[Home] [Databases] [WorldLII] [Search] [Feedback] Indian Legislation

TELECOM REGULATORY AUTHORITY OF INDIA ACT 1997

ACT NO. 24 OF 1997

[28th March, 1997]

Short title extent as commencement. 1. Short title extent and commencement.

(1) This Act may be called the Telecom Regulatory Authority of India Act, 1997.

(2) It extends to the whole of India.

(3) It shall be deemed to have come into force on the 25th day of January, 1997.

Definitions. 2. Definitions.

(1) In this Act, unless the context otherwise requires,- (a) "appointed day" means the date with effect from which the

Authority is established under sub-section (1) of section 3; (b) "Authority" means the Telecom Regulatory Authority of India

established under sub-section (1) of section 3; (c) "Chairpers on" means the Chairperson ofthe Authority

appointed under sub-section (3) of section 3; (d) "Fund" means the Fund constituted under section 22;

(e) "licensee" means any person licensed under sub-section (1) of section 4 of the Indian Telegraph Act, 1885 (13 of 1885) for providing specified public telecommunication services;

(f) "member" means a member of the Authority sub-section (3) of section 3 and includes the Chairperson and the Vice-Chairperson; (g) "notification" means a notification published in the Official Gazette; (h) "prescribed" means prescribed by rul es made under this Act; (i) "regulations" means regulations madeby the Authority under this Act; (j) "service provider" means the Government and includes a licensee; (k) "telecommunication service" means service of any description (including electronic mail, voice mail, data services, audio tex services, video tex services, radio paging and cellular mobile telephone services) which is made available to users by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature, by wire, radio, visual or other electro-magnet ic means but sh all not include broadcasting services.

(2) Words and expressions used and not defined in this Act but defined in the Indian Telegraph Act, 1885 (13 of 1885) or the Indian Wireless Telegraphy Act,1933 (17 of 1933), shall have the meanings respectively assigned to them inthose Acts.

(3) Any reference in this Act to a law which is not in force in the State of Jammu and Kashmir shall in relation to that State be construed as areference to the corresponding law, if any, in that State. CHAP TELECOM REGULATORY AUTHORITY OF INDIA CHAPTER II TELECOM REGULATORY AUTHORITY OF INDIA 3. E 3. Establishment and incorporation of Authority.

(1) With effect from such date as the Central government may, by notification appoint, there shall be established, for the purposes of this Act, an Authority to be called the Telecom Regulatory Authority of India.

(2) The Authority shall be a body corporate by the name aforesaid, having perpetual succession and a common seal, with power, subject to the provisions of this Act, to acquire, hold and dispose of property, both movable and immovable, and to contract, and shall, by the said name, sue or be sued.

(3) The Authority shall consist of a Chairperson, and not less than two, but not exceeding six members, to be appointed by the Central Government.

(4) The head office of the Authority shall be at New Delhi.

Qualifications for appointment of Chairperson and other members. 4. Qualifications for appointment of Chairperson and other members.

(1) The Chairperson shall be a person who is or has been a Judge of the Supreme Court or who is or has been the Chief Justice of a High Court.

(2) A member shall be a person who has special knowledge of, and professional experience in, telecommunication, industry, finance, accountancy, law, management and consumer affairs; Provided that a person who is or has been in the service of Government shall not be appointed as a member unless such person has held the post of Secretary or Additional Secretary, or the post of Additional Secretary and Secretary to the Government of India or any equivalent post in the Central Government or the State Government for a period of three years.

Term of office, conditions of service, etc., of Chairperson and othermembers. 5. Term of office, conditions of service, etc., of Chairperson and other members.

(1) Before appointing any person as the Chairperson or member, the Central Government shall satisfy itself that the person does not have any such financial or other interest as is likely to affect prejudicially his functions as such member.

(2) The Chairperson shall hold office for a term of five years from the date on which he enters upon his office.

(3) A member shall hold office for a term of five years from the date on which he enters upon his office or until he attains the age of sixty-five years, whichever is earlier.

(4) The employee of the government on his selection as member shall have to retire from service before joining as a member.

(5) The salary and allowances payable to and the other terms and conditions of service of the Chairperson and other members shall be such as may be prescribed.

(6) The salary, allowances and other conditions of service of the Chairperson or of a member shall not be varied to his disadvantage after appointment.

(7) Notwithstanding anything contained in sub-section (2) or sub-

section (3), a member may- (a) relinquish his office by giving in writing to the Central Government notice of not less than three months; or (b) be removed from his office in accordance with the provisions of section 7.

(8) The Chairperson or any other member ceasing to hold office as such, shall- (a) be ineligible for further employment under the Central Government or any State Government; or (b) not accept any commercial employment, for a period of two years from the date he ceases to hold such office.

(9) A vacancy caused to the office of the Chairperson or any other member shall be filled up within a period of three months from the date on which such vacancy occurs. Explanation- For the purposes of this section, "commercial employment" means employment in any capacity under, or agency of, a person engaged in trading, commercial, industrial or financial business in any field and includes also a director of a company or partner of a firm and it also includes setting up practice either independently or as partner of a firm or as an adviser or a consultant.

Powers of Chairperson and Vice-chairperson. 6. Powers of Chairperson and Vice-chairperson.

(1) The Chairperson shall have powers of general superintendence and direction in the conduct of the affairs of the Authority and he shall, in addition to presiding over the meetings of the Authority, exercise and discharge such powers and functions of the Authority and shall discharge such other powers and functions as may be prescribed.

(2) The Central Government may appoint one of the members to be a Vice-Chairperson of the Authority who shall exercise and discharge such powers and functions of the Chairperson as may be prescribed or as may be delegated to him by the Authority.

Removal and suspension of member from office in certain circumstances. 7. Removal and suspension of member from office in certain circumstances. (1 ) The Central Government may remove from office any member, who- (a) has been adjudged an insolvent; or (b) has been convicted of an offence which, in the opinion of the Central Government, involves moral turpitude; or (c) has become physically or mentally incapable of acting as a member; or (d) has acqui red such financial or other interest as is likely to affect prejudicially his functions as a member; or (e) has so abused his position as to render his continuance in office prejudicial to the public interest.

(2) Notwithstanding anything contained in sub-section (1), no member shall be removed from his office on the ground specified in clause (d) or clause (e) of that sub-section unless the Supreme Court on a reference being made to it in this behalf by the Central Government, has, on an enquiry, held by it in accordance with such procedure as prescribed in this behalf, reported that the member ought on such ground or grounds to be removed.

(3) The Central Government may suspend from office a member in respect of whom a reference has been made to the Supreme Court under

sub-section (2) until the Central Government has passed an order on receipt of the report of the Supreme Court on such reference.

Meetings. 8. Meetings.

(1) The Authority shall meet at such times and places, and shall observe such rules of procedure in regard to the transaction of business at its meetings (including quorum at such meetings) as may be provided by regulations.

(2) The Chairperson or, if for any reason, he is unable to attend a meeting of the Authority, Vice-Chairperson and in his absence, any other member chosen by the members pr esent f rom amongst themselves at the meeting shall presided at the meeting.

(3) All questions which come up before any meeting of the Authority shall be dec ided by a majority vote of the members present and voting, an d in the event of an equality of votes, the Chairpe rson or in his absence, the person presiding, shall have a second or casting vote.

(4) The Authority may make regulations for the transaction of business at its meetings.

Vacanci es, etc ., not to invalidate proceedings ofAuthority. 9. Vacancies, etc., not to invalidate proceedings of Authority. No act or proceedings of the Authority shall be invalid merely by reason of- (a) any vacancy in, or any defect in the constitution of, the Authority; or (b) any defect in the appointment of a person acting as a member of the Authority; or (c) any irregularity in the procedure of the Authority not affecting the merits of the case.

Officers and other empl oyees of Authority. 10. Officers and other employees of Authority.

(1) The A uthority may appoint officers and such other employees as it considers necessary for the efficient discharge of its functions under this Act.

(2) The salary and allowances payable to and the other conditions of service of the officers and other employees of the Authority appointed

under sub-section (1) shall be such as may be determined by regulations. CHAP POWERS AND FUNCTIONS OF THE AUTHORITY CHAPTER III POWERS AND FUNCTIONS OF THE AUTHORITY

Functions of Authority. 11. Functions of Authority.

(1) Notwithstanding anything contained in the Indian Telegraph Act, 1885 (13 of 1885), the functions of the Authority shall be to- (a) recommend the need and timing for introduction of new service provider; (b) recommend the terms and conditions of licence to a service provider; (c) ensure technical compatibility and effective inter-connection between different service providers; (d) regulate arrangement amongst service providers of sharing their revenue derived from providing telecommunication services; (e) ensure compliance of terms and conditions of licence; (f) recommend revocation of licence for non-compliance of terms and conditions of licence; (g) lay down and ensure the time period for providing local and service long distance circuits of telecommunication between different providers; (h) facilitate competition and promote efficiency in the operation of telecommunication services so as to facilitate growth in such services; (i) protect the interest of the consumers of telecommunication service; (j) monitor th e quality of service and conduct the periodical survey of such service provided by the service providers; (k) inspect the equipment used in the network and recommend the type of equipment to beused by the service providers; (l) maintain register of interconnect agreements and of all such other matters as may be provided in the regulations; (m) keep register maintained under clause (l) open for inspection to any member of public on payment ofsuch fee and compliance of such other requirements as may be provided in the regulations; (n) settle disputes between service providers; (o) render advice to the Central Government in the matters relating to the development of telecommunication technology and any other matter relatable to telecommunication industry in general; (p) levy fees and other charges at such rates and in respect of such services as may be determined by regulations; (q) ensure effective compliance of universal service obligations; (r) perform such other functions including such administrative and financial functions as may be entrusted to it by the Central Government or as may be necessary to carry out the provisions of this Act.

(2) Notwithstanding anything contained in the Indian Telegraph Act, 1885 (13 of 1885), the Authority may, from time to time, by order, notify in the Official Gazette the rates at which the telecommunication services within India and outside India shall be provided under this Act including the rates at which messages shall be transmitted to any country outside India: Provided that the Authority may notify different rates for different persons or class of persons for similar telecommunication services and where different rates are fixed as aforesaid the Authority shall record the reasons therefor.

(3) While discharging its functions under sub-section (1), the Authority shall not act against the interest of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality.

(4) The Authority shall ensure transparency while exercising its powers and discharging its functions.

Powers of Authority to call for information, conduct investigations,etc. 12. Powers of Authority to call for information, conduct investigations, etc.

(1) Where the Authority considers it expedient so to do, it may, by order in writing,- (a) call upon any service provider at any time to furnish in writing such information or explanation relating to its affairs as the authority may require; or (b) appoint one or more persons to make an inquiry in relation to the affairs of any service provider; and (c) direct any of its officers or employees to inspect the books of account or other documents of any service provider;

(2) Where any inquiry in relation to the affairs of a service

provider has been undertaken under sub-section (1),- (a) every officer of the Government Department, if such service provider is a department of the Government; (b) every director, manager, secretary or other officer, if such service provider is a company; or (c) every partner, manager, secretary or other officer, if such service provider is a firm; or (d) every other person or body of persons who has had dealings in the course of business with any of the persons mentioned in clauses (b) and (c), shall be bound to produce before the Authority making the inquiry, all such books of account or other documents in his custody or power relating to, or having a bearing on the subject- matter of such inquiry and also to furnish to the Authority with any such statement or information relating thereto, as the case may be, required of him, within such time as may be specified.

(3) Every service provider shall maintain such books of account or other documents as may be prescribed.

(4) The Authority shall have the power to issue such directions to service providers as it may consider necessary for proper functioning by service providers.

Power of Authority to issue directions. 13. Power of Authority to issue directions. The Authority may, for the discharge of its functions under sub-

section (1) of section 11, issue such directions from time to time to the service providers, as it may consider necessary. CHAP SETTLEMENT OF DISPUTES CHAPTER IV SETTLEMENT OF DISPUTES

Authority to settle disputes. 14. Authority to settle disputes.

(1) If a dispute arises, in respect of matters referred to in

sub-section (2), among service providers or between service providers and group of consumers, such disputes shall be adjudicated by a bench constituted by the Chairperson and such bench shall consist of two members: Provided that if the members of the bench differ on any point or points they shall state the point or points on which they differ and refer the same to a third member for hearing on such point or points and such point or points shall be decided according to the opinion of that member.

(2) The bench constituted under sub-section (1) shall exercise, on and from the appointed day all such jurisdiction, powers and authority as were exercisable immediately before that date by any civil court on any matter relating to- (i) technical compatibility and inter-connections between service providers; (ii) revenue sharing arrangements between different service providers; (iii) quality of telecommunication services and interest of consumers: Provided that nothing in this sub-section shall apply in respect of matters relating to- (a) the monopolistic trade practice, restrictive trade practice and unfair trade practice which are subject to the jurisdiction of the Monopolies and Restrictive Trade Practices Commission established

under sub-section (1) of section 5 of the Monopolies and Restrictive Trade practices Act, 1969 (54 of 1969); (b) the complaint of an individual consumer maintainable before a Consumer Disputes Redressal Forum or a Consumer Disputes Redressal Commission or the National Consumer Redressal Commission established under section 9 of the consumer Protection Act, 1986 (68 of 1986); (c) dispute between telegraph authority and any other person

referred to in sub-section (1) of section 7B of the Indian Telegraph Act, 1885 (13 of 1885).

Filing of application to Authority and procedure for passing order byit. 15. Filing of application to Authority and procedure for passing order by it.

(1) An aggreived person may make an application in respect of

matters referred to in sub-section (2) of section 14 within such period as may be prescribed. Explanation.- For the purposes of this sub-section, the expression "aggrieved person" means- (i) any service provider who has a dispute in respect of

matters referred to in clauses (i) and (ii) of sub-section (2) of section 14; (ii) where any loss or damage is caused to a group of consumers, any member representing such group of consumers.

(2) On receipt of an application made under sub-section (1), the Authority may, after giving the parties an opportunity of being heard, pass such orders as it thinks fit preferably within a period of six months from the date of filing of such application and shall record reasons in writing if final order cannot be passed within the said period.

(3) While arriving at a decision, the Authority shall record in writing the reasons for such decision.

(4) Every decision of the Authority shall be published in the annual report of the Authority.

(5) The orders and directions of the Authority shall be binding on the service providers, Government and all other persons concerned.

Procedure and powers of Authority. 16. Procedure and powers of Authority.

(1) The Authority shall be guided by the principles of natural justice.

(2) The Authority shall have, for the purpose of discharging their functions under this chapter, the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908) in respect of the following matters, namely:- (a) summoning and enforcing the attendance of any person and examining him on oath; (b) requiring the discovery and production of documents; (c) receiving evidence on affidavits; (d) issuing commissions for the examination of witnesses or documents; (e) reviewin its decisions; (f) dismissing an application for default or deciding it ex parte; (g) setting aside any order of dismissal of any application for default or any order passed by it ex parte; (h) any other matter which may be prescribed.

(3) Every proceeding before the Authority shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purpose of section 196 of the Indian Penal Code (45 of 1860) and the Authority shall be deemed to be a civil for all the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 (2 of 1974).

Right to legal representation. 17. Right to legal representation. The applicant may either appear in person or authorise one or more legal practitioners or any of its officers to present his or its case before the Authority.

Appeal to High Court. 18. Appeal to High Court. Any person aggrieved by any decision or order of the Authority may file an appeal to the High Court within thirty days from the date of communication of the decision or order of the Authority to him: Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days.

Orders passed by Authority or High Court to be executable as a decree. 19. Orders passed by Authority or High Court to be executable as a decree. Every order made by the Authority under this Act or the order made by the High Court in any appeal against any order of the Authority shall, on a certificate issued by any officer of the authority or the Registrar of the High Court, as the case may be, be deemed to be decree of the civil court and shall be executable in the same manner as a decree of that court.

Penalty for wilful failure to comply with orders of Authority or HighCourt. 20. Penalty for wilful failure to comply with orders of Authority or High Court. If any person wilfully fails to comply with the orders of the Authority or any order of the High Court, as the case may be, he shall be punishable with fine which may extend to one lakh rupees and in case of a second or subsequent offence with fine which may extend to two lakh rupees and in the case of continuing contravention with additional fine which may extend to two lakh rupees for every day during which the default continues. CHAP FINANCE, ACCOUNTS AND AUDIT

Grants by Central Government. 21. Grants by Central Government. The Central Government may, after due appropriation made by Parliament by law in this behalf, make to the Authority grants of such sums of money as are required to pay salaries and allowances payable to the Chairperson and the members and the administrative expenses including the salaries, allowances and pension payable to or in respect of officers and other employees of the Authority.

Fund. 22. Fund.

(1) There shall be constituted a Fund to be called the Telecom Regulatory Authority of India General fund and there shall be credited thereto- (a) all grants, fees and charges received by the Authority under this Act; and (b) all sums received by te Authority from such other services as may be decided upon by the Central Government.

(2) The Fund shall be applied for meeting- (a) the salaries and allowances payable to the Chairperson and members and the administrative expenses including the salaries, allowances and pension payable to or in respect of officers and other employees of the Authority; and (b) the expenses on objects and for purposes authorised by this Act.

Accounts and audit. 23. Accounts and audit.

(1) The Authority shall maintain proper accounts and other relevant records and prepare an annual statement of accounts in such form as may be prescribed by the Central Government in consultation with the Comptroller and Auditor-General of India.

(2) The accounts of the Authority shall be audited by the Comptroller and Auditor-General of India at such intervals as may be specified by him and any expenditure incurred in connection with such auditor shall be payable by the Authority to the Comptroller and Auditor-General of India.

(3) The Comptroller and Auditor-General of India and any other person appointed by him in connection with the audit of the accounts of the Authority shall have the same rights and privileges and authority in connection with such audit as the Comptroller and Auditor-General generally has, in connection with the audit of the government accounts and, in particular, shall have the right to demand the production of books, accounts, connected vouchers and other documents and papers and to inspect any of the offices of the Authority.

(4) The accounts of the Authority as certified by the comptroller and Auditor-General of India or any other person appointed by him in this behalf together with the audit report thereon shall be forwarded annually to the Central government and that Government shall cause the same to be laid before each House of Parliament.

Furnishing of returns, etc., to Central Government. 24. Furnishing of returns, etc., to Central Government.

(1) The Authority shall furnish to the Central Government at such time and in such form and manner as may be prescribed or as the Central Government may direct such returns and statements and such particulars in regard to any proposed or existing programme for the promotion and development of the telecommunication services, as the Central Government may from time to time, require.

(2) The Authority shall prepare once every year in such form and at such time as may be prescribed, an annual report giving a summary of its activities during the previous year and copies of the report shall be forwarded to the Central Government.

(3) A copy of the report received under sub-section (2) shall be laid, as soon as may be after it is received, before each House of Parliament. CHAP MISCELLANEOUS CHAPTER VI MISCELLANEOUS

Power of Central Government to issue directions. 25. Power of Central Government to issue directions.

(1) The Central Government may, from to time to time, issue to the Authority such directions as it may think necessary in the interest of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality.

(2) Without prejudice to the foregoing provisions, the Authority shall, in exercise of its powers or the performance of its functions, be bound by such directions on questions of policy as the Central Government may give in writing to it from time to time: Provided that the Authority shall, as far as practicable, be given an opportunity to express its views before any direction is given under this sub-section.

(3) The decision of the Central Government whether a question is one of policy or not shall be final.

Members, officers and employees of Authority to be public servants. 26. Members, officers and employees of Authority to be public servants. All members, officers and other employees of the Authority shall be deemed, when acting or purporting to act in pursuance of any of the provisions of this Act to be public servants within the meaning of section 21 of the Indian Penal Code (45 of 1860).

Bar of jurisdiction. 27. Bar of jurisdiction. No civil court shall have jurisdiction in respect of any matter which the Authority is empowered by or under this Act to determine.

Protection of action taken in good faith. 28. Protection of action taken in good faith. No suit, prosecution or other legal proceedings shall lie against the Central government or the Authority or any officer of Central Government or any member, officer or other employees of the Authority for anything which is in good faith done or intended to be done under this Act or the rules or regulations made thereunder.

Penalty for contravention of direction of Authority. 29. Penalty for contravention of direction of Authority. If a person violates directions of the Authority, such person shall be punishable with fine which may extend to one lakh rupees and in case of second or subsequent offence with fine which may extend to two lakh rupees and in the case of continuing contravention with additional fine which may extend to two lakh rupees for every day during which the default continues.

Offences by companies. 30. Offences by companies.

(1) Where an offence under this Act has been committed by a company, every person who at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act if he proves that the offence was committed without his knowledge or that he has exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to, any neglect on the part of any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. Explanation-For the purposes of this section,- (a) "company" means any body corporate and includes a firm or other association of individuals; and (b) "director", in relation to a firm, means a partner in the firm.

Offences by Government Departments. 31. Offences by Government Departments.

(1) Where an offence under this Act has been committed by any Department of Government, the Head of the Department shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly unless he proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent the commission of such offence.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a Department of government and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any officer, other than the Head of the Department, such officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

Exemption from tax on wealth and income. 32. Exemption from tax on wealth and income. Notwithstanding anything contained in the Wealth-tax Act, 1957 (27 of 1957), the Income-tax Act, 1961 (43 of 1961), or any other enactment for the time being in force relating to tax on wealth, income, profits or gains, the Authority shall not be liable to pay wealth-tax, income-tax or any other tax in respect of their wealth, income, profits or gains derived.

Delegation. 33. Delegation. The Authority may, by general or special order in writing, delegate to any member, officer of the Authority or any other person subject to such conditions, if any, as may be specified in the order, such of its powers and functions under this Act (except the power to settle dispute under Chapter IV and to make regulation under section 36) as it may deem necessary.

Cognizance of offences. 34. Cognizance of offences.

(1) No court shall take cognizance of any offence punishable under this Act or the rules or regulations made thereunder, save on a complaint made by the Authority.

(2) No court inferior to that of a Chief Metropolitan Magistrate or a Chief Judicial Magistrate of first class shall try any offence punishable under this Act.

Power to make rules. 35. Power to make rules.

(1) The Central Government may, by notification, make rules for carrying out the purposes of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters namely:- (a) the salary and allowances payable to and oter oter Conditions of

Service of the Chairperson and members under sub-section (5) of section 5; (b) the powers and functions of the Chairperson under sub-

section (1) of section 6; (c) the procedure for conducting an inquiry made under sub-

section (2) of section 7; (d) the category of books of account or other documents which

are required to be maintained under sub-section (3) of section 12; (e) the period within which an application is to be made under

sub-section (1) of section 15; (f) the manner in which the accounts of the Authority shall be

maintained under sub-section (1) of section 23; (g) the time within which and the form and manner in which returns and report are to be made to the Central Government under sub-

sections (1) and (2) of section 24; (h) any other matter which is to be, or may be, prescribed, or in respect of which provision is to be made, by rules.

Power to make regulations. 36. Power to make regulations.

(1) The Authority may, by notification, make regulations consistent with this Act and the rules made thereunder to carry out the purpose of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such regulations may provide for all or any of the following matters, namely:- (a) the times and places of meetings of the Authority and the

procedure to be followed at such meetings under sub-section (1) of section 8, including quorum necessary for the transaction of business; (b) the transaction of business at the meetings of the

Authority under sub-section (4) of section 8; (c) the salaries and allowances payable to and the other conditions of service of officers and other employees of the Authority

under sub-section (2) of section 10; (d) matters in respect of which register is to be maintained by

the Authority under clause (l) of sub-section (1) of section 11; (e) levy of fee and lay down such other requirements on fulfilment of which a copy of register may be obtained under clause

(m) of sub-section (1) of section 11; (f) levy of fees and other charges under clause (p) of sub-

section (1) of section 11;

Rules and regulations to laid before Parliament. 37. Rules and regulations to laid before Parliament. Every rule and every regulation made under this Act shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or regulations or both Houses agree that the rule or regulation should not be made, the rule or regulation shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule or regulation.

Application of certain laws. 38. Application of certain laws. The provisions of this Act shall be in addition to the provisions of the Indian Telegraph Act, 1885 (13 of 1885) and te Indian Wireless Telegraphy Act, 1933 (17 of 1933) and, in particular, nothing in this Act shall affect any jurisdiction, powers and functions required to be exercised or performed by the Telegraph Authority in relation to any area falling within the jurisdiction of such Authority.

Power to remove difficulties. 39. Power to remove difficulties.

(1) If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order, published in the Official Gazette, make such provisions not inconsistent with the provisions of this Act as may appear to be necessary for removing the difficulty: Provided that no order shall be made under this section after the expiry of two years from the date of commencement of this Act.

(2) Every order made under this section shall be laid, as soon as may be after it is made, before each House of Parliament.

Repeal and saving. 40. Repeal and saving.

(1) The Telecom Regulatory Authority of India Ordinance 1997 (Ord 11 of 1997) hereby repealed.

(2) Notwithstanding such repeal, anything done or any action taken under the said Ordinance shall be deemed to have been done or taken under the corresponding provisions of this Act. K. L. MOHANPURIA Secy. of the Govt. of India CHAP PRELIMINARY CHAPTER 1. PRELIMINARY

Short Title and Commencement. 1. Short Title and Commencement.

(1) This act may be called the Finance Act, 1997.

(2) Save as otherwise provided in this Act, sections 2 to 61 shall be deemed to have come into force on the 1st day of April, 1997. CHAP RATES OF INCOME-TAX CHAPTER II RATES OF INCOME-TAX 2 Income Tax. 2. Income Tax.

(1) Subject to the provisions of sub-section (2) and (3), for the assessment year commencing on the 1st day of April, 1997, income-tax shall be charged at the rates specified in Part 1 of the First Schedule and such tax shall be increased in the cases of which Paragraph E of that Part applies, by a surcharge, calculated in the manner provided therein.

(2) In the cases to which Paragraph A of Part 1 of the First Schedule applies, where the assessee has,. in the previous year, any net agricultural income exceeding six hundred rupees, in addition to total income, and the total income exceeds forty thousand rupees, then,- (a) the net agricultural incomes shall be taken into account, in the manner provided in clause (b) [that is to say, as if the net agricultural income were comprised in the total income after the first forty thousand rupees of the total income but without being liable to tax], only for the purpose of charging income-tax in respect of the total income; and (b) the income-tax chargeable shall be calculated as follows:- (i) the total income and the net agricultural income shall be aggregated and the amount of income-tax shall be determined in respect of the aggregate income at the rates specified in the said Paragraph A, as if such aggregate income were the total income; (ii) the net agricultural income shall be increased by a sum of forty thousand rupees, and the amount of income-tax shall be determined in respect of the net agricultural income as so increased at the rates specified in the said Paragraph A, as if the net agricultural income as so increased were the total income; (iii) the amount of income-tax determined in accordance with sub-clause (i) shall be reduced by the amount of income-tax determined in accordance with sub-clause (ii) and the sum so arrived at shall be the income-tax in respect of the total income. 3 43 of 1961. 3. 43 of 1961. In cases to which the provisions of Chapter XII or Chapter XII or Chapter XII-A or sub-section (1A) of section 161 or section 164 or section 164A or section 167B of the Income-tax Act, 1961 (hereinafter referred to as the Income-tax Act) apply, the tax chargeable shall be determined as provided in that Chapter or section,

and with reference to the rates imposed by sub-section (1) or the rates as specified in that Chapter or section, as the case may be; Provided that the amount of income-tax computed in accordance with the provisions of sections 112 and 113 of the Income-tax Act shall be increased in the case of a domestic company by a surcharge as provided in Paragraph E of Part of the First Schedule: Provided further that in respect of any income chargeable to tax under section 115B, or in the case of a domestic company having total income exceeding seventy-five thousand rupees under section 115BB of the Income-tax Act, the income-tax computed shall be increased by a surcharge calculated at the rate of seven-and-a-half percent. of such income-tax.

(4) In case in which tax has to be charged and paid under section 115-O of the Income-tax Act, the tax shall be charged and paid at the rate specified in that section.

(5) In cases in which tax has to be deducted under section1 193,194, 194B, 194BB, 194D and 195 of the Income-tax Act at the rates in force, the deduction shall be made at the rates specified in Part II of the First Schedule.

(6) In cases in which tax has to be deducted under sections 194c, 194G, 194-1, 194J and 194K of the Income-tax Act, the deduction shall be made at the rates specified in those sections.

(7) In cases in which tax has to be collected under section 206C or under the proviso to section 194B of the Income-tax Act, the collection shall be made at the rates specified in that section or at the rate specified in Part II of the First Schedule, as the case may be.

(8) Subject to the provisions of sub-section (9), in cases in which income-tax has to be calculated under the first proviso to

sub-section (5) of section 132 of the Income-tax Act or charged under

sub-section (4) of section 172 or sub-section (2) of section 174

or section 175 or sub-section (2) of section 176 of the said Act or deducted under section 192 of the said Act from income chargeable under the head "Salaries" or in which the "advance tax" payable under Chapter XVII-C of the said Act has to be computed, at the rate or rates in force, such income-tax or, as the case may be, "advance tax" shall be so calculated, charged, deducted or computed at the rate or rates specified in Part III of the First Schedule: Provided that in cases to which the provisions of Chapter XII or Chapter XII-A or sub-section (1A) of section 161 or section 164 or section 164A or section 167B of the Income-tax Act apply. "advance tax" shall be computed with reference to the rates imposed by this sub-section of the rates as specified in that Chapter or section, as the case may be.

(9) In case to which Paragraph A of Part III of the First Schedule applies, where the assessee has, in the previous year or, if by virtue of any provision of the Income-tax Act, income-tax is to be charged in respect of the income of a period other than the previous year, in such other period, any net agricultural income exceeding six hundred rupees, in addition to total income and the total net agricultural income exceeds forty thousand rupees, the, in calculating

income-tax under the first proviso to sub-section (5) of section 132

of the Income-tax Act or in charging income-tax under sub-section (2)

of section 174 or section 175 or sub-section (2) o section 176 of the said Act or in computing the "advance tax" payable under Chapter XVII- C of the said Act, at the rate or rates in force,- (a) the net agricultural income shall be taken into account, in the manner provided in clause (b) [that is to say, as if the net agricultural income were comprised in the total income after the first forty thousand rupees of the total income but without being liable to tax], only for the purpose of calculating, charging or computing such income-tax or, as the case may be, "advance tax" in respect of the total income; and (b) such income-tax or, as the case may be, "advance tax" shall be so calculated, charged or computed as follows:- (i) the total income and the net agricultural income shall e aggregated and the amount of income-tax or "advance tax" shall be determined in respect of the aggregate income at the rates specified in the said Paragraph A as if such aggregate income were the total income; (ii) the net agricultural income shall be increased by a sum of forty thousand rupees, and the amount of income-tax or "advance tax" shall be determined in respect of the net agricultural income as so increased at the rates specified in the said Paragraph A as if the net agricultural income as so increased were the total income; (iii) the amount of income-tax or "advance tax" determined in accordance with subclause (i) shall be reduced by the amount of income-tax or, as the case may be, "advance tax" determined in accordance with sub-clause (ii) and the sum so arrived at shall be the income-tax or, as the case may be, "advance tax" in respect of the total income.

(10) For the purposes of this section and the First Schedule,- (a) "domestic company" means an Indian company, or any other company which, in respect of its income liable to income-tax under the Income-tax Act for the assesmently year commencing on the 1st day of April, 1997, has made the prescribed arrangements for the declaration and payment within India of the dividends (including dividends on preference shares) payable out of such income; (b) "Insurance commission" means any remuneration or reward, whether by way of commission or otherwise, for soliciting or procuring insurance business (including business relating to the continuance, renewal or revival of policies of insurance); (c) "net agricultural income", in relation to a person, means the total amount of agricultural income, from whatever source derived, of that person computed in accordance with the rules contained in Part IV of the First Schedule; (d) all other words and expressions used in this section or in the First Schedule but not defined in this sub-section and defined in the Income-tax Act shall have the meanings respectively assigned to them in that Act. CHAP DIRECT TAXESIncome-tax CHAPTER III DIRECT TAXES Income-tax

Amendment of section 10. 3. Amendment of section 10. In section 10 of the Income-tax Act, with effect from the 1st day of April, 1998,- (a) after clause (6B0 the following clause shall be inserted, namely:- '(6BB) Where in the case of the Government of a foreign State or a foreign enterprise deriving income from an Indian company engaged in the business of operation of aircraft, as a consideration of acquiring an aircraft or an aircraft engine (other than payment for providing spares, facilities or services in connection with the operation of leased aircraft) on lease under an agreement entered after the 31st day March, 1997 and approved by the Central Government in this behalf and the tax on such income is payable by such Indian company under the terms of that agreement to the person who is a non-resident.".

(b) in clause (15), in sub-clause (iv), after item (i), in the Explanation, after clause (b), the following clause shall be inserted, namely:- "(b) the business of providing telecommunication services; or", (c) in clause (15A), after the words "under an agreement", the words, figures and letters "entered before the 1st day of April, 1997 and" shall be inserted;

(d) in clause (17), in sub-clause (iii), for the words "six hundred rupees per month", the words "two thousand rupees per month" shall be substituted; (e) in clause (23F), in the Explanation, in clause (c), for the words "engaged in the", the words "engaged in the business of generation or generation and distribution of electricity or any other form of power or business of providing telecommunication services or in the" shall be substituted; (f) in clause (23G),- (i) the words, brackets, figure and letters "Which fulfils the conditions specified in sub-section (4A) of section 80-A" shall be omitted; (ii) in the Explanation, for clause (c), the following clause shall be substituted, namely :- (c) "infrastructure facility" means- (i) a road, highway, bridge, airport, port, rail system or any other public facility of a similar nature as may be notified by the Board in this behalf in the Official Gazette which fulfils the conditions specified in sub-section (4A) of section 80-A; (ii) a water supply project, irrigation project, sanitation and sewerage system which fulfils the conditions specified in sub-section (4A) of section 80-1A; (iii) a project for generation or generation and distribution of electricity or any other form of power where such project starts generating power on or after the 1st day of April, 1993; (iv) a project for providing telecommunication services on or after the 1st day of April, 1995;':

(g) clauses (26AA) and (28) shall be omitted;

(h) after clause (32), the following clause shall be inserted, namely:-

"(33) any income by way of dividends referred to in section 115-O." 4 Amendment of Section 16. 4. Amendment of Section 16. In section 16 of the Income-tax Act, for clauses (i) and (ia) the following shall be substituted with effect from the 1st day of April, 1998, namely:- "(i) a deduction of a sum equal to thirty-three and one-third per cent. of the salary or twenty thousand rupees, whichever is less. Explanation.-For the removal of doubt, it is hereby declared that where, in the case of an assessee, salary is due from, or paid or allowed by, more than one employer, the deduction under this clause shall be computed with reference to the aggregate salary due, paid or allowed to the assessee and shall in no case exceed the amount specified under this clause;".

Amendment of Section 35. 5. Amendment of Section 35. In section 35 of the Income-tax Act, after sub-clause (2AA), the following sub-section shall be inserted with effect from the 1st day of April, 1988, namely:-

"(2AB)(1) where a company engaged in the business of manufacture or production of any drugs, pharmaceuticals, electronic equipments, computers, telecommunication equipments, chemicals or any other article or thing notified by the Board incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority, then, there shall be allowed a education of a sum equal to one and one-fourth times of the Expenditure so incurred.

(2) No deduction shall be allowed in respect of the expenditure

mentioned in clause (1) under any other provision of this Act.

(3) No company shall be entitled for deduction under clause (1) unless it enters into an agreement with the prescribed authority for cooperation in such research and development facility and for audit of the accounts maintained for that facility.

(4) The prescribed authority shall submit its report in relation to the approval of the said facility to the Director General in such form and within such times as may be prescribed.". 6 Insertion of new section 35ABB. 6. Insertion of new section 35ABB. After section 35AB of the Income-tax Act, the following section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1996, namely:- "35ABB. Expenditure for obtaining license to operate telecommunication services.

(1) In respect of any expenditure, being in the nature of capital expenditure, incurred for acquiring any right to operate telecommunication services and for which payment has actually been made to obtain a license, there shall, subject to and in accordance with the provisions of this section, be allowed for each of the relevant previous years, a deduction equal to the appropriate fraction of the amount of such expenditure. Explanation.-For the purposes of this section,- (i) "relevant previous years" means the previous years beginning with the previous year in which the licence fee is actually paid and the subsequent previous year or years during which the licence, for which the fee is paid and the subsequent previous year or years during which the licence, for which the fee is paid, shall be in force; (ii) "appropriate fraction" means the fraction the numerator of which is one and the denominator of which is the total number of the relevant previous years; (iii) "payment has actually been made" means the actual payment of expenditure irrespective of the previous year in which the liability for the expenditure was incurred according to the method of accounting regularly employed by the assessee.

(2) Where the licence is transferred and the proceeds of the transfer (so far as they consist of capital sums) are less than the expenditure incurred remaining unallowed, a deduction equal to such expenditure remaining unallowed, as reduced by the proceeds of the transfer, shall be allowed in respect of the previous year in which the licence is transferred.

(3) Where the whole or any part of the licence is transferred and the proceeds of the transfer (so far as they consist of capital sums)exceed the amount of the expenditure incurred remaining unallowed, so much of the excess as does not exceed the difference between the expenditure incurred to obtain the licence and the amount of such expenditure remaining unallowed shall be chargeable to income-tax as profits and gains of the business in the previous year in which the licence has been transferred. Explanation.- Where the licence is transferred in a previous year in which the business is n longer in existence, the provisions of this sub-section shall apply as if the business is in existence in that previous year.

(4) Where the whole or any part of the licence is transferred and the proceeds of the transfer (so far as they consist of capital sums) are not less than the amount of expenditure incurred remaining unallowed, no deduction for such expenditure shall be allowed under

sub-section (1) in respect of the previous year in which the licence is transferred or in respect of any subsequent previous year or years.

(5) Where a part of the licence is transferred in a previous year

and sub-section (3) does not apply, the deduction to be allowed under

sub-section (1) for expenditure incurred remaining unallowed shall be arrived at by- (a) subtracting the proceeds of transfer (so far as they consist of capital sums) from the expenditure remaining unallowed; and (b) dividing the remainder by the number of relevant previous years which have not expired at the beginning of the previous year during which the licence is transferred.

(6) Where, in a scheme of amalgamation, the amalgamating company sells or otherwise transfers licence to the amalgamated company (being an Indian company),-

(i) the provisions of sub-sections (2), (3) and (4) shall not apply in the case of the amalgamating company; and (ii) the provisions of this section shall, as far as may be apply to the amalgamated company as they would have applied to the amalgamating company if the latter had not transferred the licence". 7 Amendment of section 36. 7. Amendment of section 36. In section 36 of the Income-tax Act,-

(a) in sub-section (1),- (i) in clause (vii), in the proviso, for the words "a bank" the words "an assessee" shall be substituted and shall be deemed to have been substituted with effect from the 1st day April, 1992; (ii) in clause (vii), with effect from the 1st day of April, 1998,- (A) for the words "special reserve created", the words "special reserve created and maintained" shall be substituted; (B) in the Explanation, for clause (d), the following clause shall be substituted, namely:- '(d) "infrastructure facility" shall have the meaning assigned to it in clause (23G) of section 10.';

(b) in sub-section (2), for clause (v), the following clause shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 1992, namely:- "(v) where such debt or part of debt relates to advances made by

an assessee to which clause (vii) of sub-section (1) applies, no such deduction shall be allowed unless the assessee has debited the mount of such debt or part of debt in that previous year to the provision for bad and doubtful debts account made under that clause.". 8 Amendment of section 37. 8. Amendment of section 37.

In section 37 of the Income-tax Act, sub-sections (2), (3), (4)

and (5) shall be omitted with effect from the 1st day of April, 1998. 9 Amendment of section 41. 9. Amendment of section 41. In section 41 of the Income-tax Act, with effect from the 1st day of April, 1998,-

(a) after sub-section (4), the following sub-section shall be inserted, namely:- (4A) Where a deduction has been allowed in respect of any special reserve created and maintained under clause (viii) of sub-

section (1) of section 36, any amount subsequently withdrawn from such special reserve shall be deemed to be the profits and gains of business or profession and accordingly be chargeable to income-tax as the income of the previous year in which such amount is withdrawn. Explanation.- Where any amount is withdrawn from the special reserve in a previous year in which the business is no longer in existence, the provisions of this sub-section shall apply as if the business is in existence in that previous year."

(b) in sub-section (5), for the words, brackets and figure "or

sub-section (4)", the words brackets, figures and letter", sub-

section (4) or sub-section (4A)" shall be substituted. 10 Amendment of section 44AA. 10. Amendment of section 44AA.

In section 44AA of the Income-tax Act, in sub-section (2), in clause (ii), for the words "during such previous year", the following shall be substituted with effect from the 1st day of April, 1988, namely:- "during such previous year; or (iii) where the profits and gains from the business are deemed to be the profits and gains of the assessee under section 44AD or section 44AE or section 44AF, as the case may be and the assessee has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business as the case may be, during such previous year," 11 Amendment of section 44AB. 11. Amendment of section 44AB. In section 44AB of the Income-tax Act, in clause (b), for the words "previous year", the following shall be substituted with effect from the 1st day of April, 1998, namely:- "previous year or (c) carrying on the business shall, if the profits and gains from the business are deemed to be the profits and gains of such person under section 44AD or section 44AE of section 44AF, as the case may be, and he has claimed his income to be lower than the profits or gains so deemed to be the profits and gains of his business, as the case may be, in any previous year", 12 Amendment of section 44AD. 12. Amendment of section 44AD. In section 44AD of the Income-tax Act,-

(i) in sub-section (2), the following proviso shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1994, namely:- "Provided that where the assessee is a firm, the salary and interest paid to its partners shall be deducted from the income

computed under sub-section (1) subject to the conditions and limits specified in clause (b) of section 40.".

(ii) sub-section (5) shall omitted. 13 Amendment of section 44AE. 13. Amendment of section 44AE. In section 44AE of the Income-tax Act,-

(i) in sub-section (3), the following proviso shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1994, namely:- "Provided that where the assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under

sub-section (1) subject to the conditions and limits specified in clause (b) of section 40".

(ii) sub-section (6) shall be omitted. 14 Insertion of new Section 44AF. 14. Insertion of new Section 44AF. After section 44AE of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 1998, namely:- 44AF. Special provisions for computing profits and gains of retail business.

(1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an assessee engaged in retail trade in any goods or merchandise, a sum equal to five per cent of the total turnover in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum as declared by the assessee in his return of income shall be deemed to be the profits and gains of such business chargeable to tax under to head "Profits and gains of business or profession": Provided that nothing contained in this sub-section shall apply in respect of an assessee whose total turnover exceeds an amount of forty lakh rupees in the previous year.

(2) Any deduction allowable under the provisions of sections 30 to 38

shall, for the purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed: Provided that where the assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under

sub-section (1) subject to the conditions and limits specified in clause (b) of section 40.

(3) The written down value of any asset used for the purpose of the

business referred to in sub-section (1) shall be deemed to have been calculated as if the assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years.

(4) The provisions of section 44AA and 44AB shall not apply in so far

as hey relate to the business referred to in sub-section (1) and in computing the monetary limits under those sections, the total turnover or as the case may be, the income from the said business shall be excluded' 15 Amendment of section 44B. 15. Amendment of section 44B.

In section 44B of the Income-tax Act, after sub-section (2), the following Explanation shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1976, namely:- "Explanation.- For the purposes of this sub-section, the amount referred to in clause (i) or clause (ii) shall include the amount paid or payable or received or deemed to be received, as the case may be, by way of demurrage charges or handling charges or any other amount of similar nature". 16 Amendment of section 47. 16. Amendment of section 47. In section 47 of the Income-tax Act, after clause (x), the following clauses shall be inserted with effect from the 1st day of April, 1998, namely:- '(xi) any transfer made on or before the 31st day of December, 1997 by a person (not being a company) of a capital asset being membership of a recognised stock exchange to a company in exchange of shares allotted by that company to the transferor. Explanation.- For the purposes of this clause, the expression "membership of a recognised stock exchange" means the membership of a stock exchange in India which is recognised under the provisions of the Securities Contract (Regulation) Act, 1956; (xii) any transfer of a capital asset, being land of a sick industrial company, made under a scheme prepared and sanctioned under section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985 where such sick industrial company is being managed by its workers' co- operative; Provided that such transfer is made during the period commencing from the previous year in which the said company has become a sick

industrial company under sub-section (1) of section 17 of the act and ending with the previous year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Explanation.- For the purposes of this clause, "net worth" shall have

the meaning assigned to it in clause (ga) of sub-section (1) of section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985; 17 Amendment of section 47A. 17. Amendment of section 47A. Section 47A of the Income-tax Act shall be renumbered as

sub-section (1) thereof and after sub-section (1) as so renumbered, the following sub-section shall be inserted with effect from the 1st day of April 1998, namely:-

'(2) Where at any time, before expiry of a period of three years from the date of the transfer of a capital asset referred to in clause (xi) of section 47 any of the shares allotted to the transferor in exchange of a membership in a recognised stock exchange are transferred, the amount of profits and gains not charged under section 45 by virtue of the provisions contained in clause (xi) of section 47 shall, notwithstanding anything contained in the said clause, be deemed to be the income chargeable under the head "Capital gains" of the previous year in which such shares are transferred. 18 Amendment of section 48. 18. Amendment of section 48. In section 48 of the Income-tax Act, after the second proviso the following proviso shall be inserted with effect from the 1st day of April, 1988, namely:- "Provided also the nothing contained in the second proviso shall apply to the long-term capital gain arising from the transfer of a long-term capital asset being bond or debenture other than capital indexed bonds issued by the Government". 19 Amendment of section 55. 19. Amendment of section 55. In section 55 of the Income-tax Act, with effect from the 1st day of April, 1998,-

(a) in sub-section (1), in clause (b), in sub-clause (1) after the words "goodwill of a business" the words" or a right to manufacture, produce or process any article or thing" shall be inserted.

(b) in sub-section (2), in clause 9a), after the words "being goodwill of a business", the words "or a right to manufacture, produce or process any article or thing," shall be inserted. 20 Amendment of section 57. 20. Amendment of section 57. In section 57 of the Income-tax Act, in clause (iia) for the words "twelve thousand rupees", the words "fifteen thousand rupees" shall be substituted with effect from the 1st day of April, 1998. 21 Omission of Section 80AA. 21. Omission of Section 80AA. Section 80AA of the Income-tax Act shall be omitted with effect from the 1st day of April 1998. 22 Amendment of section 80AB. 22. Amendment of section 80AB. In section 80AB of the Income-tax Act, the brackets, words, figures and letter "(except section 80M)" shall be omitted with effect from the 1st day of April, 1998. 23 Amendment of section 80G. 23. Amendment of section 80G. In section 80G the Income-tax Act, with effect from the 1st day of April, 1988,-

(a) in sub-section (1), in clause (1), after the word, brackets, figures and letters "sub-clause (iiihe)". the words, brackets, figures and letters "or sub-clause (iiihf)" shall be inserted;

(b) in sub-section (2), in clause (a), after sub-clause (iiihe), the following sub-clause shall be inserted, namely:- "(iiihg) the Chief Minister's Relief Fund or the Lieutenant Governor's Relief Fund in respect of any State or Union territory, as the case may be; Provided that such Fund is- (a) the only Fund of its kind established in the State or the Union territory, as the case may be; (b) under the overall control of the Chief Secretary or the Department of Finance of the State or the Union territory, as the case may be; (c) administered in such manner as may be specified by the State Government or the Lieutenant Governor, as the case may be; or" 24 Omission of Section 80GG. 24. Omission of Section 80GG. Section 80GG of the Income-tax Act shall be omitted with effect from the 1st day April 1998. 25 Amendment of section 80-IA. 25. Amendment of section 80-IA. In section 80-1A of the Income-tax Act,-

(a) in sub-section (1), after the words "scientific and industrial research and development",- (i) the words "or providing telecommunication services whether basic or cellular" shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1996; (ii) after the words "or providing telecommunication services whether basic or cellular" as so inserted, the words "or providing telecommunication services whether basic or cellular" as so inserted, the words "or operating an industrial park or commercial production of mineral oil in the North-Eastern Region" shall be inserted with effect from the 1st day of April, 1998;

(b) in sub-section (4), with effect from the 1st day of April, 1998. (i) for the portion beginning with the words "This section applies-" and ending with the words, brackets and figures "either of the conditions (iii) or (iv) are fulfilled, namely:- "the following shall be substituted, namely:- "This section applies to the business of any hotel- (a) where conditions (i) (ii) and (v); and (b) either of the conditions (iii) or (iv); or (c) either of the conditions (iiia) or (iva), are fulfilled, namely:-" (ii) after clause (iii), the following clause shall be inserted, namely:- "(iiia) the business of the hotel, located in a hilly area or a rural area or a place of pilgrimage or such other place as the Central Government may, having regard to the need for development of infrastructure for tourism in any place and other relevant considerations, specify for the purpose of this clause, starts functioning at any time during the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, Provided the nothing contained in this clause shall apply to any hotel located at a place within the municipal jurisdiction (whether known as a municipality municipal corporation, notified area committee, town area committee or a cantonment board or by any other name) of Calcutta, Chennai, Delhi and Mumbai," (iii) after clause (iv), the following clause shall be inserted, namely:- "(iva) the business of the hotel, located in a place other than a place referred to in clause (iiia) of this sub-section and not being located at a place within the municipal jurisdiction (whether known as a municipality, municipal corporation, notified area committee, town area committee, or a cantonment board or by any other name) of Calcutta, Chennai, Delhi and Mumbai, starts functioning at any time during the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2001". (c) After sub-section (4B) the following sub-section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1996, namely:- "(4C) This section applies to any undertaking which starts providing telecommunication services whether basic or cellular at any time on or after the 1st day of April, 1995 but before the 31st day of March, 2000", (d) after sub-section (4C) as so inserted, the following sub-sections shall be inserted with effect from the 1st day of April, 1998, namely:- "(4D) This section applies to any undertaking which begins to operate an industrial park notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2002. "(4E) This section applies to any undertaking which begins commercial production of mineral oil in the North-Eastern Region."

(e) in sub-section (5),- (i) after clause (ib) the following clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1996, namely:- "(ic) in the case of an undertaking referred to in sub-section (4C), hundred per cent. of the profits and gains derived from such business for the initial five assessment years and thereafter, twenty-five per cent. of the profits and gains derived from such business. Provided that where the assessee is a company, the provisions of this clause shall have effect as if for the words "twenty-five per cent" the words "thirty per cent" had been submitted; (ii) after clause (ic), as so inserted, the following clause shall be inserted with effect from the 1st day of April, 1998, namely:- '(id) in the case of an industrial park referred to in sub-section (4D), hundred per cent. of the profits and gains derived from such business for the initial five assessment years and thereafter, twenty- five per cent. of the profits and gains derived from such business: Provided that where the assessee is a company, the provisions of this clause shall have effect as if for the words "twenty-five per cent." the words "thirty per cent." had been substituted; Provided that where the assessee is a company, the provisions of this clause shall have effect as if for the words "twenty-five per cent", the words "thirty per cent". had been substituted; (iii) after clause (ii), the following clause shall be inserted with effect from the 1st day of April, 1998, namely:- "(iia) in the case of a hotel referred to in clause (iiia) of sub-

section (4) fifty per cent, of the profits and gains derived from the business of such hotel; Provided that the said hotel is approved by the prescribed authority for the purposes of this clause in accordance with the rules made under this Act". (iv) in clause (iii), after the word, brackets and figures "clause (iv)", the words, brackets, figures and letter "or clause (iva)" shall be inserted with effect from the 1st day of April, 1998; (v) after clause (iv), the following clause shall be inserted with effect from the 1st day of April 1998, namely:- "(v) in the case of undertaking referred to in sub-section (4E) hundred per cent. of profits and gains derived from such business for the initial seven assessment years"

(f) in sub-section (6),- (i) after clause (v), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1996, namely:- "(vi) ten in the case of an assessee, being an undertaking referred to in sub-section (4C),deriving profits and gains from telecommunication services whether basic or cellular".(ii) after clause (vi) as so inserted, the following clauses shall be inserted with effect from the 1st day of April, 1998, namely:- "(vii) ten in the case of an assessee, being an undertaking referred to in sub-section (4D), deriving profits and gains from operating an industrial park; (viii) seven in the case of an assessee being an undertaking referred to in sub-section (4E)deriving profits and gains from commercial production of mineral oil in the North-Eastern Region"

(g) in sub-section (12), in clause (c),

(i) after sub-clause (3), the following sub-clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1996, namely:-

"(4) in the case of an undertaking referred to in sub-section (4C) means the assessment year relevant to the previous year in which the undertaking starts to provide the telecommunication services whether basic or cellular"

(ii) after sub-clause (4) as so inserted, the following sub-clause shall be inserted with effect from the 1st day of April, 1998, namely:-

"(5) in the case of an undertaking operating an industrial park referred to in sub-section (4D) means the assessment year relevant to the previous year in which the undertaking starts operating such industrial park notified for the purposes of the said sub-section;

(6) in the case of an undertaking engaged in the business of commercial production of mineral oil referred to in sub-section (4E) means the assessment year relevant to the previous year in which the undertaking commences the commercial production of mineral oil" (iii) after clause (f), the following clause shall be inserted with effect from the 1st day of April, 1998, namely:- '(g) "North-Eastern Region" means the region comprising of the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura. 26 Omission of Section 80JJ. 26. Omission of Section 80JJ. Section 80JJ of the Income-tax Act, shall be omitted with effect from the 1st day of April, 1998. 27 Amendment of section 80L. 27. Amendment of section 80L.

In section 80L of the Income-tax Act, in sub-section (1) with effect from the 1st day of April, 1998.- (a) clause (iv) shall be omitted; (b) in clause (x), the words", or dividend received from," shall be omitted; (c) in the proviso, for the word, brackets and figures "clause (iv)"

the word, brackets and figure "clause (1)" shall be substituted. 28 Omission of Section 80M. 28. Omission of Section 80M. Section 80M of the Income-tax Act shall be omitted with effect from the 1st day of April, 1998. 29 Amendment of section 80-O. 29. Amendment of section 80-O. In section 80-O of the Income-tax Act, for the portion beginning with the words "any income by any of royalty" and ending with the words "outside India to such Government or enterprise by the assessee" the words "any income received by the assessee from the Government of a foreign State of foreign enterprise in consideration for the use outside India of any patent, invention, design or registered trade mark" shall be substituted with effect from the 1sst day of April, 1998. 30 Amendment of section 88. 30. Amendment of section 88.

In section 88 of the Income-tax Act, in sub-section (2), in clause (xvi), with effect from the 1st day of April, 1998,- (i) after the words "by a public company", the words "or as subscription to any eligible issue of capital by any public financial institution" shall be inserted. (ii) in the Explanation,- (A) for clause (i), the following clause shall be substituted, namely:- '(i) "eligible issue of capital" means an issue made by a public company formed and registered in India or a public financial institution and the entire proceeds of the issue of utilised wholly and exclusively either for the purposes of developing, maintaining and operating an infrastructure facility or for generating, or for generating and distributing, power or for providing telecommunication services whether basic or cellular;'; (B) after clause (iii), the following clause shall be inserted namely:- '(iv) "public financial institution" shall have the meaning assigned to it in section 4A of the Companies Act, 1956.; 31 Substitution of new Section for Section 88B. 31. Substitution of new Section for Section 88B. For section 88B of the Income-tax Act, the following section shall be substituted with effect from the 1st day of April, 1998, namely:- 88B. Rebate of Income-tax in case of Individuals of sixty-five years or above. An assessee, being an individual resident in India, who is of the age of sixty-five years or more at any time during the previous year shall be entitled to a deduction from the amount of income-tax (as computed before allowing the deductions under this Chapter) on his total income, with which he is chargeable for any assessment year, of an amount equal to hundred per cent. of such income-tax or an amount of ten thousand rupees, whichever is less" 32 Amendment of section 115A. 32. Amendment of section 115A.

In section 115A of the Income-tax Act, in sub-section (1), with effect from the 1st day of April, 1998,- (a) in clause (a), for the word "dividends" wherever it occurs, the words "dividends other than dividends referred to in section 115-O" shall be substituted; (b) in clause (b), for sub-clauses (A) ad (B), the following sub- clauses shall be substituted, namely:- "(A) the amount of income-tax calculated on the income by way of royalty if any, included in the total income, at the rate of thirty per cent. If such royalty is received in pursuance of an agreement made on or before the 31st day of May, 1997 and twenty per cent, where such royalty is received in pursuance of an agreement made after the 31st day of May, 1997; (B) the amount of income-tax calculated on the income by way of fees for technical services, if any, included in the total income, at the rate of thirty per cent. If such fees for technical services are received in pursuance of an agreement made on or before the 31st day of May, 1997 and twenty per cent. Where such fees for technical services are received in pursuance of an agreement made after the 31st day of May, 1997; and". 33 Amendment of section 115AC. 33. Amendment of section 115AC. In section 115AC of the Income-tax Act, for the word "dividends" wherever it occurs, the words "dividends other than dividends referred to in section 115-O" shall be substituted with effect from the 1st day of April, 1998. 34 Amendment of section 115AD. 34. Amendment of section 115AD.

In section 115AD of the Income-tax Act, in sub-section (1), in clause (a), for the word "income", the words "income other than income by way of dividends referred to in section 115-O" shall be substituted with effect from the 1st day of April, 1998. 35 Amendment of section 115C. 35. Amendment of section 115C. In section 115C of the Income-tax Act, in clause (c), for the words "income derived", the words figures and letter "income derived other than dividends referred to in section 115-O" shall be substituted with effect from the 1st day of April, 1998. 36 Substitution of new Section for Section 115E. 36. Substitution of new Section for Section 115E. For section 115E of the Income-tax Act, the following section shall be substituted with effect from the 1st day or April, 1998, namely:- "115E. Tax on investment Income and long-term Capital gains. Where the total income of an assessee, being a non-resident Indian, includes- (a) any income from investment or income from long-term capital gains of an asset other than a specified asset; (b) income by way of long-term capital gains, the tax payable by him shall be the aggregate of- (i) the amount of income-tax calculated on the income by way of long- term capital gains referred to in clause (a), if any, included in the total income, at the rate of twenty per cent; (ii) the amount of income-tax calculated on the income by way of long- term capital gains referred to in clause (b), if any, included in the total income, at the rate of ten per cent.; and (iii) the amount of income-tax with which he would have been chargeable has his total income been reduced by the amount of income referred to in clauses (a) and (b)". 37 Amendment of section 115JA. 37. Amendment of section 115JA.

In section 115JA of the Income-tax Act, in sub-section (2),- (a) in clause (viii), in the Explanation, the word "or" shall be inserted at the end: (b) after clause (vii) as so amended, the following clause shall be inserted with effect from the 1st day of April, 1998, namely:- "(viii) the amount of profits eligible for deduction under section

80HHC, computed under clause (a), (b) or (c) of sub-section (3) or sub-section (3A), as the case my be, of that section, and subject to

the conditions specified in sub-sections (4) and (4A) of that section; (ix) the amount of profits eligible for deduction under section 80HHE,

computed under sub-section (3) of that section.". 38 Insertion of new Section 115JAA. 38. Insertion of new Section 115JAA. After section 115JA of the Income-tax Act, the following section shall be inserted, namely:- "115JAA. TAX Credit In respect of Tax Paid on deemed income relating to certain companies.

(1) Where any amount of tax is paid under sub-section (1) of section 115JA by an assessee being a company for any assessment year, then credit in respect of tax so paid shall be allowed to him in accordance with the provisions of this section.

(2) The tax credit to be allowed under sub-section (1) shall be the difference of the tax paid for any assessment year under sub-section

(1) of section 115JA and the amount of tax payable by the assessee on his total income computed in accordance with the other provisions of this Act: Provided that no interest shall be payable on the tax credit allowed

under sub-section (1).

(3) The amount of tax credit determined under sub-section (2) shall be carried forward and set off in accordance with the provisions of sub-

section (4) and sub-section (5) but such carry forward shall not be allowed beyond the fifth assessment year immediately succeeding the assessment year in which tax credit becomes allowable under sub-

section (1).

(4) The Tax credit shall be allowed set-off in a year when tax becomes payable on the total income computed in accordance with the provisions of this Act other than section 115JA.

(5) Set off in respect of brought forward tax credit shall be allowed for any assessment year to the extent of the difference between the tax on his total income and the tax which would have been payable

under the provisions of sub-section (1) of section 115JA for that assessment year.

(6) Where as a result of an order under sub-section (1) or sub-section

(3) of section 143, section 144, section 147, section 154, section

155, sub-section (4) of section 245D, section 250, section 254, section 260, section 262 section 263 or section 264, the amount of tax payable under this Act is reduced or increased, as the case may be, the amount to tax credit allowed under this section shall also be increased or reduced accordingly". 39 Omission of Chapter XII-C. 39. Omission of Chapter XII-C. Chapter XII-C of the Income-tax Act, shall be omitted with effect from the 1st day of April, 1998. 40 Insertion of new Chapter XII-D. 40. Insertion of new Chapter XII-D. After section 115N of the Income-tax Act, the following Chapter shall be inserted with effect from the 1st day of June, 1997, namely:- CHAP Tax on distributed profits of domestic companies. CHAPTER XII-D Tax on distributed profits of domestic companies. SPECIAL PROVISIONS RELATING TO TAX ON DISTRIBUTED PROFITS OF DOMESTIC COMPANIES 115- Tax on distributed profits of domestic companies. Tax on distributed profits of domestic companies.

(1) Notwithstanding anything contained in any other provision of this act and subject to the provisions of this section, in addition to the income-tax chargeable in respect of the total income of a domestic company for any assessment year, any amount declared, distributed or paid by such company by way of dividends (whether interim or otherwise) on or after the 1st day of June, 1997, whether out of current or accumulated profits shall be charged to additional income- tax (hereafter referred to as tax on distributed profits) at the rate of ten per cent.

(2) Notwithstanding that no income-tax is payable by a domestic company ion its total income computed in accordance wit the provisions

of this Act, the tax on distributed profits under sub-section (1) shall be payable by such company.

(3) The principal officer of the domestic company and the company shall be liable to pay the tax on distributed profits to the credit of he Central Government within fourteen days from the date of- (a) declaration of any dividend; or (b) distribution of any dividend; or (c) payment of any dividend, whichever is earliest.

(4) The tax on distributed profits so paid by the company shall be treated as the final payment of tax in respect of the amount declared, distributed or paid as dividends and no further credit therefor shall be claimed by the any other person in respect of the amount of tax so paid.

(5) No deduction under any other provision of this Act shall be allowed to the company or a shareholder in respect of the amount which

has been charged to tax under sub-section (1) or the tax thereon. 115P Interest payable for non-payment of tax by domestic companies. 115P. Interest payable for non-payment of tax by domestic companies. Where the principal officer of a domestic company and the company fails to pay the whole or any part of the tax on distributed

profits referred to in sub-section (1) of section 115-O within the

time allowed under sub-section (3) of that section, he or it shall be liable to pay simple interest at the rate of two per cent. for every month or part thereof on the amount of such tax for the period beginning on the date immediately after the last date on which such tax was payable and ending with the date on which the tax is actually paid. 115Q When Company is deemed to be in default. 115Q. When Company is deemed to be in default. If any principal officer of a domestic company and the company does not pay tax on distributed profits in accordance with the provisions of section 115-O, then, he or it shall be deemed to be an assessee in default in respect of the amount of tax payable by him or it and all the provisions of this Act for the collection and recovery of income-tax shall apply. Explanation.- For the purposes of this Chapter, the expression "dividends" shall have the same meaning as is given to "dividend" in

clause (22) of section 2 but shall not include sub-clause (e) thereof.'. 41 Amendment of section 132. 41. Amendment of section 132. In section 132 of the Income-tax Act,-

(a) in sub-section (8), for the words "Chief Commissioner or Commissioner" at both the places where they occur, the words "Chief Commissioner, Commissioner, Director General or Director' shall be substituted and shall be deemed to have been substituted with effect from the 1st day of October, 1996;

(b) in sub-section (10), for the words "Chief Commissioner or Commissioner", the words "Chief Commissioner, Commissioner, Director General or Director" shall be substituted and shall be deemed to have been substituted with effect from the 1st day of October, 1996. 42 Amendment of section 139. 42. Amendment of section 139.

In section 139 of the Income-tax Act, in sub-section (1),- (i) the following proviso shall be inserted, namely:- "Provided that a person, not furnishing return under this sub-section and residing in such are as may be specified by the Board in this behalf by a notification in the Official Gazette, and who at any time during the previous year fulfils any two of the following conditions, namely:- (i) is in occupation of an immovable property exceeding a specified floor area, whether by way of ownership, tenancy or otherwise, as may be specified by the Board in this behalf; or (ii) is the owner or the lessee of a motor vehicle; or (iii) is a subscriber to a telephone; or (iv) has incurred expenditure for himself or any other person on travel to any foreign country. shall furnish a return, of his income during the previous year, on or before the due date in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed". (ii) after Explanation 2, the following Explanation shall be inserted, namely:- 'Explanation 3- For the purposes of this sub-section the expression

"motor vehicle" shall have the meaning assigned to it in clause (28) of section 2 of Motor Vehicles Act, 1988.'. 43 Amendment of section 143. 43. Amendment of section 143.

In section 143 of the Income-tax Act, in sub-section (1), in clause (a), with effect from the 1st day of April, 1998.- (i) for the second proviso, the following proviso shall be substituted, namely:- "Provided further that an intimation shall be sent to the assessee whether or not any adjustment has been made under the first proviso and notwithstanding that no tax or interest is due from him." (ii) in the third proviso, the words "for any tax or interest due" shall be omitted. 44 Amendment of section 167A. 44. Amendment of section 167A. In section 147A of Income-tax Act, for the words "maximum marginal rate", the words" rate as specified in the Finance Act of the relevant year" shall be substituted with effect from the 1st day of April, 1976, namely:-

"(8) For the purposes of this section, the amount referred to in sub-

section (2) shall include the amount paid or payable by way of demurrage charge or handling charge or any other amount of similar nature.". 45 Amendment of section 172. 45. Amendment of section 172.

In section 172 of the Income-tax Act, after sub-section (7), the following sub-section shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1976, namely:-

"(8) For the purposes of this section, the amount referred to in

sub-section (2) shall include the amount paid or payable by way of demurrage charge or handling charge or any other amount of similar nature.". 46 Amendment of section 193. 46. Amendment of section 193. In section 193 of the Income-tax Act, in the proviso, with effect from the 1st day of June, 1997,- (a) clause (iiia) shall be omitted; (b) for clause (iv), the following clauses shall be substituted, namely:- "(iv) any interest payable on any security of the Central Government or a State Government". 47 Amendment of section 194. 47. Amendment of section 194. In section 194 of the Income-tax Act, after the proviso, the following proviso shall be inserted with effect from the 1st day of June, 1997, namely:- "Provided further that no such deduction shall be made in respect of any dividends referred to in section 115-O". 48 Amendment of section 194B. 48. Amendment of section 194B. In section 194B of the Income-tax Act, after the proviso, the following proviso shall be inserted with effect from the 1st day June, 1997, namely:- "Provided further that in a case where the winnings are wholly in kind or partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the winnings. 49 Amendment of section 195. 49. Amendment of section 195.

In section 195 of the Income-tax Act, in sub-section (1), after the first proviso, the following proviso shall be inserted with effect from the 1st day of June, 1997, namely:- "Provided further that no such deduction shall be made in respect of any dividends referred to in section 115-O". 50 Amendment of section 196C. 50. Amendment of section 196C. In section 196C of the Income-tax Act, the following proviso shall be inserted with effect from the 1st day of June, 1997, namely:- 51 Amendment of section 196D. 51. Amendment of section 196D.

In section 196D of the Income-tax Act, in sub-section (1), the following proviso shall be inserted with effect from the 1st day of June, 1997, namely:- "Provided that no such deduction shall be made in respect of any dividends referred to in section 115-O". 52 Amendment of section 206. 52. Amendment of section 196. Section 206 of the Income-tax Act shall be renumbered as

sub-section (1) of that section and after sub-section (1) as so renumbered, the following sub-sections shall be inserted, namely:-

"(2) Notwithstanding anything contained in any other law for the time being in force, a return filed on a floppy, diskette, magnetic cartridge tape. CD-ROM or any other computer readable media as may be specified by the board (hereinafter referred to as the computer media) shall be deemed to be a return for the purposes of this section and the rules made thereunder and shall be admissible in any proceedings thereunder, without further proof of production of the original, a evidence of any contents of the original or of any fact stated therein.

(3) A return filed under sub-section (2) shall fulfil the following conditions, namely:- (a) while receiving returns on computer media, necessary checks by scanning the documents filed on computer media will be carried out and the media will be duly authenticated by the Assessing Officer; and (b) the Assessing Officer shall also take due care to preserve the computer media by duplicating, transferring, mastering or storage without loss of data". 53 Amendment of section 271C. 53. Amendment of section 271C.

In section 271C of the Income-tax Act, for sub-section (1), the following sub-section hall be substituted with effect from the 1st day of June, 1997, namely:-

"(1) If any person fails to- (a) deduct the whole or any part of the tax as required by or under the provisions of Chapter XVII-B; or (b) pay the whole or any part of the tax as required by or under-

(i) sub-section (2) of section 115-O; or (ii) the second proviso to section 194B then, such person shall be liable to pay, by way of penalty, a sum, equal to the amount of tax which such person failed to deduct or pay as aforesaid.". 54 Insertion of new section 27 1F. 54. Insertion of new section 27 1F. After section 271E of the Income-tax Act, the following section shall be inserted, namely:- "271F.Penalty for failure to furnish return of income. If a person who is required to furnish a return of his income

as required by the proviso to sub-section (1) of section 139 fails to furnish such return on or before the due date, he shall be liable to pay by way of penalty, sum of five hundred rupees.". 55 Amendment of section 273B. 55. Amendment of section 273B. In section 273B of the Income-tax Act, after the word, figures and letter "section 271E", the word, figures and letter "section 271F" shall be inserted. 56 Substitution of new section for section 276B. 56. Substitution of new section for section 276B. For section 276B of the Income-tax Act, the following section shall be substituted with effect from the 1st day of June, 1997, namely:- "276B. Failure to pay tax to the credit of Central Government under Chapter XII-D or XVII-B. If a person fails to pay to the credit of the Central Government,- (a) the tax deducted at source by him as required by or under the provisions of Chapter XVII-B; or (b) the tax payable by him, as required by or under-

(i) sub-section (2) of section 115-O; or (ii) the second proviso to section 194B, He shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.". 57 Amendment of section 281B. 57. Amendment of section 281B.

In section 281B of the Income-tax Act, in sub-sections (1)

and (2), for the words "Chief Commissioner or Commissioner", the words "Chief Commissioner, commissioner, Director General or Director" shall be substituted and shall be deemed to have been substituted with effect from the 1st day of October, 1996. 58 Amendment of Schedule IV. 58. Amendment of Schedule IV. In Schedule IV to the Income tax Act, in Part A, in rule 6, in clause (a), for the word "ten", the word "twelve" shall be substituted with effect from the 1st day of April, 1998. 59 Amendment of section 4.Interest-tax 59. Amendment of section 4. Interest-tax In section 4 of the Interest-tax Act, 1974 (hereinafter

referred to as the Interest-tax Act), in sub-section (2), the following proviso shall be inserted with effect from the 1stday of April, 1998, namely:- "Provided that the rate at which interest-tax shall be charged in respect of any chargeable interest accruing or arising after the 31st day of March, 1997 shall be two per cent. of such chargeable interest". 60 Amendment of section 21. 60. Amendment of section 21. In section 21 of the Interest-tax Act, after the figures

and brackets "2(44)" the figures "1219" shall be inserted and shall be deemed to have been inserted with effect from the 1st day of October, 1991. Expenditure-tax 61 Amendment of section 4 of act 35 of 1987.Expenditure-tax 61. Amendment of section 4 of act 35 of 1987. Expenditure-tax In section 4 of the Expenditure-tax Act, 1987, in clause (a) after the proviso, the following proviso shall be inserted with effect from the 1st day of April, 1998, namely:- "Provided further that nothing in this clauses shall apply in the case

of a hotel referred to in clause (iia) of sub-section (5) of section 80-1A of the Income-tax Act, 1961 during the period beginning on the 1st day of April, 1998 and ending on the 31st day of arch, 2008.". CHAP The Voluntary Disclosure of Income Scheme, 1997 CHAPTER IV The Voluntary Disclosure of Income Scheme, 1997

Short title and commencement. 62. Short title and commencement.

(1) This Scheme may be called the Voluntary Disclosure of Income Scheme, 1997.

(2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.

Definitions 63. Definitions In this Scheme, unless the context otherwise requires- (a) "declarant" means a person making the declaration under sub-

section (1) of section 64: (b) "Income-tax Act" means the Income-tax Act, 1957; (d) all other words and expressions used in this Scheme but not defined and defined in the Income-tax Act or the Wealth-Act shall have the meaning respectively assigned to them in those Acts.

Charge of tax on voluntarily disclosed income. 64. Charge of tax on voluntarily disclosed income.

(1) Subject to the provisions of this Scheme where any person makes, on or after the date of commencement of this Scheme but on or before the 31st day of December, 1997, a declaration in accordance with the provisions of section 65 in respect of any income chargeable to tax under the Income-tax Act for any assessment year- (a) for which he has failed to furnish a return under section 139 of the Income-tax Act; (b) which he has failed to disclose in a return of income furnished by him under the Income-tax Act before the date of commencement of this Scheme; (c) which has escaped assessment by reason of the omission of failure on the part of such person to make a return under the Income-tax Act or to disclosed fully and truly all material facts necessary for his assessment or otherwise. then, notwithstanding anything contained in the Income-tax Act or in any Finance Act, income-tax shall be charged in respect of the income so declared (such income being hereinafter referred to as the voluntarily disclosed income) at the rates specified hereunder, namely: (i) in the case of a declarant, being a company or a firm at the rte or thirty-five per cent. of the voluntarily disclosed income; (ii) in the case of a declarant, being a person other than a company or a firm, at the rate of thirty per cent. of the voluntarily disclosed income.

(2) Nothing contained in sub-section (1) shall apply in relation to- (i) the income assessable for any assessment year for which a notice under section 142 or section 148 of the Income-tax Act has been served upon such person and the return has not been furnished before the commencement of this Scheme. (ii) the income in f the Income-tax Act was carried out or in respect of any earlier previous year.

Particulars to be furnished in declaration. 65. Particulars to be furnished in declaration.

(1) A declaration under sub-section (1) of section 64 shall be made to the Commissioner and shall be in such form and shall be verified in such manner as may be prescribed.

(2) The declaration shall be signed.- (a) where the declarant is an individual, by the individual himself; where such individual is absent from India, b the individual concerned or by some person duly authorised by him in this behalf; and where the individual is mentally incapacitated from attending to his affairs, by his guardian or by any other person competent to act on his behalf; (b) where he declarant is a Hindu undivided family, by the Karta, and where the Karta is absent from India or is mentally incapacitated from attending to his affairs, by any other adult member of such family; (c) where the declarant is a company by the managing director thereof, or where for any unavoidable reason such managing director is not able to sign the declaration or where there is no managing director, by any director thereof; (d) where the declarant is a firm by the managing partner thereof, or where for any unavoidable reason such managing partner is not able to sign the declaration, or where there is no managing partner as such, by any partner thereof, not being a minor; (e) where the declarant is any other association, by any member of the association or the principal officer thereof: and (f) where the declarant is any other person, by that person or by some other person competent to act on his behalf.

(3) Any person, who has made a declaration under sub-section (1) of section 64 in respect of his income or as a representative assessee in respect of the income of any other person, shall not be entitled to make any other declaration, under that sub-section in respect of his income or the income of such other person, and any such other declaration, if made, shall be deemed to be void.

Time for payment of tax. 66. Time for payment of tax. The tax payable under this Scheme is respect of the voluntarily disclosed income shall be paid by the declarant and the declaration shall be accompanied by proof of payment of such tax.

Interest payable by declarant. 67. Interest payable by declarant.

(1) Notwithstanding anything contained in section 66, the declarant may file a declaration without paying the tax under that section and the declarant may file the declaration and the declarant may pay the tax within three months from the date of filing of the declaration with simple interest at the rate of two pet cent. For every month or part of a month comprised in the period beginning from the date of filing the declaration and ending on the date of payment of such tax and file the proof of such payment within the said period of three months.

(2) If the declarant fails to pay the tax in respect of the voluntarily disclosed income before the expiry of three months from the date of filing of the declaration, the declaration filed by him shall be deemed never to have been made under this Scheme.

Voluntarily disclosed income not to be included in the total income. 68. Voluntarily disclosed income not to be included in the total income.

(1) The amount of the voluntarily disclosed income shall not be included in the total income of the declarant for any assessment year under the Income-tax Act, if the following conditions are fulfilled, namely:- (i) the declarant credits such amount in the books of account, if any, maintained by him for any source of income or in any other record, and intimates the credit so made to the Assessing Officer; and (ii) the income-tax in respect of the voluntarily disclosed income is paid by the declarant within the time specified in section 66 or section 67.

(2) The Commissioner shall, on an application made by the declarant, grant a certificate to him setting forth the particulars of the voluntarily disclosed income and the amount of income-tax aid in respect of the same.

Voluntarily disclosed income not to affect finality of completedassessments etc. 69. Voluntarily disclosed income not to affect finality of completed assessments etc. The declarant shall not be entitled, in respect of the voluntarily disclosed income or any amount of tax paid thereon, to reopen any assessment or reassessment made under the Income-tax Act or the Wealth-tax Act or claim any set off or relief in any appeal, reference or other proceeding in relation to any such assessment or reassessment.

Tax in respect of voluntarily disclosed income not refundable. 70. Tax in respect of voluntarily disclosed income not refundable. Any amount of tax paid in pursuance of a declaration made

under sub-section (1) of section 64 shall not be refundable under any circumstances.

Declaration not admissible in evidence against declarant. 71. Declaration not admissible in evidence against declarant. Notwithstanding anything contained in any other law for the time being in force, nothing contained in any declaration made under

sub-section (1) of section 64 shall be admissible in evidence against the declarant for the purpose of any proceeding relating to imposition of penalty or for the purposes of prosecution under the Income-tax Act or the Wealth-tax Act or the Foreign Exchange Regulation Act, 1973 or the Companies Act, 1956.

Secrecy of declaration. 72. Secrecy of declaration.

(1) All particulars contained in a declaration made under

sub-section (1) of section 64 shall be treated as confidential and, notwithstanding anything contained in any law for the time being in force, no court or any other authority shall be entitled to require any public servant or the declarant to produce before it any such declaration or any part thereof or to give any evidence before it in respect thereof.

(2) No public servant shall disclose any particulars contained in any such declaration except to any officer employed in the execution of the income-tax Act or the Wealth-tax Act, or to any officer appointed by the Comptroller and Auditor-General of India or the Board to audit income-tax receipts or refunds.

Exemption from wealth tax in respect of assets specified indeclaration. 73. Exemption from wealth tax in respect of assets specified in declaration.

(1) Where the voluntarily disclosed income is represented by cash (including bank deposits), bullion, investment is shares, debts due from other persons, commodities or any other asset

specified in the declaration made under sub-section (1) of section 64- (a) in respect of which the declarant has failed to furnish a return under section 14 of the Wealth-tax Act for the assessment year commencing on the 1st day of April, 1997 or any earlier assessment year or years, or (c) which have been understated in value in the return of net wealth furnished by him for the said assessment year or years. then, notwithstanding anything contained in the Wealth-tax Act or any rules made thereunder,- (i) wealth-tax shall not be payable by the declarant in respect of the assets referred to in clause (a) or clause (b) and such assets shall not be included in his net wealth for the said assessment year or years, (ii) the amount by which the value of the assets referred to in clause (c) has been understated in the return of net wealth for the said assessment year or years, to the extent such amount does not exceed the voluntarily disclosed income utilised for acquiring such assets, shall not be taken into account in computing the net wealth of the declarant for the said assessment year or years; (iii) the value of the jewellery or bullion so declared shall be taken to be its market value as on the 1st day of April, 1987, where the disclosure is made in respect of an assessment year earlier than assessment year 1987-88, and for the purposes of this Chapter the expression "jewellery" shall have the same meaning assigned to it in Explanation 1 to clause (vii) of section 5 of the Wealth-tax Act.

Explanation.- Where a declaration under sub-section (1) of section 64 is made by a firm, the assets referred to n clause (i) or, as the case may be, the amount referred to in clause (ii) shall not be taken into account in computing the net wealth of any partner of the firm or, as the case may, be in determining the value of the interest of any partner in the firm.

(2) The provisions of sub-section (1) shall not apply unless the

conditions specified in sub-section (1) of section 68 are fulfilled by the declarant.

Applicability of certain provisions of Income-tax Act and of Chapter Vof Wealth-tax Act. 74. Applicability of certain provisions of Income-tax Act and of Chapter V of Wealth-tax Act. The provisions of Chapter XV of the Income-tax Act relating to liability in special cases and of section 189 of that Act or of Chapter V of the Wealth-tax Act relating to liability to assessment in special cases shall, so far as may be, apply in relation to proceedings under this Scheme as they apply in relation to proceeding under the Income-tax Act, or as the case may be, the Wealth-tax Act.

Removal of doubts. 75. Removal of doubts. For the removal of doubts, it is hereby declared that, save

as otherwise expressly provided in the Explanation to sub-section (1) of section 73, nothing contained in this Scheme shall be construed as conferring any benefit, concession or immunity on any person other than the person making the declaration under this Scheme.

Power to remove difficulties. 76. Power to remove difficulties.

(1) If any difficulty arises in giving effect to the provisions of this Scheme, the Central Government may, by order, not inconsistent with the provisions of this Scheme, remove the difficulty; Provided that no such order shall be made after the expiry of a period of two years from the date on which the provisions of this Scheme come into force.

(2) Every order made under this section shall, as soon as may be after it is made, be laid before each House of Parliament.

Power to make rules. 77. Power to make rules.

(1) The Board may, by notification in the Official Gazette, make rules for carrying out the provisions of this Scheme.

(2) Without prejudice to the generality of the foregoing power, such rules may provide for the form in which a declaration may be made

under sub-section (1) of section 64 and the manner in which these may be verified.

(3) The Central Government shall cause every rule made under this Scheme to be laid as soon as may be after it is made before each House of Parliament while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule.

Scheme not to apply to certain persons. 78. Scheme not to apply to certain persons. The provisions of this Scheme shall not apply- (a) to any person in respect of whom an order of detention has been made under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974: Provided that- (i) such order of detention, being an order to which the provision of section 9 of the said Act apply, has not been revoked before the expiry of the time for, or on the basis of, the review under sub-

section (3) of section 9, or on the report of the Advisory Board under

section 8, read with sub-section (2) of section 9, of the said Act; or (iii) such order of detention, being an order to which the provisions of section 12A of the said Act apply, has not been revoked before the expiry of the time for, or on the basis of, the first review under

sub-section (3) of that section or on the basis of the report of the

Advisory Board under section 8, read with sub-section (6) of section 12A, of the said act; or (iv) such order of detention has not been set aside by a court of competent jurisdiction; (b) in relation to prosecution for any offence punishable under Chapter IX or Chapter XVII of the Indian Penal Code, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Terrorists and Disruptive Activities (Prevention) act, 1987, the Prevention of Corruption Act, 1988 or for the purpose of enforcement of any civil liability; (c) to any person notified under section 3 of the Special Court (Trial of Offences Relating to Transaction in Securities) Act, 1992. CHAP INDIRECT TAXESCustoms CHAPTER V INDIRECT TAXES Customs

Insertion of new section 8B. 79. Insertion of new section 8B. In the Customs Tariff Act, 1975 (hereinafter referred to as the Customs Tariff Act), after selection 8A, the following section shall be inserted, namely:-

Amendment of Act 51 of 1975. 80. Amendment of Act 51 of 1975. The Customs Tariff Act shall be amended in the manner specified in the Second Schedule. EXCISE

Insertion of new section 3A. 81. Insertion of new section 3A. After section 3 of the Central Excise Act, 1994 (hereinafter referred to as the Central Excise Act), the following section shall be inserted, namely:- "3A. Determination of annual capacity of production of the factory for levy of Excise duty.

(1) Notwithstanding anything contained in section 3, where the Central Government, having regard to the nature of the process of manufacture or production of excisable goods of any specified description, the extent of evasion of duty in regard to such goods or such other factors ad may be relevant, is of the opinion that it is necessary to safeguard the interest of revenue, specify, by notification in the Official Gazette, such goods as notified goods and there shall be levied and collected duty or excise on such goods in accordance with the provisions of this section.

(2) Where a notification is issued under sub-section (1), the Central Government may, by rules, provide for determination of the annual capacity of production, of such factor or factors relevant to the annual capacity of production of the factory in which such goods are produced, by the Commissioner of Central Excise and such annual capacity of production shall be deemed to be the annual production of such goods by such factory: Provided that where a factory producing notified goods is in operation only during a part of the year, the production thereof shall be calculated on proportionate basis of the annual capacity of production. (3 The duty of excise on notified goods shall be levied at such rate as the Central Government may by notification in the Official Gazette specify, and collected in such manner as may be prescribed; Provided that, where a factory producing notified goods did not produce the notified goods during any continuous period of not less than seen days, duty calculated on a proportionate basis shall be abated in respect of such period if the manufacturer of such goods fulfils such conditions as may be prescribed.

(4) where an assessee claims that the actual production of notified goods in his factory is lower than the production determined under

sub-section (2), the Commissioner of Central Excise shall, after giving an opportunity to the assessee to produce evidence in support of his claim, determine the actual production and predetermine the amount of duty payable by the assessee with reference to such

actual production at the rate specified in sub-section (3).

(5) Where the Commissioner of Central Excise determines the actual

production under sub-section (4), the amount of duty already paid, if any, shall be adjusted against the duty so predetermined and if the duty already paid falls short of, or is in excess of, the duty so predetermined, the assessee shall pay the deficiency or be entitled to a refund, as the case may be.

(6) The provisions of this section shall not apply to goods produced or manufactured,- (i) in a free trade zone and brought to any other place in India; or (ii) by a hundred per cent export-oriented undertaking and allowed to be sold in India. Explanation 1.- For the removal of doubts, it is hereby clarified that for the purposes of section 3 of the Customs Tariff Act, 1975, the duty of excise leviable on the notified goods shall be deemed to be the duty of excise leviable on such goods under the Schedule to the central Excise Tariff Act, 1985, read with any notification for the time being in force. Explanation 2. - For the purposes of this section the expressions "free trade zone" and "hundred per cent. export-oriented undertaking" shall have the meanings assigned to them in section 3'.

Insertion of new section 4A. 82. Insertion of new section 4A. After section 4 of the Central Excise Act, the following section shall be inserted, namely:- `4A. Valuation of excisable goods with reference to retail sale price.

(1) The Central Government may, by notification in the Official Gazette, specify any goods, in relation to which it is required, under the provisions of the Standards of Weights and Measures Act, 1976 or the rules made thereunder or under any other law for the time being in force, to declare on the package three of the retail sale price of such goods, to which he provisions of sub-

section (2) shall apply.

(2) Where the goods specified under sub-section (1) are excisable goods and are chargeable to duty of excise with reference to value, then, notwithstanding anything contained in section 4, such value shall be deemed to be the retail sale price declared on such goods less such amount of abatement, if any, from such retail sale price as the Central Government may allow by notification in the Official Gazette.

(3) The Central Government may, for the purpose of allowing any

abatement under sub-section (2), take account the amount of duty of excise, sales tax and other taxes, if any, payable on such good. Explanation 1.- For the purpose of this section, "retail sale price" means the maximum price at which the excisable goods in packaged form may be sold to the ultimate consumer and includes all taxes local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like, as the case may be. Explanation 2.- Where on any excisable goods more than one retail sale price is declared, the maximum of such retail sale price shall be deemed to be the retail sale price for the purposes of this section.'.

Insertion of new section 14AA. 83. Insertion of new section 14AA. After section 14A of the Central Excise Act, the following section shall be inserted, namely:- `14AA. Special audit in cases where credit of duty availed or utilised is not within the normal limits, etc.

(1) If the Commissioner of Central Excise has reason to believe that the credit of duty availed of or utilised under the rules made under this Act by a manufacturer of any excisable goods- (a) is not within the normal limit having regard to the nature of the excisable goods produced or manufactured, the type of inputs used and other relevant factors, as he may deem appropriate; (b) has been availed of or utilised by reason of fraud, collusion or any willful mis-statement or suppression of facts, he may direct such manufacturer to get the accounts of his factory, office, depot, distributor or any other place, as may be specified by him, audited by a cost accountant nominated by him.

(2) The cost accountant so nominated shall, within the period specified by the Commissioner of central Excise, submit a report of such audit duly signed and certified by him to the said Commissioner mentioning therein such other particulars as may be specified.

(3) The provisions of sub-section (1) shall have effect notwithstanding that the accounts of the said manufacturer aforesaid have been audited under any other law for the time being in force or otherwise.

(4) The expenses of, and incidental to, such audit (including the remuneration of the cost accountant) shall be determined by the Commissioner of Central Excise (which determination shall be final) and paid by the manufacturer and in default of such payment shall be recoverable from the manufacturer in the manner provided in section 11 for the recovery of sums due to the Government.

(5) The manufacturer shall be given an opportunity of being heard in respect of any material gathered on the basis of the audit under sub-

section (1) and proposed to be utilised in any proceeding under this Act or rules made thereunder. Explanation,- For the purpose of this section, "cost accountant" shall

have the meaning assigned to it in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959'.

Amendment of section 38. 84. Amendment of section 38.

In section 38 of the Central Excise Act, in sub-section (2), after the words "every notification issued under", the words, figures and letters "section 3A, section 4A" shall be inserted.

Amendment of Act 5 of 1986. 85. Amendment of Act 5 of 1986. The Central Excise Tariff Act, 1985 (hereinafter referred to as the Central Excise Tariff Act) shall be amended in the manner specified in the Third Schedule.

Amendment of Act 58 of 1957. 86. Amendment of Act 58 of 1957 The Additional Duties of Excise (Goods of Special Importance) Act, 1957 (hereinafter referred to as the Additional Duties of Excise Act) shall be amended in the manner specified in the Fourth Schedule. 87 . Provisions as to duties on specified petroleum products in relation toa certain period and validation. 87. Provisions as to duties on specified petroleum products in relation to a certain period and validation.

(1) The notification o