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THE TAXATION LAWS (AMENDMENT) ACT, 2006
NO. 29 OF 2006
[13th July, 2006.]
AN ACT further to amend the Income-tax Act, 1961, the Customs Act, 1962, the Customs Tariff Act, 1975 and the Central Excise Act, 1944.
BE it enacted by Parliament in the Fifty-seventh Year of the Republic of India as follows:-
CHAPTER I
PRELIMINARY
Short title.
1. This Act may be called the Taxation Laws (Amendment) Act, 2006.
CHAPTER II
DIRECT TAXES
Income-tax
Amendment of section 2.
2. In section 2 of the Income-tax Act, 1961 (hereafter in this Chapter referred to as the Income-tax Act), in clause (44), after the words “powers of a Tax Recovery Officer”, the following shall be inserted, namely:-
“and also to exercise or perform such powers and functions which are conferred on, or assigned to, an Assessing Officer under this Act and which may be prescribed”.
Amendment of section 10.
3. In section 10 of the Income-tax Act, with effect from the 1st day of April, 2006,-
(?) after clause (23BBE), the following clause shall be inserted, namely:-
“(23BBF) any income of the North-Eastern Development Finance Corporation Limited, being a company formed and registered under the Companies Act, 1956:
Provided that in computing the total income of the North-Eastern Development Finance Corporation Limited, the amount to the extent of-
(i) twenty per cent, of the total income for assessment year beginning on the 1st day of April, 2006;
(ii) forty per cent, of the total income for assessment year beginning on the 1st day of April, 2007;
(iii) sixty per cent, of the total income for assessment year beginning on the 1st day of April, 2008;
(iv) eighty per cent, of the total income for assessment year beginning on the 1st day of April, 2009;
(v) one hundred per cent, of the total income for assessment year beginning on the 1st day of April, 2010 and any subsequent assessment year or years,
shall be included in such total income;”;
(b) in clause (23C),-
(i) in the eighth proviso, for the words, brackets and letters “notification issued by the Central Government under sub-clause (iv) or sub-clause (v) shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years”, the words, brackets, figures and letters “notification issued by the Central Government under sub-clause (iv) or sub-clause (v), before the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President, shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years” shall be substituted;
(ii) after the eighth proviso, the following provisos shall be inserted, namely:-
“Provided also that where an application under the first proviso is made on or after the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President, every notification under sub-clause (iv) or sub-clause (v) shall be issued or approval under sub-clause (vi) or sub-clause (via) shall be granted or an order rejecting the application shall be passed within the period of twelve months from the end of the month in which such application was received:
Provided also that where the total income, of the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), without giving effect to the provisions of the said sub-clauses, exceeds the maximum amount which is not chargeable to tax in any previous year, such trust or institution or any university or other educational institution or any hospital or other medical institution shall get its accounts audited in respect of that year by an accountant as defined in the Explanation below sub-section (2) of section 288 and furnish along with the return of income for the relevant assessment year, the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed:”.
Amendment of section 12A.
4. In section 12A of the Income-tax Act, in clause (b), for the words and figures ‘‘the provisions of section 11 and section 12 exceeds fifty-thousand rupees in any previous year”, the words and figures "the provisions of section 11 and section 12 exceeds the maximum amount which is not chargeable to income-tax in any previous year” shall be substituted with effect from the 1st day of April, 2006.
Amendment of section 35.
5. In the Income-tax Act, in section 35, with effect from the 1st day of April, 2006,-
(i) in sub-section (1),-
(a) in clause (ii), for the proviso, the following proviso shall be substituted, namely:-
“Provided that such association, university, college or other institution for the purposes of this clause-
(A) is for the time being approved, in accordance with the guidelines, in the manner and subject to such conditions as may be prescribed; and
(B) such association, university, college or other institution is specified as such, by notification in the Official Gazette, by the Central Government;”;
(b) in clause (iii), for the proviso, the following proviso shall be substituted, namely:-
“Provided that such university, college or other institution for the purposes of this clause-
(A) is for the time being approved, in accordance with the guidelines, in the manner and subject to such conditions as may be prescribed; and
(B) such university, college or other institution is specified as such, by notification in the Official Gazette, by the Central Government;”;
(c) after clause (iii), the following Explanation shall be inserted, namely:-
“Explanation.-The deduction, to which the assessee is entitled in respect of any sum paid to a scientific research association, university, college or other institution to which clause (ii) or clause (iii) applies, shall not be denied merely on the ground that, subsequent to the payment of such sum by the assessee, the approval granted to the association, university, college or other institution referred to in clause (ii) or clause (iii) has been withdrawn;”;
(d) in the second proviso, for the word “authority”, the word “Government” shall be substituted;
(e) in the third proviso, for the words, brackets and letters “notification issued by the Central Government under clause (ii) or clause (iii) shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years”, the words, brackets, figures and letters “notification issued, by the Central Government under clause (ii) or clause (iii), before the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President, shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years” shall be substituted;
(f) after the third proviso, the following proviso shall be inserted at the end, namely:-
“Provided also that where an application under the first proviso is made on or after the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President, every notification under clause (ii) or clause (iii) shall be issued or an order rejecting the application shall be passed within the period of twelve months from the end of the month in which such application was received by the Central Government.”;
(ii) in sub-section (2AA), the Explanation shall be numbered as Explanation 2 thereof and before the Explanation 2 as so numbered, the following Explanation shall be inserted, namely:-
“Explanation 1.-The deduction, to which the assessee is entitled in respect of any sum paid to a National Laboratory, University, Indian Institute of Technology or a specified person for the approved programme referred to in this sub-section, shall not be denied merely on the ground that, subsequent to the payment of such sum by the assessee, the approval granted to,-
(a) such Laboratory, or specified person has been withdrawn; or
(b) the programme, undertaken by the National Laboratory, University, Indian Institute of Technology or specified person, has been withdrawn.”.
Amendment of section 35AC.
6. In section 35AC of the Income-tax Act, after sub-section (2), the following Explanation shall be inserted with effect from the 1st day of April, 2006, namely:-
“Explanation.-The deduction, to which the assessee is entitled in respect of any sum paid to a public sector company or a local authority or to an association or institution for carrying out the eligible project or scheme referred to in this section applies, shall not be denied merely on the ground that subsequent to the payment of such sum by the assessee,-
(a) the approval granted to such association or institution has been withdrawn; or
(b) the notification notifying the eligible project or scheme carried out by the public sector company or local authority or association or institution has been withdrawn.”.
Amendment of section 35CCA.
7. In section 35CCA of the Income-tax Act, after sub-section (2A), the following Explanation shall be inserted with effect from the 1st day of April, 2006, namely:-
“Explanation.-The deduction, to which the assessee is entitled in respect of any sum paid to an association or institution for carrying out the programme of rural development referred to in sub-section (1), shall not be denied merely on the ground that subsequent to the payment of such sum by the assessee, the approval granted to such programme of rural development, or as the case may be, to the association or institution has been withdrawn.”.
Amendment of section 40.
8. In section 40 of the Income-tax Act, in clause (a), in sub-clause (ia), with effect from the 1st day of April, 2006,-
(a) after the words “commission or brokerage,”, the words “rent, royalty,” shall be inserted;
(b) in the Explanation, after clause (iv), the following clauses shall be inserted at the end, namely:-
‘(v) “rent” shall have the same meaning as in clause (i) to the Explanation to section 194-I;
(vi) “royalty” shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;’.
Amendment of section 40A.
9. In section 40A of the Income-tax Act, in sub-sections (3) and (4) for the words “a crossed cheque drawn on a bank or by a crossed bank draft”, wherever they occur, the words “an account payee cheque drawn on a bank or account payee bank draft” shall be substituted.
Amendment of section 56.
10. In section 56 of the Income-tax Act, in sub-section (2),-
(?) in clause (v),-
(i) after the words, letters and figures “after the 1st day of September, 2004”, the words, letters and figures “but before the 1st day of April, 2006” shall be inserted with effect from the 1st day of April, 2006;
(ii) in the proviso, after clause (d), the following clauses shall be inserted, namely:-
“(e) from any local authority as defined in the Explanation to clause (20) of section 10; or
(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or
(g) from any trust or institution registered under section 12AA.”;
(b) after clause (v) and the Explanation, the following shall be inserted with effect from the 1st day of April, 2007, namely:-
u(vi) where any sum of money, the aggregate value of which exceeds fifty thousand rupees, is received without consideration, by an individual or a Hindu undivided family, in any previous year from any person or persons on or after the 1st day of April, 2006, the whole of the aggregate value of such sum:
Provided that this clause shall not apply to any sum of money received-
(?) from any relative; or
(b) on the occasion of the marriage of the individual; or
(c) under a will or by way of inheritance; or
(d) in contemplation of death of the payer; or
(e) from any local authority as defined in the Explanation to clause (20) of section 10; or
(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or
(g) from any trust or institution registered under section 12AA.
Explanation.-For the purposes of this clause, “relative” means-
(i) spouse of the individual;
(ii) brother or, sister of the individual;
(iii) brother or sister of the spouse of the individual;
(iv) brother or sister of either of the parents of the individual;
(v) any lineal ascendant or descendant of the individual;
(vi) any lineal ascendant or descendant of the spouse of the individual;
(vii) spouse of the person referred to in clauses (ii) to (vi).”.
Amendment of section 80GGA.
11. In section 80GGA of the Income-tax Act, in sub-section (2), with effect from the 1st day of April, 2006,-
(a) after clause (aa), the following Explanation shall be inserted, namely:-
“Explanation.-The deduction, to which the assessee is entitled in respect of any sum paid to a scientific research association, University, college or other institution to which clause (a) or clause (aa) applies, shall not be denied merely on the ground that, subsequent to the payment of such sum by the assessee, the approval to such association, University, college or other institution referred to in clause (a) or clause (aa), as the case may be, has been withdrawn;”;
(b) after clause (b), the following Explanation shall be inserted, namely:-
“Explanation.-The deduction, to which the assessee i
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