is a company having no share capital and if, having regard to its objects, the nature and composition of its membership and other relevant considerations, it is declared by order of the Board to be a company in which the public are substantially interested: Provided that such company shall be deemed to be a company in which the public are substantially interested only for such assessment year or assessment years (whether commencing before the 1st day of April, 1971, or on or after that date) as may be specified in the declaration; or] 5[(ac) if it is a mutual benefit finance company, that is to say, a company which carries on, as its principal business, the business of acceptance of deposits from its members and which is declared by the Central Government under section 620A of the Companies Act, 19566 (1 of 1956), to be a Nidhi or Mutual Benefit Society; or] 7[(ad) if it is a company, wherein shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than fifty per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by, one or more co-operative societies;] 8[(b) if it is a company which is not a private company as defined in the Companies Act, 19569 (1 of 1956), and the conditions specified either in item (A) or in item (B) are fulfilled, namely:- (A) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) were, as on the last day of the relevant previous year, listed in a recognised stock exchange in India in --------------------------------------------------------------------- 2 Substituted by the Finance Act, 1964, w.e.f. 1-4-1964. 3 Inserted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1971. 4 Inserted by the Finance Act, 1985, w.r.e.f. 1-4- 5 Inserted by the Finance Act, 1992, w.e.f. 1-4-1993. 6 Substituted by the Finance Act, 1969, w.e.f. 1-4-1970. Earlier, it was amended by the Finance Act, 1965, w.e.f. 1-4-1965 and the Finance Act, 1966, w.e.f. 1-4-1966. --------------------------------------------------------------------- 1.39 accordance with the Securities Contracts (Regulation) Act, 1956 1 (42 of 1956), and any rules made thereunder; 2[(B) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than fifty per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by- (a) the Government, or (b) a corporation established by a Central, State or Provincial Act, or (c) any company to which this clause applies or any subsidiary company of such company 1[if the whole of the share capital of such subsidiary company has been held by the parent company or by its nominees throughout the previous year.] Explanation.-In its application to an Indian company whose business consists mainly in the construction of ships or in the manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other form of power, item (B) shall have effect as if for the words "not less than fifty per cent", the words "not less than forty per cent" had been substituted;]]

(19) "co-operative society" means a co-operative society registered under the Co-operative Societies Act, 1912 4 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies; 5[(19A) "Deputy Commissioner" means a person appointed to be a Deputy Commissioner of Income-tax 6[or an Additional Commissioner of

Income-tax] under sub-section (1) of section 117; (19B) "Deputy Commissioner (Appeals)" means a person appointed to be a Deputy Commissioner of Income-tax (Appeals) 7 [or an Additional

Commissioner of Income-tax (Appeals)] under sub-section (1) of section 117;] 8[(19c) "Deputy Director" means a person appointed to be a Deputy Director of Income-tax or an Additional Director of Income-tax under

sub-section (1) of section 117;]

(20) "director", "manager" and "managing agent", in relation to a --------------------------------------------------------------------- 2 Substituted by the Finance Act, 1983, w.e.f. 2-4-1983. 3 Substituted for 'where such subsidiary company fulfils the conditions laid down in clause (b) of section 108' by the Finance Act, 1987, w.e.f. 1-4-1988. 4 Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 5 Inserted by the Finance Act, 1994, w.e.f. 1-6-1994. 6 Ibid. --------------------------------------------------------------------- 1.40 company, have the meanings respectively assigned to them in the Companies Act, 1956 1 (1 of 1956);

2[(21) "Director General or Director" means a person appointed to be a Director General of Income-tax or, as the case may be, a Director

of Income-tax, under sub-section (1) of section 117, and includes a person appointed under that sub-section to be 3[an Additional Director of Income-tax or] a Deputy Director of Income-tax or an Assistant Director of Income-tax;]

(22) 4"dividend" includes- (a) any distribution by a company of accumulated profits, whether capitalised or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company; (b) any distribution to its shareholders by a company of debentures, debenture-stock, or deposit certificates in any form, whether with or without interest, and any distribution to its preference shareholders of shares by way of bonus, to the extent to which the company possesses accumulated profits, whether capitalised or not; (c) any distribution made to the shareholders of a company on its liquidation, to the extent to which the distribution is attributable to the accumulated profits of the company immediately before its liquidation, whether capitalised or not; (d) any distribution to its shareholders by a company on the reduction of its capital, to the extent to which the company possesses accumulated profits which arose after the end of the previous year ending next before the 1st day of April, 1933, whether such accumulated profits have been capitalised or not; (e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) 5[made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern, in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as --------------------------------------------------------------------- 1 Substituted by the Direct Tax Laws (Amendment) Act, 1987,

w.e.f. 1-4-1988. Prior to the substitution, clause (21) read as under:

(21) 'Director of Inspection' means a person appointed to be a

Director of Inspection under sub-section (1) of section 117, and includes a person appointed to be an Additional Director of Inspection, a Deputy Director of Inspection or an Assistant Director of Inspection;' 3 Inserted by the Finance Act, 1994, w.e.f. 1-6-1994. 5 Substituted for 'by way of advance or loan to a shareholder, being a person who has a substantial interest in the company,' by the Finance Act, 1987, w.e.f. 1-4-1988. --------------------------------------------------------------------- 1.41 the said concern)] or any payment by any such company on behalf, or for- the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits; but "dividend" does not include-- (i) a distribution made in accordance with sub-clause (c) or sub-clause (d)in respect of any share issued for full cash consideration, where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets; 1[(ia)a distribution made in accordance with sub-clause (c) or sub-clause (d) in so far as such distribution is attributable to the capitalised profits of the company representing bonus shares allotted to its equity shareholders after the 31st day of March, 1964, 2[and before the 1st day of April, 1965];] (ii) any advance or loan made to a shareholder 3[or the said concern] by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company; (iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clause (e), to the extent to which it is so set off. Explanation 1.-The expression "accumulated profits", wherever it occurs in this clause, shall not include capital gains arising before the 1st day of April, 1946, or after the 31st day of March, 1948, and before the 1st day of April, 1956. Explanation 2.--The expression "accumulated profits" in sub- clauses (a), (b), (d) and (e), shall include all profits of the company up to the date of distribution or payment referred to in those sub-clauses, and in subclause (c) shall include all profits of the company up to the. date of liquidation, 4[but shall not, where the liquidation is consequent on the compulsory acquisition of its undertaking by the Government or a corporation owned or controlled by the Government under any law for the time being in force, include any profits of the company prior to three successive previous years immediately preceding the previous year in which such acquisition took place]. Explanation 3.-For the purposes of this clause,- (a) "concern" means a Hindu undivided family, or a firm or an association of persons or a body of individuals or a company; (b) a person shall be deemed to have a substantial interest in a concern, other than a company, if he is, at any time during the previous year, beneficially entitled to not less than twenty per cent of the income of such concern;] --------------------------------------------------------------------- 1 Inserted by the Finance Act, 1965, w.e.f. 1-4-1965. 2 Inserted by the Finance Act, 1966, w.e.f. 1-4-1966. 3 Inserted by the Finance Act, 1987, w.e.f. 1-4-1988. 4 Inserted by the Direct Taxes (Amendment) Act, 1964, w.r.e.f. 1-4-

5 Inserted by the Finance Act, 1987, w.e.f. 1-4-1988. --------------------------------------------------------------------- 1.4

(23) "firm", "partner" and "partnership" have the meanings respectively assigned to them in the Indian Partnership Act, 1932 4 (9 of 1932); but the expression "partner" shall also include any person who, being a minor has been admitted to the benefits of partnership; 5[(23A) "foreign company" means a company which is not a domestic company;]

(24) 6"income" includes- (i) profits and gains; (ii) dividend; 7[(iia) voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes 8[or by an association or institution referred to in

clause (21) or clause (23), or by a fund or trust or institution referred to in subclause (iv) or sub-clause (v) of clause (23C) of section 10]. Explanation.-For the purposes of this sub-clause, "trust" includes any other legal obligation;] --------------------------------------------------------------------- 1 Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. quit 2 Inserted by the Finance Act, 1964, w.e.f. 1-4-1964. 3 Renumbered for "(22A)" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4- 5 Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. 7 Inserted by the- Finance Act, 1972, w.e.f. 1-4-1973. 8 Substituted for 'or by a trust or institution of national

importance refer-red to in clause (d) of sub-section (1) of section 80F" by the Direct Tax Laws (Amendment), Act, 1989, w.e.f. 1-4-1989. Earlier, the said expression was substituted for " not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution' by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date. --------------------------------------------------------------------- 1.43 (iii) the value of any perquisite or profit in lieu of

salary taxable under clauses (2) and (3) of section 17; 1[(iiia) any special allowance 2 or benefit, other than perquisite included under sub-clause (iii), specifically granted to the assessee to meet expenses wholly, necessarily and exclusively for the performance of the duties of an office or employment of profit; (iiib) any allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at a place where he ordinarily resides or to compensate him for the increased cost of living;] (iv) the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative of the director or such person, and any sum paid by any such company in respect of any obligation which, but for such payment, would have been payable by the director or other person aforesaid; 3[(iva) the value of any benefit or perquisite, whether convertible into money or not, obtained by any representative assessee mentioned in clause (iii) or clause (iv) of sub-

section (1) of section 160 or by any person on whose behalf or for whose benefit any income is receivable by the representative assessee (such person being hereafter in this sub-clause referred to as the "beneficiary") and any sum paid by the representative assessee in respect of any obligation which, but for such payment, would have been payable by the beneficiary;] (v) any sum chargeable to income-tax under clauses (ii) and (iii) of section 28 or section 41 or section 59; 4[(va) any sum chargeable to income-tax under clause (iiia) of section 28;] 5[(vb)] any sum chargeable to income-tax under clause (iiib) of section 28; 6[(VC ) any sum chargeable to income-tax under clause (iiic) of section 28;] 7[(vd)] the value of any benefit or perquisite taxable under clause (iv) of section 28; 8[(ve) any sum chargeable to income-tax under clause (v) of section 28;] --------------------------------------------------------------------- 1 Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.r.e.f. 1-4-1962 2 Inserted by the Finance (No. 2) Act, 1980, w.e.f. 1-4-1980. 3 Inserted by the Finance Act, 1990, w.r.e.f. 1-4-1962. 4 Inserted, ibid, w.r.e.f. 1-4-1967. 5 Inserted by the Finance Act, 1990, w.r.e.f. 1-4-1972. 6 Renumbered for "(va)" by the Finance Act, 1990, w.e.f. 1-4- 1990. The original clause (va) was inserted by the Finance Act, 1964, w.e.f. 1-4-1964. 8 Inserted by the Finance Act, 1992, w.e.f. 1-4-1993. --------------------------------------------------------------------- 1.44 (vi) any capital gains chargeable under section 45; (vii) the profits and gains of any business of insurance carried on by a mutual insurance company or by a co-operative society, computed in accordance with section 44 or any surplus taken to be such profits and gains by virtue of provisions contained in the First Schedule; 1[(viii) Omitted by the Finance Act, 1988, with effect from April, 1988. It was inserted by the Finance Act, 1964, w.e.f 1-4-1964.] 2[(ix) any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever;] 3[(x)any sum received by the assessee from his employees as contributions to any provident fund or superannuation fund or any fund set up under the provisions of the Employees' State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees;] --------------------------------------------------------------------- 1 Prior to omission, sub-clause (viii) read as under: "(viii) any annuity due, or commuted value of any annuity paid, under the provisions of section 280D;" 2 Inserted by the Finance Act, 1972 w.e.f. 1-4-1972. 3 Inserted by the Finance Act, 1987 w.e.f. 1-4-1988. --------------------------------------------------------------------- 1.45 interest in the company or a relative of the director or the other person. 4. The word 'income' is of the widest amplitude and it must be given its natural and grammatical meaning. The definition of income

in section 2(24) is inclusive. The purpose of the definition is not to limit the meaning of 'income' but to widen its net and the several clauses therein are not exhaustive of the meaning of income; even if a receipt did not fall within the ambit of any of those clauses, it might still be income if it partook the nature of income. The words "other games of any sort' were of wide amplitude and their meaning was not confined to mere gambling or betting activities. Assuming that the expression "winnings" had acquired a particular meaning viz. receipts from activities of a gambling or betting nature only, it did not follow that monies received from non-gambling or non-betting activities were not included within the ambit of income. The assessee participated in a car rally and won a prize. The car rally was a contest, if not a race and the assessee entered the contest to win it. What he got was a return for his skill and endurance. It was "income" construed in its widest sense. Though it was casual in nature, it was nevertheless income.

(25) "Income-tax-Officer" means a person appointed to be an Income-tax Officer under 1[* * *] section 117; 2[(25A) "India" shall be deemed to include the Union territories of Dadra and Nagar Haveli, Goa, Daman and Diu and Pondicherry,- (a) as respects any period, for the purposes of section 6; and (b) as respects any period included in the previous year, for the purposes of making any assessment for the assessment year commencing on the 1st day of April, 1963, or for any subsequent year;]

(26) "Indian Company" means a company formed and registered under the Companies Act, 1956 (1 of 1956), and includes- (i) a company formed and registered under any law relating to companies formerly in force in any part of India (other than the State of Jammu and Kashmir 3[and the Union territories specified in sub-clause (iii) of this clause]); 4[(ia) a corporation established by or under a Central, State or Provincial Act; (ib) any institution, association or body which is declared

by the Board to be a company under clause (17);] (ii) in the case of the State of Jammu and Kashmir, a company formed and registered under any law for the time being in force in that State; 5[(iii) in the case of any of the Union territories of Dadra and Nagar ---------------------------------------------------------------------

1 The words 'sub-section (1) of' omitted by the Direct Tax Laws (Amendment) Act, 1989, w.r.e.f. 1-4-1988. Earlier, they were inserted by the Direct Tax Laws (Amendment.) Act, 1987, with effect from the same date. 2 Inserted by the Taxation Laws (Extension 'to Union Territories) Regulation, 1963, w.e.f. 1-4-1963. 3 Ibid. 4 Inserted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1971. 5 Inserted by the Taxation Laws (Extension to Union Territories) Regulation, 1963, w.e.f. 1-4-1963. --------------------------------------------------------------------- 1.46 Haveli, Goa, Daman and Diu, and Pondicherry, a company formed and registered under any law for the time being in force in that Union territory:] Provided that the 1[registered or, as the case may be, principal office of the company, corporation, institution, association or body] in all cases is in India; 4[ (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 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;] 6[(28B) "interest on securities" means,- (i) interest on any security of the Central Government or a State Government; (ii) interest on debentures or other securities for money issued by or on behalf of a local authority or a company or a corporation established by a Central, State or Provincial Act;]

(29) "legal representative" has the meaning assigned to it in

clause (11) of section 2 of the Code of Civil Procedure, 1908 7 (5 of 1908); 8[(29A) "long-term capital asset" means a capital asset which is not a short-.term capital asset; (29B) "long-term capital gain" means capital gain arising from the transfer of a long-term capital asset;] 9[(29C) "maximum marginal rate" means the rate of income-tax (including surcharge on income-tax, if any) applicable in relation to the highest slab of income in the case of an individual 10[association of --------------------------------------------------------------------- 1 Substituted for "registered office of the company" by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1971.

2 Prior to omission, clause (27) read as under:

"(27) 'Inspecting Assistant Commissioner' means a person appointed to be an Inspecting Assistant Commissioner of Income-tax

under sub-section (1) of section 117;

3 Substituted for "(2)" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 4 Inserted by the Finance Act, 1976, w.e.f. 1-6-1976. 5 Inserted by the Finance Act, 1988, w.e.f. 1-4-1989. 6 Inserted by the Finance Act, 1987, w.e.f. 1-4-1988. 7 Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. 8 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991. --------------------------------------------------------------------- 1.47 persons or, as the case may be, body of individuals] as specified in the Finance Act of the relevant year;]

(30)"non-resident" means a person who is not a 'resident', and for the purposes of sections 92, 93 1[* * *] and 168, includes a person who is not ordinarily resident within the meaning of sub-

section (6) of section 6;

(31) "person" includes- (i) an individual, (ii) a Hindu undivided family, (iii) a company, (iv) a firm, (v) an association of persons or a body of individuals, whether incorporated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses;

(32) "person who has a substantial interest in the company", in relation to a company, means a person who is the beneficial owner of shares, not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits, carrying not less than twenty per cent of the voting power;

(33) "prescribed" means prescribed by rules made under this Act;

(34) "previous year" means the previous year as defined in section 3;

(35) "principal officer", used with reference to a local authority or a company or any other public body or any association of persons or any body of individuals, means- (a) the secretary, treasurer, manager or agent of the authority, company, association or body, or (b) any person connected with the management or administration of the local authority, company, association or body upon whom the 2[Assessing] Officer has served a notice of his intention of treating him as the principal officer thereof;

(36) "Profession" includes vocation; 3[(36A) "public sector company" means any corporation established by or under any Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 19564 (1 of 1956);]

(37) "public servant" has the same meaning as in section 21 of the Indian Penal Code, 18605 (45 of 1860); 6[(37A) "rate or rates in force" or "rates in force", in relation to an assessment year or financial year, mean- --------------------------------------------------------------------- 1 The figure 113 omitted by the Finance Act, 1965, w.e.f. 1-4-1965. 2 Substituted for "Income-tax" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 3 Inserted by the Finance Act, 1987, w.e.f. 1-4-1987. 5 Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967. --------------------------------------------------------------------- 1.48 (i) for the purposes of calculating income-tax under the

first proviso to sub-section (5) of section 132, or computing

the income-tax chargeable under sub-section (4) of section

172 or sub-section (2) of section 174 or section 175 or sub-

section (2) of section 176 or deducting income-tax under section 192 from income chargeable under the head "Salaries" 1[* * *] or 2 [computation of the "advance tax" payable under Chapter XVII-C, in a case not falling under 3[section 115A or section 115B 4[or section 115BB or section 115E] or] section 164 5[or section 164A 6[* * *]] 7[or section 167B], the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year, and for the purposes of computation of the "advance Tax" payable under Chapter XVII-C 8[in a case falling under section 115A or section 115B 9[or section 115BB or section 115E] or section 164 10[or section 164A 11[* * *]] 12[or section 167B], the rate or rates specified in section 115A or 13[section 115B or section 115BB or section 115E or section 164 or section 164A 14[* * *1 15[or section 167B], as the case may be,] or the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year, whichever is applicable;] (ii) for the purposes of deduction of tax under sections 193, 194, 194A 16[194B] 17[, 194BB] 18[and 194D], the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year;] ---------------------------------------------------------------------

1 The words or sub-section (9) of section 80E from any payment referred to therein' omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. These words were inserted by the Finance Act, 1968, w.e.f. 1-4-1968. 2 Substituted for 'computation of the "advance tax" payable under Chapter XVII-C, the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year' by the Finance Act, 1970, w.e.f. 1-4-1971. 3 Inserted by the Finance Act, 1976, w.e.f. 1-6-1976. 4 Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 5 Ibid. 6 The words or section 167A" omitted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. These words were inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 7 Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. 8 Substituted for "in a case falling under section 164, the rate specified in that section' by the Finance Act, 1976, w.e.f. 1-6-1976. 9 Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 10 ibid. 11 The words "or section 167A" omitted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. These words were inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 12 Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. 13 Substituted for "section 115B or, as the case may be, section 164" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 14 The words "or section 167A" omitted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. These words were inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 15 Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. 16 Inserted by the Finance Act, 1972, w.e.f. 1-4-1972. 17 Inserted by the Finance Act, 1978, w.e.f. 1-4-1978. 18 Substituted for ", 194D and 195 by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991. --------------------------------------------------------------------- 1.49 1[(iii)for the purposes of deduction of tax under section 195, the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year or the rate or rates of income-tax specified in an agreement entered into by the Central Government under section 90, whichever is applicable by virtue of the provisions of section 90;]

(38) 2"recognised provident fund" means a provident fund which has been and continues to be recognised by the 3[Chief Commissioner or Commissioner] in accordance with the rules contained in Part A of the Fourth Schedule, and includes a provident fund established under a scheme framed under the Employees' Provident Funds Act, 1952 4 (19 of 1952);

5[(39) Omitted by the Finance Act, 1992, w.e.f. 1-4-1993]

(40)"regular assessment" means the assessment made under 6[sub-

section (3) of] section 143 or section 144; --------------------------------------------------------------------- 1 Substituted by the Finance Act, 1992, w.e.f. 1-6-1992. Prior to the substitution, subclause (iii), as inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991, read as under: "(iii) for the purposes of deduction of tax under section 195, the rate or rates of income-tax specified in section 115A or the rate or rates of income-tax specified in this behalf in the Finance Act of the relevant year, whichever is applicable;" 3 Substituted for "Commissioner" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

5 Prior to the omission, clause (39), as inserted by the Direct Tax Laws (Amendment) Act, 1989, read as under:

"(39) "registered firm" means a firm registered under the

provisions of clause (a) of sub-section (1) of section 185 or deemed

to be registered under the provisions of subsection (6) of that

section or under those provisions read with sub-section (7) of section 184;" Earlier, the following original clause was omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989:

"(39) 'registered firm' means a firm registered under the

provisions of clause (a) of sub-section (1) of section 185 or under

that provision read with sub-section (7) of section 184;" 6 Inserted by the Finance Act, 1990, w.r.e.f. 1-4-1989. --------------------------------------------------------------------- 1.50

(41)"relative", in relation to an individual, means the husband, wife, brother or sister or any lineal ascendant or descendant of that individual;

(42)"resident" means a person who is resident in India within the meaning of section 6; 1[(42A) 2["short-term capital asset"3 means a capital asset held by an assessee for not more than 4[thirty-six] months immediately preceding the date of its transfer":] 6[Provided that in the case of a share held in a company 7[or any other security listed in a recognised stock exchange in India or a unit of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963) or a unit of a Mutual Fund specified under clause (23D) of section 10], the provisions of this clause shall have effect as if for the words "thirty-six months", the words "twelve months" had been substituted.] Explanation 8[1].--In determining the period for which any capital asset is held by the assessee-- (a) in the case of a share held in a company in liquidation, there shall be excluded the period subsequent to the date on which the company goes into liquidation; (b) in the case of a capital asset which becomes the property of the assessee in the circumstances mentioned in

9[sub-section (1)] of section 49, there shall be included the period for which the asset was held by the previous owner referred to in the said section; 10[(c) in the case of a capital asset being a share or shares in an Indian company, which becomes the property of the assessee in consideration of a transfer referred to in clause (vii) of section 47, there shall be included the period for which the share or shares in the amalgamating company were held by the assessee;] 11[(d) in the case of a capital asset, being a share or any other security (hereafter in this clause referred to as the financial asset) subscribed to by the assessee on the basis of' his right to subscribe to such financial asset or subscribed to by the person in whose favour the assessee has renounced his right to subscribe to such financial asset, the period shall be reckoned from the date of allotment of such financial asset; --------------------------------------------------------------------- 1 Inserted by the Finance (No. 2) Act, 1962, w.e.f. 1-4-1962. 2 Substituted by the Finance Act, 1973, w.e.f. 1-4-1974. It was also amended by the Finance Act, 1966, w.e.f. 1-4-1966; Finance (No. 2) Act, 1967, w.e.f. 1-4-1967 and Finance Act, 1968, w.e.f. 1-4-1969. 4 Substituted for "sixty" by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978. 6 Inserted by the Finance Act, 1987, w.e.f. 1-4-1988. 7 Inserted by the Finance Act, 1994, w.e.f. 1-4-1995. 8 Ibid. 9 Substituted for "clauses (i) to (iii)" by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967. 10 Inserted by the Finance (No. 2) Act, 1967 w.e.f. 1-4-1967. 11 Inserted by the Finance Act, 1994, w.e.f. 1-4-1995. ---------------------------------------------------------------------- 1.51 (e) in the case of a capital asset, being the right to subscribe to any financial asset, which is renounced in favour of any other person, the period shall be reckoned from the date of the offer of such right by the company or institution, as the case may be, making such offer;] 1[(f)in the case of a capital asset, being a financial asset, allotted without any payment and on the basis of holding of any other financial asset, the period shall be reckoned from the date of the allotment of such financial asset;] (ii) in respect of capital assets other than those mentioned in clause (i), the period for which any capital asset is held by the assessee shall be determined subject to any rules which the Board may make in this behalf,] 2[Explanation 2.-For the purposes of this clause, the expression "security" shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 3 (42 of 1956) 4[(42B) "short-term capital gain" means capital gain arising from the transfer of a short-term capital asset;] 5[(42C) Omitted by the Finance Act, 1990, with effect from 1 April, 1990. Earlier, it was inserted by the Direct Tax Laws (Second Amendment) Act, 1989, with effect from the same date.]

6[(43) "tax" in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date;] --------------------------------------------------------------------- 1 Being inserted by the Finance Act, 1995, w.e.f. 1-4-1996. 2 Inserted by the Finance Act, 1994, w.e.f 1-4-1995. 3 Inserted by the Finance Act, 1987, w.e.f. 1-4-1988. 4 Prior to the omission, it read as under: 5 "(42C) 'security' means a Government security as defined in

clause (2) of section 2 of the Public Debt Act, 1944 (18 of 1944);" 6 Substituted by the Finance Act, 1965, w.e.f. 1-4-1965. --------------------------------------------------------------------- 1.52 1[(43A) "tax credit certificate" means a tax credit certificate granted to any person in accordance with the provisions of Chapter XXII-B and any scheme made thereunder;] 2[(43B) Omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from 1 April, 1989.]

3[(44) "Tax Recovery Officer" means any Income-tax Officer who may be authorised by the Chief Commissioner or Commissioner, by general or special order in writing, to exercise the powers of a Tax Recovery Officer;]

(45)"total income" means the total amount of income referred to in section 5, computed in the manner laid down in this Act;

4[(46) * * *]

(47) 5["transfer", in relation to a capital asset, includes,- (i) the sale, exchange or relinquishment of the asset; or (ii) the extinguishment of any rights therein; or (iii) the compulsory acquisition thereof under any law; or (iv) in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment;] 6[or] 7[(v) any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of --------------------------------------------------------------------- 1 Inserted by the Finance Act, 1965, w.e.f. 1-4-1965. This clause needs to be omitted consequent upon the omission of Chapter XXII-B by the Finance Act, 1990, w.e.f. 1-4-1990. 2 Prior to the omission, clause (43B), as inserted by the Finance (No. 2) Act, 1971, w.e.f. 1-1-1972, read as under: "(43B) "Tax Recovery Commissioner" means a Commissioner or an Assistant Commissioner of Income-tax who may be authorised by the Central Government, by general or special notification in the Official Gazette, to exercise the powers of a Tax Recovery Commissioner;" 3 Substituted by the Direct Tax Laws (Amendment). Act, 1987, w.r.e.f. 1-4-1988 [as amended by the Direct Tax Laws (Amendment) Act,

1989]. Prior to the substitution, clause (44), as substituted by the Finance Act, 1963, w.r.e.f. 1-4-1962, read as under:

"(44) "Tax Recovery Officer" means- (i) a Collector or an Additional Collector; (ii) any such officer empowered to effect recovery of arrears of land revenue or other public demand under any law relating to land revenue or other public demand for the time being in force in the State as may be authorised by the State Government, by general or special notification in the Official Gazette, to exercise the powers of a Tax Recovery Officer; (iii)any Gazetted Officer of the Central or a State Government who may be authorised by the Central Government, by general or special notification in the Official Gazette, to exercise the powers of a Tax Recovery Officer;" 4 Omitted by the Finance Act, 1965, w.e.f. 1-4-1965. 5 Substituted for "transfer" in relation to a capital asset, includes the sale, exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law;" by the Taxation Laws (Amendment), Act 1984, w.e.f. 1-4-1985. 6 Inserted by the Finance Act, 1987, w.e.f. 1-4-1988. 7 Ibid. --------------------------------------------------------------------- 1.53 a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 1 (4 of 1882); or (vi) any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property. Explanation.-For the purposes of sub-clauses (v) and (vi), "immovable property" shall have the same meaning as in clause (d) of section 269UA;]

2[(48) Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.]

"Previous year" defined 4. 3[3. "Previous year" defined 4

(1) Save as otherwise provided in this section, "previous year" for the purposes of this Act, means the financial year immediately preceding the assessment year: ---------------------------------------------------------------------

2 Prior to the omission, clause (48) read as under;

"(48) "unregistered firm" means a firm which is not a registered firm." Earlier, it was omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 but reintroduced by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. the same date. 3 Substituted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1-4-1989. Prior to the substitution, section 3, as amended by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988, read as under:

"Previous year" defined.-(1) For the purposes of this Act, "previous year" means- (a) the financial year immediately preceding the assessment year; or (b) if the accounts of the assessee have been made up to a date within the said financial year, then, at the option of the assessee, the twelve months ending on such date; or (c) in the case of any person or business or class of persons or business not falling within clause (a) or clause (b), such period as may be determined by the Board or by any authority authorised by the Board in this behalf; or (d) in the case of a business or profession newly set up in the said financial year, the period beginning with the date of the setting up of the business or profession and- (i) ending with the said financial year, or (ii) if the accounts of the assessee have been made up to a date within the said financial year, then,, at the option of the assessee, ending on that date, or (iii)ending with the period, if any, determined under clause (c), as the case may be; or (e) in the case of a business or profession newly set up in the twelve months immediately preceding the said financial year- (i)if the accounts of the assessee have been made up to a date within the said financial year and the period from the date of the setting up of the business or profession to such date does not exceed twelve months, then, at the option of the assessee, such period, or (ii)if any period has been determined under clause (c), then the period beginning with the date of the setting up of the business or profession and ending with that period, as the case may be; or (f) where the assessee is a partner in a firm and the firm has been assessed as such, then, in respect of the assessee's share in the income of the -> -> --------------------------------------------------------------------- 1.54 Provided that, in the case of a business or profession newly set up, or a source of income newly coming into existence, in the said financial year, the previous year shall be the period beginning with the date of setting up of the business or profession or, as the case may be, the date on which the source of income newly comes into existence and ending with the said financial year.

(2) "Previous year", in relation to the assessment year commencing on the 1st day of April, 1989, means the period which begins with the date immediately following the last day of the previous year relevant to the assessment year commencing on the 1st day of April, 1988, and ends on the 31st day of March, 1989: 1 Provided that where the assessee has adopted more than one period as the "previous year" in relation to the assessment year commencing on the 1st day of April, 1988, for different sources of his income, the previous year in relation to the assessment year commencing on the 1st day of April, 1989, shall be reckoned separately in the manner aforesaid in respect of each such source of income, and the longer or the longest of the periods so reckoned shall be the previous year for the said assessment year: 2[Provided further that in the case of a business or profession newly set up, or a source of income newly coming into existence on or after the, 1st day of April, 1987, but before the 1st day of April, 1988 and where the --------------------------------------------------------------------- -> -> firm, the period determined as the previous year for the assessment of the income of the firm; or (g) in respect of profits and gains from life insurance business, the year immediately preceding the assessment year for which annual accounts are required to be prepared under the Insurance Act, 1938 (4 of 1938), or under that Act read with section 43 of the Life Insurance Corporation Act, 1956 (31 of 1956).

(2) Where an assessee has newly set up a business or profession in the said financial year and his accounts are made up to a date in the assessment year in respect of a period not exceeding twelve months from the date of such setting up, then, notwithstanding anything

contained in sub-clause (iii) of clause (d) of sub-section (1), the assessee shall, in respect of that business or profession, at his option, be deemed to have no previous year for the said assessment year under that clause and such option shall, in relation to the immediately succeeding assessment year, have effect as an option

exercised under sub-clause (i) of clause (e) of sub-section (1).

(3) Subject to the other provisions of this section, an assessee may have different previous years in respect of separate sources of his income.

(4) Where in respect of a particular source of income or in respect of a business or profession newly set up, an assessee has once exercised the option under clause (b) or sub-clause (ii) of clause (d)

or sub-clause (i) of clause (e) of sub-section (1) or has once been assessed, then, he shall not, In respect of that source, or, as the case may be, business or profession, be entitled to vary the meaning of the expression "previous year" as then applicable to him, except with the consent of the Assessing Officer and upon such conditions as the Assessing Officer may think fit to impose." 1 See rule 125. 2 Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. --------------------------------------------------------------------- 1.55 accounts in relation to such business or profession or source of income have not been made up to the 31st day of March, 1988, the "previous year" in relation to the assessment year commencing on the 1st day of April, 1989, shall be the period beginning with the date of setting up of the business or profession or, as the case may be, the date on which the source of income newly comes into existence and ending on the 31st day of March, 1989: 1 Provided also that where the assessee has adopted one or more periods as the "previous year" in relation to the assessment year commencing on the 1st day of April, 1988, for any source or sources of his income, in addition to the business or profession or source of income referred to in the second proviso, the previous year in relation to the assessment year commencing on the 1st day of April, 1989, shall be reckoned separately in the manner aforesaid in respect of each such source of income, and the longer or the longest of the periods so reckoned shall be the previous year in relation to the said assessment year.]

(3)Where the previous year in relation to the assessment year commencing on the 1st day of April, 1989, referred to in sub-section

(2) exceeds a period of twelve months, the provisions of this Act shall apply subject to the modifications specified in the rules in the Tenth Schedule.] --------------------------------------------------------------------- --------------------------------------------------------------------- CHAP BASIS OF CHARGE. CHAPTER II BASIS OF CHARGE

Charge of income-tax 1. 4. Charge of income-tax 1

(1)Where any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and 2[subject to the provisions (including provisions for the levy of additional income-tax) of, this Act] in respect of the total income of the previous year * *] of every person: Provided that where by virtue of any provision of this Act income-tax is to be charged in respect of the income of a period other than the previous year, income-tax shall be charged accordingly.

(2)In respect of income chargeable under sub-section (1), income- tax shall be deducted at the source or paid in advance, where it is so deductible or payable under any provision of this Act. -------------------------------------------------------------------- 1 Substituted for 'subject to the provisions of, this Act" by the Direct Tax Laws (Amendment)' Act, 1987, w.e.f. 1-4-1989. This amendment was consequent to the insertion of Chapter XIV-B (comprising of section 158B), but after the withdrawal of the chapter, without even coming into effect, this amendment too needs to be undone. 3 The words "or previous years, as the case may be," omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. --------------------------------------------------------------------- 1.57 liability arising from contracts as well as torts. it would be incorrect to assume that the share of an assessee in a form consists only of income yielding assets. It equally comprises of risk and liability of paying debts on behalf of the firm. An assessee cannot, under the Hindu law make a declaration whereby the joint family would have to bear the risk and liability of the business and such a declaration should be ignored altogether. 6.Where payment is made to compensate for the loss of the use of any goods in which the assessee does not carry on any business or the payment is a just equivalent of the cost incurred by the assessee, but excess accrues due to fortuitous circumstances or is a windfall, then ccrual may be a receipt, but it would not be income arising from business, and, therefore, not taxable under the Act. 7.In the hands of an assessee, who maintains his accounts on the mercantile system, sales tax collected but not paid to the Sales Tax Department pending adjudication of dispute over his liability to pay sales tax, is a revenue receipt of the year in which it is collected. 8.Where a company goes into liquidation and the liquidator distributes the assets of the company among the shareholders, what each shareholder gets is in lieu of his shareholding. That is the worth, the value and the price of his shareholding. A shareholder participates in the distribution of the assets of a company on its liquidation by virtue of and because of his shareholding. It is true that a liquidator does not sell the shares. It is equally true that there is no transfer of shares by the shareholder to the liquidator or to any other person. That is not really necessary. So long as money is received in lieu of shares, there is a receipt and where an assessee is a dealer in shares, any surplus amount received by him constitutes his income. The money received by the assessee in lieu of its shareholding partakes of the same character in which he held the shares. If he held the shares as stock-in-trade, the money received by it represents his income i.e. a revenue receipt in its hands. If it held them by way of investment, the money it receives represents a capital receipt by it.

Scope of total income 1. 5. Scope of total income 1.

(1)Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which- (a) is received or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year; or (c) accrues or arises to him outside India during such year: Provided that, in the case of a person not ordinarily resident in

India within the meaning of sub-section (6) of section 6, the income which accrues or arises to him outside India shall not be so included unless it is derivedfrom a business controlled in or a profession set up in India.

(2) Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which - (a) is received or is deemed to be received in India in such year by or on behalf of such person; or --------------------------------------------------------------------- 1.58 (b) accrues or arises or is deemed to accrue or arise to him in India during such year. Explanation 1.-Income accruing or arising outside India shall not be deemed to be received in India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India. Explanation 2.-For the removal of doubts, it is hereby declared that income which has been included in the total income of a person on the basis that it has accrued or arisen or is deemed to have accrued or arisen to him shall not again be so included on the basis that it is received or deemed to be received by him in India. 1[5A. Apportionment of income between spouses governed by Portuguese Civil Code

(1) Where the husband and wife are governed by the system of community of property (known under the Portuguese Civil Code of 1860 as "COMMUNIAO DOS BENS") in force in the State of Goa and in the Union territories of Dadra and Nagar Haveli and Daman and Diu, the income of the husband and of the wife under any head of income shall not be assessed as that of such community of property (whether treated as an association of persons or a body of individuals), but such income of the husband and of the wife under each head of income (other than under the head "Salaries") shall be apportioned equally between the husband and the wife and the income so apportioned shall be included separately in the total income of the husband and of the wife respectively, and the remaining provisions of this Act shall apply accordingly.

(2) Where the husband or, as the case may be, the wife governed by the aforesaid system of community of property has any income under the head --------------------------------------------------------------------- 1 Inserted by the Finance Act, 1994, w.r.e.f. 1-4-1963. --------------------------------------------------------------------- 1.59 "Salaries", such income shall be included in the total income of the spouse who has actually earned it.]

Residence in India 1. 6. Residence in India 1. For the purposes of this Act,-

(1) An individual is said to be resident in India in any previous year, if he- (a) is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more; or 2[(b) * * *] (c) having within the four years preceding that year been in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year. 3[Explanation.-In the case of an individual,- (a) being a citizen of India, who leaves India in any previous year 4 [as a member of the crew of an Indian ship as

defined in clause (18) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958), or] for the purposes of employment outside India, the provisions of subclause (c) shall apply in relation to that year as if for the words "sixty days", occurring therein, the words "one hundred and eighty two days" had been substituted; (b) being a citizen of India, or a person of Indian origin within the meaning of Explanation to clause (e) of section 115C, who, being outside India, comes on a visit to India in any previous year, the provisions of sub-clause (c) shall apply in relation to that year as if for the words "sixty days", occurring therein, the words 5["one hundred and eighty-two days"] had been substituted.]

(2) A Hindu undivided family, firm or other association of persons is said to be resident in India in any previous year in every case except where during that year the control and management of its affairs is situated wholly outside India. -------------------------------------------------------------------- 2 Omitted by the Finance Act, 1982, w.e.f. 1-4-1983. 3 Substituted by the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1990. Prior to the substitution, the Explanation, as substituted by the Finance Act, 1982, w.e.f. 1-4-1983, read as under: 3[Explanation : In the case of an individual, being a citizen of India,- (a) who leaves India in any previous year for the purposes of employment outside India, the provisions of sub-clause (c) shall apply in relation to that year as if for the words "sixty days", occurring therein, the words "one hundred and eighty-two days' had been substituted; (b) who, being outside India, comes on a visit to India in any previous year, the provisions of sub-clause (c) shall apply in relation to that year as if for the words 'sixty days", occurring therein, the words "ninety days" had been substituted." It was originally inserted by the Finance Act, 1978, w.e.f. 1-4-

4 Inserted by the Finance Act, 1990, w.e.f. 1-4-1990. 5 Substituted for "one hundred and fifty days" by the Finance Act, 1994, w.e.f. 1-4-1995. --------------------------------------------------------------------- 1.60

(3) A company is said to be resident in India in any previous year, if- (i) it is an Indian company; or (ii) during that year, the control and management of its affairs is situated wholly in India.

(4) Every other person is said to be resident in India in any previous year in every case, except where during that year the control and management of his affairs is situated wholly outside India.

(5) If a person is resident in India in a previous year relevant to an assessment year in respect of any source of income, he shall be deemed to be resident in India in the previous year relevant to the assessment year in respect of each of his other sources of income.

(6) A person is said to be "not ordinarily resident" in India in any previous year if such person is- (a) an individual who has not been resident in India in nine out of the ten previous years preceding that year, or has not during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and thirty days or more; or (b) a Hindu undivided family whose manager has not been resident in India in nine out of the ten previous years preceding that year, or has not during the seven previous years preceding that year been in India for a period of, or periods amounting in all to, seven hundred and thirty days or more.

Income deemed to be received. 7. Income deemed to be received The following incomes shall be deemed to be received in the previous year:- (i) the annual accretion in the previous year to the balance at the credit of an employee participating in a recognised provident fund, to the extent provided in rule 6 of Part A of the Fourth Schedule; (ii) the transferred balance in a recognised provident fund,

to the extent provided in sub-rule (4) of rule 11 of Part A of the Fourth Schedule.

Dividend income. 8. Dividend income 1[For the purposes of inclusion in the total income of an assessee,- (a) any dividend] declared by a company or distributed or paid by it within the meaning of sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) or sub-clause (e)

of clause (22) of section 2 --------------------------------------------------------------------- 1 Substituted for 'For the purposes of inclusion in the total income of an assessee, any dividend' by the Finance Act, 1965, w.e.f. 1-4-1965. --------------------------------------------------------------------- 1.61 shall be deemed to be the income of the previous year in which it is so declared, distributed or paid, as the case may be; 1[(b) any interim dividend shall be deemed to be the income of the previous year in which the amount of such dividend is unconditionally made available by the company to the member who is entitled to it.]

Income deemed to accrue or arise in India 2. 9. Income deemed to accrue or arise in India 2.

(1) The following incomes shall be deemed to accrue or arise in India- 3(i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India 4[* or through the transfer of a capital asset situate in India. Explanation.-For the purposes of this clause- (a) in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India; (b) in the case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operation,., which are confined to the purchase of goods in India for the purpose of export; 5[* * *] 6[(c) in the case of a non-resident, being a person engaged in the business of running a news agency or of publishing newspapers, magazines or journals, no income shall be deemed to accrue or arise in India to him through or from activities which are confined to the collection of news and views in India for transmission out of India;] 7[ (d) in the case of a non-resident, being-

(1) an individual who is not a citizen of India; or

(2) a firm which does not have any partner who is a citizen of India or who is resident in India; or

(3) a company which does not have any shareholder who is a citizen of India or who is resident in India, --------------------------------------------------------------------- 1 Inserted by the Finance Act, 1965, w.e.f. 1-4-196 4 The words "or through or from any money lent at interest and brought into India in cash or in kind" omitted by the Finance Act, 1976, w.e.f. 1-6-1976. 5 Proviso omitted by the Finance Act, 1964, w.e.f. 1-4-1964. 6 Inserted by the Finance Act, 1983, w.r.e.f. 1-4-1962. 7 Inserted by the Taxation Laws (Amendment) Act, 1984, w.r.e.f. 1-4-1982. --------------------------------------------------------------------- 1.62 no income shall be deemed to accrue or arise in India to such individual, firm or company through or from operations which are confined to the shooting of any cinematography film in India;] (ii) income which falls under the head "Salaries" if it is earned in India. 1[Explanation.-For the removal of doubts, it is hereby declared that income of the nature referred to in this clause payable for service rendered in India shall be regarded as income earned in India;] (iii)income chargeable under the head "Salaries" payable by the Government to a citizen of India for service outside India; (iv) a dividend paid by an Indian company outside India; 2[(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 from any source outside India; or (c) a person who is a non-resident, 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 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 utilised 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 from 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, de sign, 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: --------------------------------------------------------------------- 1 Inserted by the Finance Act, 1983, w.r.e.f. 1-4-1979. 2 Clauses (v), (vi) and (vii) inserted by the Finance Act, 1976, w.e.f. 1-6-1976. --------------------------------------------------------------------- 1.63 1[Provided further 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 payment made by a person, who is a resident, for the transfer of all or any rights (including the granting of a licence) in respect of computer software supplied by a nonresident manufacturer along with a computer or computer-based equipment under any scheme approved under the Policy on Computer Software Export, Software Development and Training, 1986 of the Government of India.] Explanation 1.-For the purposes of the 2[first] 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 3[Assessing] 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 licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in --------------------------------------------------------------------- 1 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991. 2 Substituted for "foregoing", ibid. 3 Substituted for "Income-tax" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. --------------------------------------------------------------------- 1.64 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-clauses (i) to (v); 1[Explanation 3.-For the purposes of this clause, the expression "computer software" shall have the meaning assigned to it in clause (b) of the Explanation to section 80HHE;] (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: 2[Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of an agreement made before the 1st day of April, 1976, and approved by the Central Government.] 3[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.] Explanation 4 [2].-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 include 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".]

(2) Notwithstanding anything contained in sub-section (1), any pension payable outside India to a person residing permanently outside India shall not be deemed to accrue or arise in India, if the pension is payable to a person referred to in Article 314 of the Constitution or to a person who, having been appointed before the 15th day of August, 1947, to be a Judge of the Federal Court or of a High Court within the meaning of the Government of India Act, 1935, continues to serve on or after the commencement of the Constitution as a Judge in India. --------------------------------------------------------------------- 1 Inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991. 2 Inserted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1977. 3 Ibid. 4 Ibid. --------------------------------------------------------------------- 1.65 Where a foreign agent of Indian exporter operates in his own country and no part of his income arises in India and his commission is usually remitted directly to him and is not received by him or on his behalf in India, the agent is not liable to income-tax in India on the commission. A non-resident will not be liable to tax in India, on any income attributable to operations confined to purchase of goods in India for export even though the nonresident has an office or agency in India for this purpose. Where a non-resident allows an Indian customer facilities of extended credit for payment there would be no assessment merely for this reason provided that the contracts to sell were made outside India and the sales were made on a principal to principal basis. Section 9 does not seek to bring into the tax net the profits of a non-resident which cannot reasonably be attributed to operations carried out in India. Even if there be a business connection in India the whole of the profit accruing or arising from the business connection is not deemed to accrue or arise in India. It is only that portion of the profit which can reasonably be attributed to the operations of the business carried out in India which is liable to income-tax. 1.66 5. The mere existence of an agency, established by a non- resident in India, will not be sufficient to make the non-resident liable to tax, if the sole function of the agency is to purchase goods for export. 6. Where shares in Indian companies are allotted in consideration for the machinery and plant, the income embedded in the payments would be received in India as the shares in the Indian companies are located in India and would accordingly attract liability to income-tax as income received in India. 1.67 CHAP INCOMES WHICH DO NOT FORM PART OF TOAL INCOME. CHAPTER III INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME

Incomes not included in total income. 10. Incomes not included in total income In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included-

(1) agricultural income;

(2) 1[subject to the provisions of sub-section (2) of section 64,] any sum received by an individual as a member of a Hindu undivided family, where such sum has been paid out of the income of the family, or, in the case of any impartible estate, where such sum has been paid out of the income of the estate belonging to the family; 2[(2A) in the case of a person being a partner of a firm which is separately assessed as such, his share in the total income of the firm. Explanation.-For the purposes of this clause, the share of a partner in the total income of a firm separately assessed as such shall, notwithstanding anything contained in any other law, be an amount which bears to the total income of the firm the same proportion as the amount of his share in the profits of the firm in accordance with the partnership deed bears to such profits;]

3[(3) any receipts which are of a casual and non-recurring nature, 4[to the extent such receipts do not exceed five thousand rupees in the aggregate:] 5[Provided that where such receipts relate to winnings from races including horse races, the provisions of this clause shall have effect as if for the words "five thousand rupees", the words "two thousand five hundred rupees" had been substituted: Provided further that) this clause shall not apply to- (i) capital gains chargeable under the provisions of section 45; or --------------------------------------------------------------------- 1 Inserted by the Taxation Laws (Amendment) Act, 1970 w.e.f. 1-4-

2 Inserted by the Finance Act, 1992, w.e.f. 1-4-1993. Earlier, clause (2A) was inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989 but was omitted by the Direct Tax Laws (Amendment) Act, 1989, with effect from the same date. 3 Substituted by the Finance Act, 1972, w.e.f. 14-1972. Section 59 of the said Finance Act has made the following special provision in this regard: "59. Certain casual and non-recurring receipts not to be included in the total income for the assessment year 1972-73.- Notwithstanding the amendments made by this Act to the Income-tax Act, in computing, in the case of any person, the total income of a previous year relevant to the assessment year commencing on the 1st

day of April, 1972, any income falling within clause (3) of section 10 of the Income-tax Act as it stood immediately before the 1st day of April, 1972, shall not be included." 4 Substituted for 'not being winnings from lotteries, to the extent such receipts do not exceed one thousand rupees in the aggregate' by the Finance Act, 1986, w.e.f. 1-4-1987. 5 Substituted for 'Provided that' by the Finance Act, 1992, w.e.f. 1-4-1992. --------------------------------------------------------------------- 1.68 (ii) receipts arising from business or the exercise of a profession or occupation; or (iii) receipts by way of addition to the remuneration of an employee;] I[* * *] 2[(iv)* * * *]

3[(4)(i) in the case of a non-resident, any income by way of interest on ---------------------------------------------------------------------- 1 The word 'or' omitted by the Finance Act, 1992, w.e.f. 1-4-1992. Earlier, it was inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991. 2 Omitted by the Finance Act, 1992, w.e.f. 1-4-1992. Prior to the omission, clause (iv), as inserted by the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991, read as under: "(iv) winnings from races including horse races;"

3 Substituted for clauses (4) and (4A) by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Prior to the substitution,

clause (4), as amended by the Finance Act, 1964, w.e.f. 1-4-1964, and clause (4A), as inserted by the Finance Act, 1964, w.e.f. 1-4-1965; amended by the Finance Act, 1968, w.e.f. 1-4-1969 and substituted by the Finance Act, 1982, w.e.f. 1-4-1982, read as under: -> -> 1.69 such securities or bonds as the Central Government may, by notification in the Official Gazette, specify in this behalf, including income by way of premium on the redemption of such bonds; 1[(ii) 2 in the case of an individual, any income by way of interest on moneys standing to his credit in a Non-Resident (External) Account in any bank in India in accordance with the Foreign Exchange Regulation Act, 1973 (46 of 1973), and the rules made thereunder: Provided that such individual is a person resident outside India as defined in clause (q) of section 23 of the said Act or is a person who has been permitted by the Reserve Bank of India to maintain the aforesaid Account;] ---------------------------------------------------------------------

-> -> "(4) in the case of a non-resident, any income from interest on such securities as the Central Government may, by notification in the Official Gazette, specify in this behalf, or any income from interest on, or from premium on the redemption of, any bonds issued by the Central Government under a loan agreement between the Central Government and the International Bank for Reconstruction and Development or under a loan agreement between the Central Government and the Development Loan Fund of the United States of America or by any industrial undertaking or financial corporation in India under a loan agreement with the said Bank or Fund, as the case may be, which is guaranteed by the Central Government; (4A) in the case of a per-son resident outside India, any income from interest on moneys standing to his credit in a Non-Resident (External) Account in any bank in India in accordance with the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder. Explanation.-In this clause, 'person resident outside India" shall have the meaning assigned to it in clause (q) of section 2 of the Foreign Exchange Regulation Act, 1973 (46 of 1973);" 1 Substituted by the Finance (No. 2) Act, 1991, w.e.f. 1-4-1991. Prior to the substitution, sub-clause (ii) read as under: "(ii) in the case of an individual, who is a person resident outside India as defined in clause (q) of section 2 of the Foreign Exchange Regulation Act, 1973 (46 of 1973), any income by way of interest on moneys standing to his credit in a Non-Resident (External) Account in any bank in India in accordance with the said Act and the rules made thereunder;" ---------------------------------------------------------------------- 1.70

August, 1990 would be eligible for exemption under section 10(4)(ii) in respect of NRE/FCNR accounts maintained upto 30th June, 1991.

[(4A) Substituted by clause 10(4)(ii), supra, by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1 April, 1989.] 1[(4B) in the case of an individual.. being a citizen of India or a person of Indian origin, who is a non-resident, any income from interest on such savings certificates issued by the-Central Government as that Government may, by notification in the Official Gazette, specify in this behalf: Provided that the individual has subscribed to such certificates in convertible foreign exchange remitted from a country outside India in accordance with the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder. Explanation.-For the purposes of this clause,- (a) a per-son shall be deemed to be of Indian origin if he, or either of his parents or any of his grand-parents, was born in undivided India; (b) "convertible foreign exchange" means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Regulation Act, 1973 (46 of 1973), and any rules made thereunder;]

2[(5) 'in the case of an individual, the value of any travel concession or --------------------------------------------------------------------- 1 Inserted by the Finance Act, 1982, w.e.f. 1-4-1983. 2 Substituted by the Direct Tax Laws (Second Amendment) Act, 1989,

w.r.e.f. 1-4-1989. Prior to the substitution, clause (5), as substituted by the Taxation Laws (Amendment) Act, 1970, w.r.e.f. 14- 1962 and amended by the Finance Act, 1975, w.e.f. 14-1975, read as under:

"(5) subject to such conditions as the Central Government may prescribe, in the case of an individual being a citizen of India,- (i) in relation to any assessment year not being an assessment year commencing after the 1st day of April, 1970, the value of any travel concession or assistance received by or due to such individual,- (a)from his employer for himself, his spouse and children, in connection with his proceeding on leave to his home-district in India; (b)from his employer or former employer for himself, his spouse and children, in connection with his proceeding to his home-district in India after retirement from service or after the termination of his service; (ii) in relation to any other assessment year, the value of any travel concession or assistance received by or due to such individual,- (a)from his employer for himself and his family, in connection with his proceeding on leave to any place in India; (b)from his employer or former employer for himself, and his family, in connection with his proceeding to any place in India after retirement from service or after the termination of his service: Provided that the amount exempt under item (a) or item (b) of this sub-clause shall not, except in such cases and under such circumstances, as may be prescribed, having regard to the travel concession or assistance granted to the employees of the Central Government, exceed the value of the travel concession or assistance which would have been received by or due to the individual in connection with his proceeding to his home district in India on leave or, as the case may be, after retirement from service -> -> 1.71 assistance received by, or due to, him,- (a) from his employer for himself and his family, in connection with his proceeding on leave to any place in India; (b) from his employer or former employer for himself and his family, in connection with his proceeding to any place in India after retirement from service or after the termination of his service, subject to such conditions as may be prescribed (including conditions as to number of journeys and the amount which shall be exempt per head) having regard to the travel concession or assistance granted to the employees of the Central Government: Provided that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel. Explanation.-For the purposes of this clause, "family", in relation to an individual, means- (i) the spouse and children of the individual; and (ii) the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual;] 2. Home district: Meaning.-The following criteria have been laid down for determining home district for the purposes of section

10(5): --------------------------------------------------------------------- -> -> or after the termination of his service. Explanation.-For the purposes of this sub-clause, "family", in relation to an individual, means- (i) the spouse and children of the individual; and (ii) the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual."

The new clause (5) substituted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1-4-1989 was again substituted by the Direct Tax Laws (Second Amendment) Act, 1989 with effect from the same date making the earlier amendment of academic interest only. --------------------------------------------------------------------- 1.72 (a) the place declared by the assessee is one which requires his physical presence at intervals, for discharging various domestic or social obligations and if so, after his entry into service he had been visiting that place frequently; or (b) the assessee owns residential property in the place or is a member of the joint family having such property there; or (c) his near relations are resident in that place; or (d) prior to his entry into service he had been living there for some years. If any of these conditions is satisfied, the assessee may be allowed to claim a particular place as his home district. 1[(5A) in the case of an individual who is not a citizen of India and is a non-resident, who comes to India solely in connection with the shooting of a cinematograph film in India by the individual, firm or company referred to in clause (d) of the Explanation to clause (i)

of sub-section (1) of section 9, any remuneration received by him for rendering any service in connection with such shooting;] 2[(5B) in the case of an individual who renders services as a technician in the employment (commencing from a date after the 31st day of March, 1993) of the Government or of a local authority or of any corporation set up under any special law or of any such institution or body established in India for carrying on scientific research as is approved for the purposes of this clause or sub-clause

(viia) of clause (6) by the prescribed authority or in any business carried on in India and the individual was not resident in India in any of the four financial years immediately preceding the financial year in which he arrived in India and the tax on his income for such services chargeable under the head "Salaries" is paid to the Central Government by the employer (which tax, in the case of an employer, being a company, may be paid notwithstanding anything contained in section 200 of the Companies Act, 19563) (1 of 1956), the tax so paid by the employer for a period not exceeding forty-eight months commencing from the date of his arrival in India: Provided that the Central Government may, if it considers it necessary or expedient in the public interest so to do, waive the condition relating to non-residence in India as specified in this clause in the case of any individual who is employed in India for designing, erection or commissioning of machinery or plant or supervising activities connected with such designing, erection or commissioning. Explanation.-For the purposes of this clause, "technician" means a person having specialised knowledge and experience in- (i) constructional or manufacturing operations, or in mining or in the generation of electricity or any other form of power, or (ii) agriculture, animal husbandry, dairy farming, deep sea fishing or ship building, or (iii) such other field as the Central Government may, having regard to availability of Indians having specialised knowledge and --------------------------------------------------------------------- 1 Inserted by the Taxation Laws (Amendment) Act, 1984, w.r.e.f. 1-4-

2 Inserted by the Finance Act, 1993, w.e.f. 1-4-1994. ---------------------------------------------------------------------- 1.73 experience therein, the needs of the country and other relevant circumstances, by notification' in the Official Gazette, specify, who is employed in India in a capacity in which such specialised knowledge and experience are actually utilised;]

(6) in the case of an individual who is not a citizen of India,- 2[(i) 3 subject to such conditions as the Central Government may prescribe, passage moneys or the value of any free or concessional passage received by or due to such individual- (a) from his employer, for himself, his spouse and children, in connection with his proceeding on home leave out of India; 4 [(aa) from his employer, for his children having full time education in any educational institution outside India, in connection with their proceeding to India during vacation;] (b) from his employer or former employer for himself, his spouse and children, in connection with his proceeding to his home country out of India after retirement from service in India or after the termination of such service;] 5[(ii) the remuneration received by him as an official, by whatever name --------------------------------------------------------------------- 1 The fields of (i) grading and evaluation of diamonds for diamond export or import trade; (ii) cookery; and (iii) information technology including computer architecture systems platforms and associated technology, software development process and tools have been specified: 2 Substituted by the Taxation Laws (Amendment) Act, 1970, w.r.e.f 1-4-1962. 4 Inserted by the Finance (No. 2) Act, 1977, w.r.e.f. 1-4-1972. 5 Substituted for sub-clauses (ii) to (v) by the Finance Act, 1988, w.e.f. 1-4-1989. Prior to the substitution, sub-clauses (ii) to (v) read as under: "(ii) the remuneration received by him as ambassador, high commissioner, envoy, minister, charged affaires, commissioner, counsellor or the secretary, adviser or attache of an embassy, high commission, legation or commission of a foreign State, for service in such capacity; (iii) the remuneration received by him as a consul de carrier, whether called a consul general, consul, vice- consul, consular agent, pro-consul or by any other name, of a foreign State for service in such capacity; (iv) the remuneration received by him as a trade commissioner or other official representative in India of the Government of a foreign State (not holding office as such in an honorary capacity), if the remuneration of the corresponding officials, if any, of the Government resident for similar purposes in the country concerned enjoys a similar exemption in that country; (v) the remuneration received by him as a member of the staff of any of the officials referred to in clause (ii), clause (iii) or clause (iv), if the member- (a) is a subject of the country represented-, (b) is not engaged in any business or profession or employment in India otherwise than as a member of such staff; and further, where the individual is a member of the staff of any official referred to in clause (iv) if the country represented has made corresponding provisions for similar exemptions in the case of members of the staff of the corresponding officials of the Government;". 1.74 called, of an embassy, high commission, legation, commission, consulate or the trade representation of a foreign State, or as a member of the staff of any of these officials, for service in such capacity: Provided that the remuneration received by him as trade commissioner or other official representative in India of the Government of a foreign State (not holding office as such in an honorary capacity), or as a member of the staff of any of those officials, shall be exempt only if the remuneration of the corresponding officials or, as the case may be, members of the staff, if any, of the Government resident for similar purposes in the country concerned enjoys a similar exemption in that country: Provided further that such members of the staff are subjects of the country represented and are not engaged in any business or profession or employment in India otherwise than as members of such staff;] (vi) the remuneration received by him as an employee of a foreign enterprise for services rendered by him during his stay in India, provided the following conditions are fulfilled- (a) the foreign enterprise is not engaged in any trade or business in India; (b) his stay in India does not exceed in the aggregate a period of ninety days in such previous year; and (c) such remuneration is not liable to be deducted from the income of the employer chargeable under this Act; 1[(via) the remuneration received by him as an employee of, or a consultant to, an institution or association or a body established or formed outside India solely for philanthropic purposes, for services rendered by him in India in connection with such purposes, provided that such institution or association or body and the purposes for which his services are rendered in India are approved by the Central Government;] 2[(Vii) Omitted by the Finance Act, 1993, w.e.f 1-4-1993.] --------------------------------------------------------------------- 1 Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-10-

2 Prior to the omission, sub-clause (vii), as originally enacted and amended by the Finance Act, 1964, w.e.f. 1-4-1964; Finance Act, 1965, w.e.f. 1-4-1965 and the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-1971, read as under: "(vii) *the remuneration due to or received by him chargeable under the head 'Salaries' for services rendered as a technician in the employment (commencing from a date before the 1st day of April, 1971) of the Government or of a local authority or of any corporation set up under any special law or in any business carried on in India, if he was not resident in any of the four financial years immediately preceding the financial year in which he arrived in India to the extent mentioned below- (a) where his contract of service is approved by the Central Government before the commencement of his service or within one year of such commencement- (i) in the case of a technician who has special knowledge and experience in industrial or business management techniques, such remuneration due to or received by him during the period of six -> -> ---------------------------------------------------------------------- 1.75 1[(viia)'where such individual renders services as a technician in the employment 3[* * *] of the Government or of a local authority or of any corporation set up under any special law or of any such institution or body established in India for carrying on scientific research as is approved for the purposes of this sub-clause by the prescribed authority or in any business carried on in India and 4[the individual was not resident in India in any of the four financial years immediately preceding the financial year in which he arrived in India,] the remuneration for such services due to or received by him, which is chargeable under the head "Salaries", to the extent mentioned below, namely:- --------------------------------------------------------------------- -> -> months commencing from the date of his arrival in India; (ii)in the case of any other technician, such remuneration due to or received by him during the thirty-six months commencing from the date of his arrival in India, and where any such person continues with the approval of the Central Government obtained before the 1st day of October of the relevant assessment year to remain in employment in India after the expiry of the thirty-six months aforesaid and the tax on his income chargeable under the head 'Salaries' is paid by the employer to the Central Government which tax in the case of an employer being a company may be paid notwithstanding anything contained in section 200 of the Companies Act, 1956 (1 of 1956), the tax so paid by the employer for a period not exceeding sixty months following the expiry of the thirty-six months aforesaid; (b) in any other case, not being the case of a technician who has special knowledge and experience in industrial or business management techniques, such remuneration due to or received by him for the period of three hundred and sixty-five days in all commencing from the date of his arrival in India. Explanation.-For the purposes of this sub-clause, 'Technician' means a person having specialised knowledge and experience in- (i)constructional or manufacturing operations, or in mining or in the generation or distribution of electricity or any other form of power, or (ii)industrial or business management techniques, who is employed in India in a capacity in which such specialised knowledge and experience are actually utilised;". 1 Inserted by the Taxation Laws (Amendment) Act, 1970, w.e.f. 1-4-

3 The words '(commencing from a date after the 31st day of March, 1971)" omitted by the Finance Act, 1988, w.e.f. 1-4-1988. 4 Substituted for "the following conditions are fulfilled, namely, that-

(1) the individual was not resident in India in any of the four financial years immediately preceding the financial year in which he arrived in India, and

(2) the contract of his service in India is approved by the Central Government, the application for such approval having been made to that Government before the commencement of such service or within six months of such commencement," by the Finance Act, 1992, w.e.f. 1-6-1992. --------------------------------------------------------------------- 1.76

1[(1) where such services commence from a date after the 31st day of March, 1971 but before the 1st day of April, 1988,- (A) such remuneration due to or received by him] during the period of twenty-four months commencing from the date of his arrival in India, in so far as such remuneration does not exceed an amount calculated at the rate of four thousand rupees per month, and where the tax on the excess, if any, of such remuneration for the period aforesaid over the amount so calculated is paid to the Central Government, by the employer [which tax, in the case of an employer, being a company, may be paid notwithstanding anything contained in section 200 of the Companies Act, 1956 2 (1 of 1956)], also the tax so paid by the employer; and (B) where he continues, with the approval of the Central Government obtained before the 1st day of October of the relevant assessment year, to remain in employment in India after the expiry of the period of twenty-four months aforesaid and the tax on his income chargeable under the head "Salaries" is paid to the Central Government by the employer [which tax, in the case of an employer, being a company, may be paid notwithstanding anything contained in section 200 of the Companies Act, 1956 3 (1 of 1956)], the tax so paid by the employer for a period not exceeding twenty-four months next following the expiry of the first mentioned twenty-four months;

4[(11)where such services commence from a date after the 31st day of March, 1988 5 [but before the 1st day of April, 1993], and tax on his income chargeable under the head "Salaries" is paid to the Central Government by the employer [which tax, in the case of an employer, being a company, may be paid notwithstanding anything contained in section 200 of the Companies Act, 19566 (1 of 1956)], the tax so paid by the employer for a period not exceeding forty-eight months commencing from the date of his arrival in India: 7[Omitted by the Finance Act, 1992, w.e.f 1-6-1992.]] --------------------------------------------------------------------- 1 Substituted for '(A) such remuneration due to or received by him' by the Finance Act, 1988, w.e.f. 1-4-1988. 3 Ibid. 4 Substituted for 'Provided that' by the Finance Act, 1988, w.e.f 1-4-1988. 5 Inserted by the Finance Act, 1993, w.e.f. 1-4-1993. 7 Prior to the omission, the proviso, as inserted by the Finance Act, 1988, w.e.f. 1-4-1988, read as under: "Provided that nothing in this item shall relate to a period exceeding twenty-four months commencing from the date of his arrival in India if the approval of the Central Government for his employment in India for such period is not obtained before the 1st day of October of the relevant assessment year:" --------------------------------------------------------------------- 1.77 1[Provided [* * *] that the Central Government may, if it considers it necessary or expedient in the public interest so to do, waive the 3[condition relating to non-residence in India as specified in] this sub-clause in the case of any individual who is employed in India for designing, erection or commissioning of machinery or plant or supervising activities connected with such designing, erection or commissioning.] Explanation.-For the purposes of this sub-clause, "technician" means a person having specialised knowledge and experience in- (i) constructional or manufacturing operations, or in mining or in the generation of electricity or any other form of power, or (ii) agriculture, animal husbandry, dairy farming, deep sea fishing or ship building, 4[or] 5[(iii)such other field6 as the Central Government may, having regard to the availability of Indians having specialised knowledge and experience therein, the needs of the country and other relevant circumstances, by notification in the Official Gazette, specify,] who is employed in India in a capacity in which such specialised knowledge and experience are actually utilised;] (viii) any income chargeable under the head "Salaries" received by or due to any such individual being a non- resident as remuneration for services rendered in connection with his employment on a foreign ship where his total stay in India does not exceed in the aggregate a period of ninety days in the previous year; 7[(ix) "any income chargeable under the head "Salaries" received by or due to him during the thirty-six months commencing from the date of his arrival in India for service rendered as a professor or other teacher in a University or other educational institution, and where any such individual continues to remain in employment in India after the expiry of the thirty-six months aforesaid and the tax on his income chargeable under the head "Salaries" is paid by the University or other educational institution concerned to the ---------------------------------------------------------------------- 1 Inserted by the Direct Taxes (Amendment) Act, 1974, w.r.e.f. 1-4-

2 The word 'further' omitted by the Finance Act, 1992, w.e.f. 1-6- 1992. Earlier, it was Inserted by the Finance Act, 1988, w.e.f. 1-4-

3 Substituted for 'condition specified in item (1) of by the Finance Act, 1992, w.e.f. 1-6-1992. 4 Inserted by the Finance Act, 1979, w.e.f. 1-6-1979. 5 Ibid. 6 The fields of 'grading and evaluation of diamonds for diamond export or import trade'; 'cookery' 'information technology including computer architecture systems platforms and associated technology, software development process and tools' have been notified: 7 Inserted by the Finance Act, 1964, w.e.f. 1-4-1964. ---------------------------------------------------------------------- 1.78 Central Government, the tax so paid for a period not exceeding twenty-four months following the expiry of the thirty-six months aforesaid, provided in either case the following conditions are fulfilled, namely:- (i) such individual was not resident in any of the four financial years immediately preceding the financial year in which he arrived in India; and (ii) his contract of service is approved by the Central Government- (a) on or before the 1st day of October, 1964, in the case of a professor or other teacher whose service commenced before the 1st day of April, 1964; (b) before the commencement of his service or within one year of such commencement, in any other case;] 1[(x) 'any sum due to or received by him, during the twenty- four months commencing from the date of his arrival in India, for undertaking any research work in India, provided the following conditions are fulfilled, namely:- (a) the research work is undertaken in connection with a research scheme approved in this behalf by the Central Government on or before the 1st day of October of the relevant assessment year; and (b) such sum is payable or paid directly or indirectly by the Government of a foreign State or any institution or association or other body established outside India;] 3[(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 refer-red to in item (ii); or (iv) any corporation established by or under a Central, State or 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;] ----------------------------------------------------------------------- 1 Inserted by the Finance Act, 1964, w.e.f. 1-4-1964. 3 Inserted by the Finance Act, 1976, w.e.f. 1-4-1976. ----------------------------------------------------------------------- 1.79 1[(6A) 2 where in the case of a foreign company deriving income by way of royalty or fees for technical services received from Government or an Indian concern in pursuance of an agreement made by the foreign company with Government or the Indian concern after the 31st day of March, 1976 3[and,- ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1983, 3 Substituted for the following by the Finance Act, 1992, w.e.f. 1- 6-1992: "and approved by the Central Government, the tax on such income is payable, under the terms of such agreement, by Government or the Indian concern to the Central Government, the tax so paid;" ----------------------------------------------------------------------- 1.81 (a) where the agreement relates to a matter included in the industrial policy, for the time being in force,. of the Government of India, such agreement is in accordance with that policy; and (b) in any other case, the agreement is approved by the Central Government, the tax on such income is payable, under the terms of the agreement, by Government or the Indian concern to the Central Government, the tax so paid.) Explanation.-For the purposes of this clause 1[and clause (6B)],- (a) "fees for technical services" shall have the same meaning as in Explanation 2 to clause (vii) of sub-section

(1) of section 9; (b) "foreign company" shall have the same meaning as in section 80B; (c) "royalty" shall have the same meaning as in Explanation

2 to clause (vi) of sub-section (1) of section 9;] 2[(6B) where in the case of a non-resident (not being a company) or of a foreign company deriving income (not being salary, royalty or fees for technical services) from Government or an Indian concern in pursuance of an agreement entered into by the Central Government with the Government of a foreign State or an international Organisation, the tax on such income is payable by Government or the Indian concern to the Central Government under the terms of that agreement or any other related agreement approved by the Central Government, the tax so paid;] 3[(6C ) 4 any income arising to such foreign company, as the Central Government may, by notification in the Official Gazette, specify in this behalf, by way of fees for technical services received in pursuance of an agreement entered into with that Government for providing services in or outside India in projects connected with security of India;]

(7) any allowances or perquisites paid or allowed as such outside India by the Government to a citizen of India for rendering service outside India;

(8) in the case of an individual who is assigned to, duties in India in connection with any co-operative technical assistance programmes and projects in accordance with an agreement entered into by the Central Government and the Government of a foreign State (the terms whereof provide for the exemption given by this clause)- (a) the remuneration received by him directly or indirectly from the Government of that foreign State for such duties, and (b) any other income of such individual which accrues or arises outside India, and is not deemed to accrue or arise in India, in respect of which such individual is required to pay any income or social security tax to the Government of that foreign State; ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1988, w.e.f. 1-4-1988. 2 Ibid. 3 Inserted by the Direct Tax Laws (Amendment) Act, 1989, w.e.f. 1-4-1989. ----------------------------------------------------------------------- 1.82 1[(8A) in the case of a consultant- (a) any remuneration or fee received by him or it, directly or indirectly, out of the funds made available to an international Organisation [hereafter referred to in this clause and clause (8B) as the agency] under a technical assistance grant agreement between the agency and the Government of a foreign State; and (b) any other income which accrues or arises to him or it outside India, and is not deemed to accrue or arise in India, in respect of which such consultant is required to pay any income or social security tax to the Government of the country of his or its origin. Explanation.-In this clause, "consultant" means- (i) any individual, who is either not a citizen of India or, being a citizen of India, is not ordinarily resident in India, or (ii) any other person, being a non-resident, engaged by the agency for rendering technical