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FINANCE ACT, 2007
22 of 2007
PREAMBLE An Act to give effect to the financial proposals of the Central Government for the financial year 2007-2008. BE it enacted by Parliament in the Fifty-eighth Year of the Republic of India as follows-
CHAPTER 1: PRELIMINARY:
SECTION 1: Short title and commencement:
(1) This Act may be called the Finance Act, 2007.
(2) Save as otherwise provided in this Act, sections 2 to 93 shall be deemed to have come into force on the 1st day of April, 2007.
CHAPTER 2: RATES OF INCOME-TAX:
SECTION 2: Income-tax:
(1) Subject to the provisions of sub-sections (2) and (3), for the assessment year commencing on the 1st day of April, 2007, income-tax shall be charged at the rates specified in Part I of the First Schedule and such tax as reduced by the rebate of income-tax calculated under Chapter VIII-A of the Income-tax Act, 1961(43 of 1961) (hereinafter referred to as the Income-tax Act) shall be increased by a surcharge for purposes of the Union calculated in each case in the manner provided therein.
(2) In the cases to which Paragraph A of Part I of the First Schedule applies, where the assessee has, in the previous year, any net agricultural income exceeding five thousand rupees, in addition to total income, and the total income exceeds one lakh rupees, then,-- (a) the net agricultural income shall be taken into account, in the manner provided in clause (b) [that is to say, as if the net agricultural income were comprised in the total income after the first one lakh 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 one lakh 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: Provided that in the case of every woman, resident in India and below the age of sixty-five years at any time during the previous year, referred to in item (II) of Paragraph A of Part I of the First Schedule, the provisions of this sub-section shall have effect as if for the words "one lakh rupees", the words "one lakh thirty-five thousand rupees" had been substituted: Provided further that in the case of every individual, being a resident in India, who is of the age of sixty-five years or more at any time during the previous year, referred to in item (III) of Paragraph A of Part I of the First Schedule, the provisions of this sub-section shall have effect as if for the words "one lakh rupees", the words "one lakh eighty-five thousand rupees" had been Substituted: Provided also that the amount of income-tax so arrived at, as reduced by the amount of rebate of income-tax calculated under Chapter VIII-A of the Income-tax Act, shall be increased by a surcharge for purposes of the Union calculated in each case in the manner
(3) In cases to which the provisions of Chapter XII or Chapter XII-A or Chapter XII-H or (S.115JB) or sub-section (1A) of (S.161) or (S.164) or (S.164A) or (S.167B of the Income Tax Act, 1961) apply, the tax chargeable shall be determined as provided in that Chapter or that section, and with reference to the rates imposed by subsection (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 section 111A or section 112 shall be increased by a surcharge for purposes of the Union as provided in Paragraph A, B, C, D or E, as he case may be, of Part I of the First Schedule: Provided further that in respect of any income chargeable to tax under (S.115A) (S.115AB), (S.115AC), (S.115ACA), (S.115AD), (S.115B), (S.115BB), (S.115BBA), (S.115BBC), (S.115E) and (S.115JB) or fringe benefits chargeable to tax under (S.115 WA of the Income Tax Act, 1961), the amount of income-tax computed under this sub-section shall be increased by a surcharge for purposes of the Union, calculated, (a) in the case of every individual, Hindu undivided family, association of persons and body of individuals, whether incorporated or not, at the rate of ten per cent. of such income-tax where the total income or fringe benefits, as the case may be, exceeds ten lakh rupees; (b) in the case of every firm, artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act, and domestic company at the rate of ten per cent. of such income-tax; (c) in the case of every company, other than a domestic company, at the rate of two and one-half per cent. of such income-tax.
(4) In cases in which tax has to be charged and paid under (S.115-O) or sub section (2) of (S.115R of the Income Tax Act, 1961), the tax shall be charged and paid at the rate as specified in those sections and shall be increased by a surcharge for purposes of the Union, calculated at the rate of ten per cent. of such tax.
(5) In cases in which tax has to be deducted under (S.193), (S.194), (S.194A),(S.194B), (S.194BB), (S.194D) and (S.195 of the Income Tax Act, 1961), at the rates in force, the deductions shall be made at the rates specified in Part II of the First Schedule and shall be increased, by a surcharge for purposes of the Union, calculated in each case, in the manner provided therein.
(6) In cases in which tax has to be deducted under S.194C, S.194E, S.194EE, S.194F, S.194G, (S.194H), (S.194-I), (S.194J), (S.194LA), (S.196B), (S.196C) and (S.196D of the Income Tax Act, 1961), the deductions shall be made at the rates specified in those sections and shall be increased by a surcharge for purposes of the Union, calculated,-- (a) in the case of every individual, Hindu undivided family, association of persons and body of individuals, whether incorporated or not, at the rate of ten per cent. of such tax where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds ten lakh rupees; (b) in the case of every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act, at the rate of ten per cent. of such tax; (c) in the case of every firm and domestic company, at the rate of ten per cent. of such tax where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds one crore rupees; (d) in the case of every company, other than a domestic company, at the rate of two and one-half per cent. of such tax where the income or the aggregate of such incomes paid or likely to be paid and subject to the deduction exceeds one crore rupees.
(7) In cases in which tax has to be collected under the proviso to section 194B of the " Income-tax Act, the collection shall be made at the rates specified in Part II of the First Schedule, and shall be increased, by a surcharge for purposes of the Union, calculated in the manner provided therein.
(8) In cases in which tax has to be collected under section 206C of the Income-tax Act, the collection shall be made at the rates specified in that section and shall be increased by a surcharge for purposes of the Union, calculated,-- (a) in the case of every individual, Hindu undivided family, association of persons and body of individuals, whether incorporated or not, at the rate of ten per cent. of such tax where the amount or the aggregate of such amounts collected, and subject to the collection, exceeds ten lakh rupees; (b) in the case of every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act, at the rate of ten per cent. of such tax; (c) in the case of every firm and domestic company at the rate of ten per cent. of such tax where the amount or the aggregate of such amounts collected, and subject to the collection, exceeds one crore rupees; (d) in the case of every company, other than a domestic company, at the rate of two and one-half per cent. of such tax where the amount or the aggregate of such amounts collected, and subject to the collection, exceeds one crore rupees.
(9) Subject to the provisions of sub-section (10), in cases in which income-tax has to be charged under sub-section (4) of section 172 or sub-section (2) of section 174 or section 174A or section 175 or sub-section (2) of section 176 of the Income-tax Act or I deducted from, or paid on, income chargeable under the head "Salaries" under section 192 of the said Act 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 charged, deducted or computed at the rate or rates specified in Part III of the First Schedule and such tax as reduced by the rebate of income-tax calculated under Chapter , VIII-A of the said Act shall be increased by a surcharge for purposes of the Union, calculated in each case in the manner provided therein: Provided that in cases to which the provisions of Chapter XII or Chapter XII-A or Chapter XII-H or section 115 JB 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 or the rates as specified in that Chapter or section, as the case may be: Provided further that the amount of "advance tax" computed in accordance with the provisions of section 111 A or section 112 of the Income-tax Act shall be increased by a surcharge for purposes of the Union as provided in Paragraph A, B, C, D or E, as the case may , be, of Part III of the First Schedule: Provided also that in respect of any income chargeable to tax under sections 115A, 115AB, 115AC, 115ACA, 115AD, 115B, 115BB, 115BBA, 115BBC, 115E and 115JB of the Income-tax Act, "advance tax" computed under the first proviso shall be increased by a surcharge for purposes of the Union, calculated,-- (a) in the case of every individual, Hindu undivided family, association of persons and body of individuals, whether incorporated or not, at the rate of ten per cent. of "advance tax" where the total income exceeds ten lakh rupees; (b) in the case of every artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 of the Income-tax Act, at the rate of ten per cent. of such "advance tax"; (c) in the case of every firm and domestic company, at the rate of ten per cent. of such "advance tax" where the total income exceeds one crore rupees; (d) in the case of every company, other than a domestic company, at the rate of two and one-half per cent. of such "advance tax" where the total income exceeds one crore rupees: Provided also that in the case of every company having total income chargeable to tax under section 115JB of the Income-tax Act, and such income exceeds one crore rupees, the total amount payable as "advance tax" and surcharge on such income shall not exceed the total amount payable as "advance tax" on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees: Provided also that in respect of any fringe benefits chargeable to tax under section 115WA of the Income-tax Act, "advance tax" computed under the first proviso shall be increased by a surcharge for purposes of the Union, calculated,-- (a) in the case of every association of persons and body of individuals, whether incorporated or not, at the rate of ten per cent. of "advance tax" where the fringe benefits exceed ten lakh rupees; (b) in the case of every firm, artificial juridical person referred to in sub-clause (v) of clause (a) of section 115 W of the Income-tax Act, and domestic company, at the rate of ten per cent. of such "advance tax"; (c) in the case of every company, other than a domestic company, at the rate of two and one-half per cent. of such "advance tax".
(10) In cases 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 five thousand rupees, in addition to total income and the total income exceeds one lakh ten thousand rupees, then, in charging income-tax under sub-section (2) of section 174 or section 174A or section 175 or subsection (2) of section 176 of the said Act or in computing the "advance tax" payable under Chapter XVII-C of the said Act, at the rate or rates in force,-- (a) the net agricultural income-shall be taken into account, in the manner provided in clause (b) [that is to say, as if the net agricultural income were comprised in the total income after the first one lakh ten thousand rupees of the total income but without being liable to tax], only for the purpose of 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 charged or computed as follows- (i) the total income and the net agricultural income shall be aggregated and the amount of income-tax or "advance tax" shall be determined in respect of the aggregate income at the rates specified in 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 one lakh ten 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 were the total income; (iii) the amount of income-tax or "advance tax" determined in accordance with sub-clause (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: Provided that in the case of every woman, resident in India and below the age of sixty-five years at any time during the previous year, referred to in item (II) of Paragraph A of Part III of the First Schedule, the provisions of this sub-section shall have effect as if for the words "one lakh ten thousand rupees", the words "one lakh forty-five thousand rupees" had been substituted: Provided further that in the case of every individual, being a resident in India, who is of the age of sixty-five years or more at any time during the previous year, referred to in item (III) of Paragraph A of Part III of the First Schedule, the provisions of this sub-section shall have effect as if for the words "one lakh ten thousand rupees", the words "one lakh ninety-five thousand rupees" had been substituted: Provided also that the amount of income-tax or "advance tax" so arrived at, as reduced by the rebate of income-tax calculated under Chapter VIII-A of the said Act, shall be increased by a surcharge for purposes of the Union calculated in each case, in the manner provided therein.
(11) The amount of income-tax as specified in sub-sections (1) to (10) and as increased by a surcharge for purposes of the Union calculated in the manner provided therein, shall be further increased by an additional surcharge for purposes of the Union, to be called the "Education Cess on income-tax", calculated at the rate of two per cent. of such income-tax and surcharge, so as to fulfil the commitment of the Government to provide and finance universalised quality basic education.
(12) The amount of income-tax as specified in sub-sections (4) to (10) and as increased by a surcharge for purposes of the Union calculated in the manner provided therein, shall be also increased by an additional surcharge for purposes of the Union, to be called the "Secondary and Higher Education Cess on income-tax", calculated at the rate of one per cent. of such income-tax and surcharge, so as to fulfil the commitment of the Government to provide and finance secondary and higher education.
(13) 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 assessment year commencing on the 1st day of April, 2007, 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 and 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.
CHAPTER 3: DIRECT TAXES:
SECTION 3: Amendment of Section 2:
In section 2 of the Income-tax Act,-- (a) after clause (1B), the following clauses shall be inserted and shall be deemed to have been inserted with effect from the 1st day of June, 1994, namely- '(1C) "Additional Commissioner" means a person appointed to be an Additional Commissioner of Income-tax under sub-section (1) of section 117; (1D) "Additional Director" means a person appointed to be an Additional Director of Income-tax under sub-section (1) of section 117;';
(b) in clause (7A),-- (i) after the words "any other provision of this Act, and the", the words "Additional Commissioner or" shall be inserted and shall be deemed to have been inserted with effect from the 1st day of June, 1994; (ii) after the words "Additional Commissioner or", as so inserted, the words "Additional Director or," shall be inserted and shall be deemed to have been inserted with effect from the 1st day of October, 1996;
(c) after clause (9A), the following clause shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 1988, namely- '(9B) "Assistant Director" means a person appointed to be an Assistant Director of Income-tax under sub-section (1) of section 117;';
(d) in clause (14), for sub-clause (ii), the following shall be substituted with effect from the 1st day of April, 2008, namely- '(ii) personal effects, that is to say, movable property (including wearing apparel and furniture) held for personal use by the assessee or any member of his family dependent on him, but excludes-- (a) jewellery; (b) archaeological collections; (c) drawings; (d) paintings;
(e) sculptures; or
(f) any work of art.
Explanation.--For the purposes of this sub-clause, "jewellery" includes-- (a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel; (b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel;'; (e) in clause (24), after sub-clause (xiii) the following sub-clause shall be inserted, namely- "(xiv) any sum referred to in clause (vi) of sub-section (2) of section 56;";
(f) for clause (25A), the following clause shall be substituted and shall be deemed to have been substituted with effect from the 25th day of August, 1976, namely- '(25A) "India" means the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and subsoil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976, and the air space above its territory and territorial waters;'.
'(g) in clause (42A), with effect from the 1st day of April, 2008 -- (i) in Explanation 1, in clause (i), after sub-clause (ha), insert-- "(hb) in the case of a capital asset, being any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer free of cost or at concessional rate to his employees (including former employee or employees), the period shall be reckoned from the date of allotment or transfer of such specified security or sweat equity shares;"; (ii) after Explanation 2, insert--
'Explanation 3.--For the purposes of this clause, the expressions "specified security" and "sweat equity shares" shall have the meaning respectively assigned to them in the Explanation to clause (d) of subsection (1) of section 115WB;'.
SECTION 4: Amendment of section 7:
In section 7 of the Income-tax Act, in clause (iii), for the words "Central Government", the words "Central Government or any other employer" shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 2004.
Section 5: Amendment of section 9:
In section 9 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 June, 1976, namely- "Explanation.--For the removal of doubts, it is hereby declared that for the purposes of this section, where income is deemed to accrue or arise in India under clauses (v), (vi) and (vii) of sub-section (1), such income shall be included in the total income of the non-resident, whether or not the non-resident has a residence or place of business or business connection in India.".
SECTION 6: Amendment of section 10:
In section 10 of the Income-tax Act,-- (a) after clause (10BB), the following shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2005, namely- '(10BC) any amount received or receivable from the Central Government or a State Government or a local authority by an individual or his legal heir by way of compensation on account of any disaster, except the amount received or receivable to the extent such individual or his legal heir has been allowed a deduction under this Act on account of any loss or damage caused by such disaster. Explanation.--For the purposes of this clause, the expression "disaster" shall have the meaning assigned to it under clause (d) of section 2 of the Disaster Management Act, 2005(53 of 2005);';
(b) in clause (15),-- (A) in sub-clause (iv), in item (fa), for the Explanation, the following Explanation shall be substituted, namely- 'Explanation.--For the purposes of this item, the expression "scheduled bank" means the State Bank of India constituted under the State Bank of India Act, 1955(23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959(38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970(5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980(40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934(2 of 1934), but does not include a co-operative bank;'; (B) for sub-clause (vii), the following shall be substituted with effect from the 1st day of April, 2008, namely- '(vii) interest on bonds-- (a) issued by a local authority or by a State Pooled Finance Entity; and (b) specified by the Central Government by notification in the Official Gazette. Explanation.--For the purposes of this sub-clause, the expression "State Pooled Finance Entity" shall mean such entity which is set up in accordance with the guidelines for the Pooled Finance Development Scheme notified by the Central Government in the Ministry of Urban Development;'; (c) in clause (23BBD), for the words, figures and letters "seven previous years relevant to the assessment years beginning on the 1st day of April, 2001 and ending on the 31st day of March, 2008", the words, figures and letters "ten previous years relevant to the assessment years beginning on the 1st day of April, 2001 and ending on the 31st day of March, 2011" shall be substituted with effect from the 1st day of April, 2008; (d) after clause (23BBF), the following clause shall be inserted with effect from the 1st day of April, 2008, namely- "(23BBG) any income of the Central Electricity Regulatory Commission constituted under sub-section (1) of section 76 of the Electricity Act, 2003(36 of 2003);"; (e) in clause (23C) with effect from the 1st day of June, 2007,-- (A) in sub-clause (iv), for the words "which may be notified by the Central Government in the Official Gazette", the words "which may be approved by the prescribed authority" shall be substituted; (B) in sub-clause (v), for the words "which may be notified by the Central Government in the Official Gazette", the words "which may be approved by the prescribed authority" shall be substituted; (C) for the second proviso, the following proviso shall be substituted, namely- "Provided further that the prescribed authority, before approving any fund or trust or institution or any university or other educational institution or any hospital or other medical institution, under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or subclause (via), may call for such documents (including audited annual accounts) or information from the fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, as it thinks necessary in order to satisfy itself about the genuineness of the activities of such fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, and the prescribed authority may also make such inquiries as it deems necessary in this behalf:"; (D) in the ninth proviso, for the words, brackets, figures and letter "every notification under sub-clause (iv) or sub-clause (v) shall be issued or approval under sub-clause (vi) or sub-clause (via)", the words, brackets, figures and letter "every notification under sub-clause (iv) or sub-clause (v) shall be issued or approval under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via)" shall be substituted; (E) in the thirteenth proviso, after the words "Central Government", the words "or is approved by the prescribed authority, as the case may be," shall be inserted; (F) after the fifteenth proviso, the following proviso shall be inserted, namely- "Provided also that all pending applications, on which no notification has been issued under sub-clause (iv) or sub-clause (v) before the 1st day of June, 2007, shall stand transferred on that day to the prescribed authority and the prescribed authority may proceed with such applications under those sub-clauses from the stage at which they were on that day;"; (f) after clause (23EB), the following shall be inserted with effect from the 1st day of April, 2008, namely- '(23EC) any income, by way of contributions received from commodity exchanges and the members thereof, of such Investor Protection Fund set up by commodity exchanges in India, either jointly or separately, as the Central Government may, by notification in the Official Gazette, specify in this behalf: Provided that where any amount standing to the credit of the said Fund and not charged to income-tax during any previous year is shared, either wholly or in part, with a commodity exchange, the whole of the amount so shared shall be deemed to be the income of the previous year in which such amount is so shared and shall accordingly be chargeable to income-tax. Explanation.--For the purposes of this clause, "commodity exchange" shall mean a "registered association" as defined in clause (jj) of section 2 of the Forward Contracts (Regulation) Act, 1952(74 of 1952);'; (g) in clause (23FB), with effect from the 1st day of April, 2008 -- (i) for the words "set up to raise funds for investment", the words "from investment" shall be substituted; (ii) in Explanation 1, for clause (c), the following clause shall be substituted, namely-
(c) "venture capital undertaking" means such domestic company whose shares are not listed in a recognised stock exchange in India and which is engaged in the-- (i) business of-- (A) nanotechnology; (B) information technology relating to hardware and software development; (C) seed research and development; (D) bio-technology; (E) research and development of new chemical entities in the pharmaceutical sector; (F) production of bio-fuels; (G) building and operating composite hotel-cum-convention centre with seating capacity of more than three thousand; or "(H) developing or operating and maintaining or developing, operating and maintaining any infrastructure facility as defined in the Explanation to clause (i) of sub-section (4) of section 80-IA; or". (ii) dairy or poultry industry;'.
SECTION 7: Amendment of section 10AA:
In section 10AA of the Income-tax Act, for sub-section (4), the following subsection shall be substituted and shall be deemed to have been substituted with effect from the 10th day of February, 2006, namely- "(4) This section applies to any undertaking, being the Unit, which fulfils all the following conditions, namely- (i) it has begun or begins to manufacture or produce articles or things or provide services during the previous year relevant to the assessment year commencing on or after the 1st day of April, 2006 in any Special Economic Zone; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence: Provided that this condition shall not apply in respect of any undertaking, being the Unit, which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (iii) it is not formed by the transfer to a new business, of machinery or plant previously used for any purpose.
Explanation.--The provisions of Explanations 1 and 2 to sub-section (3) of section 80-IA shall apply for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section.".
SECTION 8: Amendment of section 12A:
In section 12A of the Income-tax Act, with effect from the 1st day of June, 2007,-- (a) for the marginal heading, the following marginal heading shall be substituted, namely- "Conditions for applicability of sections 11 and 12.";
(b) the existing section 12A shall be renumbered as sub-section (1) thereof, and in sub-section (1) as so renumbered,-- (i) in clause (a), after the proviso, the following proviso shall be inserted, namely- "Provided further that the provisions of this clause shall not apply in relation to any application made on or after the 1st day of June, 2007;"; (ii) after clause (a), the following clause shall be inserted, namely- "(aa) the person in receipt of the income has made an application for registration of the trust or institution on or after the 1st day of June, 2007 in the prescribed form and manner to the Commissioner and such trust or institution is registered under section 12AA;";
(c) after sub-section (1) as so renumbered, the following sub-section shall be inserted, namely- "(2) Where an application has been made on or after the 1st day of June, 2007, the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made.".
SECTION 9: Amendment of section 12AA:
In section 12AA of the Income-tax Act, with effect from the 1st day of June, 2007,-- (a) in sub-section (1), after the word, brackets and letter "clause (a)", the words, brackets, letters and figure "or clause (aa) of sub-section (1)" shall be inserted;
(b) in sub-section (2), after the word, brackets and letter "clause (a)", the words, brackets, letters and figure "or clause (aa) of sub-section (1)" shall be inserted.
SECTION 10: Amendment of Section 13:
In section 13 of the Income-tax Act, in sub-section (1), in clause (d), for sub-clause (iii), the following sub-clause shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 1999, namely- "(iii) any shares in a company, other than-- (A) shares in a public sector company; (B) shares prescribed as a form or mode of investment under clause (xii) of sub-section (5) of section 11, are held by the trust or institution af'ter the 30th day of November, 1983:".
SECTION 11: Amendment of section 17:
In section 17 of the Income-tax Act,-- (a) in clause (1), in sub-clause (viii), for the words "Central Government", the words "Central Government or any other employer" shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 2004;
(b) in clause (2),-- (A) after sub-clause (ii'),-- (i) the following Explanations shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2002, namely- "Explanation 1.--For the purposes of this sub-clause, concession in the matter of rent shall be deemed to have been provided if,-- (d) in a case where the accommodation is provided by the employer in a hotel (except where the assessee is provided such accommodation for a period not exceeding in aggregate fifteen days on his transfer from one place to another), the value of the accommodation determined at the rate of twenty-four per cent. of salary paid or payable for the previous year or the actual charges paid or payable to such hotel, whichever is lower, for the period during which such accommodation is provided, exceeds the rent recoverable from, or payable by, the assessee. Explanation 2.--For the purposes of this sub-clause, value of furniture and fixtures shall be ten per cent. per annum of the cost of furniture (including television sets, radio sets, refrigerators, other household appliances, air-conditioning plant or equipment or other similar appliances or gadgets) or if such furniture is hired from a third party, the actual hire charges payable for the same as reduced by any charges paid or payable for the same by the assessee during the previous year."; 'Explanation 3.--For the purposes of this sub-clause, "salary" includes the pay, allowances, bonus or commission payable monthly or otherwise or any monetary payment, by whatever name called, from one or more employers, as the case may be, but does not include the following, namely- (a) dearness allowance or dearness pay unless it enters into the computation of superannuation or retirement benefits of the employee concerned; (b) employer's contribution to the provident fund account of the employee; (c) allowances which are exempted from the payment of tax; (d) value of the perquisites specified in this clause; (g) any payment or expenditure specifically excluded under the proviso to this clause;".; '(ii) in Explanation 1 as so inserted, for clause (a), the following clause shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 2006, namely- "(a) in a case where an unfurnished accommodation is provided by any employer other than the Central Government or any State Government and-- 'Explanation 4.--For the purposes of this sub-clause, "specified rate" shall be-- (i) fifteen per cent. of salary in cities having population exceeding twenty-five lakhs as per 2001 census; (ii) ten per cent. of salary in cities having population exceeding ten lakhs but not exceeding twenty-five lakhs as per 2001 census; and (iii) seven and one-half per cent of salary in any other place.'.
(B) in sub-clause (iii), the proviso shall be omitted with effect from the 1st day of April, 2008.
SECTION 12: Amendment of section 35:
Section In section 35 of the Income-tax Act, in sub-section (2AB), in clause (5), for the figures, letters and words "31st day of March, 2007", the figures, letters and words "31st day of March, 2012" shall be substituted with effect from the 1st day of April, 2008.
Section 13: Amendment of section 36:
In section 36 of the Income-tax Act, in sub-section (1),-- (A) in clause (ib), for the words "paid by cheque", the words "paid by any mode of payment other than cash" shall be substituted with effect from the 1st day of April, 2008;
(B) in clause (viia),-- (a) in sub-clause (a), after the words "or a non-scheduled bank", the words "or a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank" shall be inserted; (b) in the Explanation,-- (i) in clause (ii) at the end, the words ", but does not include a cooperative bank" shall be omitted; (ii) after clause (v), the following clause shall be inserted, namely- '(vi) "co-operative bank", "primary agricultural credit society" and "primary co-operative agricultural and rural development bank" shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P;';
(C) for clause (viii), the following shall be substituted with effect from the 1st day of April, 2008, namely- '(viii) in respect of any special reserve created and maintained by a specified entity, an amount not exceeding twenty per cent. of the profits derived from eligible business computed under the head "Profits and gains of business or profession" (before making any deduction under this clause) carried to such reserve account: Provided that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid up share capital and of the general reserves of the specified entity, no allowance under this clause shall be made in respect of such excess. Explanation.--In this clause,-- (a) "specified entity" means,-- (b) "eligible business" means,-- (i) in respect of the specified entity referred to in sub-clause (i) or sub-clause (ii) or sub-clause (iii) or sub-clause (iv) of clause (a), the business of providing long-term finance for industrial or agricultural development or development of infrastructure facility in India or construction or purchase of houses in India for residential purposes; (ii) in respect of the specified entity referred to in sub-clause (v) of clause (a), the business of providing long-term finance for the construction or purchase of houses in India for residential purposes; and (iii) in respect of the specified entity referred to in sub-clause (vi) of clause (a), the business of providing long-term finance for development of infrastructure facility in India; (c) "banking company" means a company to which the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act; (d) "co-operative bank", "primary agricultural credit society" and "primary co-operative agricultural and rural development bank" shall have the meanings respectively assigned to them in the Explanation to subsection (4) of section 80P; (e) "housing finance company" means a public company formed or registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes; (f) "public company" shall have the meaning assigned to it in section 3 of the Companies Act, 1956(1 of 1956); (g) "infrastructure facility" means-- (i) an infrastructure facility as defined in the Explanation to clause (i) of sub-section (4) of section 80-IA, or any other public facility of a similar nature as may be notified by the Board in this behalf in the Official Gazette and which fulfils the conditions as may be prescribed; (ii) an undertaking referred to in clause (ii) or clause (iii) or clause (iv) or clause (vi) of sub-section (4) of section 80-IA; and (iii) an undertaking referred to in sub-section (10) of section 80-IB; (h) "long-term finance" means any loan or advance where the terms under which moneys are loaned or advanced provide for repayment along with interest thereof during a period of not less than five years;';
(D) clause (x) shall be omitted with effect from the 1st day of April, 2008;
(E) for clause (xii), the following clause shall be substituted with effect from the 1st day of April, 2008, namely- "(xii) any expenditure (not being in the nature of capital expenditure) incurred by a corporation or a body corporate, by whatever name called, if,-- (a) it is constituted or established by a Central, State or Provincial Act; (b) such corporation or body corporate, having regard to the objects and purposes of the Act referred to in sub-clause (a), is notified by the Central Government in the Official Gazette for the purposes of this clause; and (c) the expenditure is incurred for the objects and purposes authorised by the Act under which it is constituted or established;";
(F) after clause (xiii), the following clause shall be inserted with effect from the 1st day of April, 2008, namely '(xiv) any sum paid by a public financial institution by way of contribution to such credit guarantee fund trust for small industries as the Central Government may, by notification in the Official Gazette, specify in this behalf.
Explanation.--For the purposes of this clause, "public financial institution" shall have the meaning assigned to it in section 4A of the Companies Act, 1956(1 of 1956);'.
SECTION 14: Amendment of section 40A:
In section 40A of the Income-tax Act, for sub-section (3), the following shall be substituted with effect from the 1st day of April, 2008, namely- "(3) (a) Where the assessee incurs any expenditure in respect of which payment is made in a sum exceeding twenty thousand rupees otherwise than by an account payee cheque drawn on a bank or account payee bank draft, no deduction shall be allowed in respect of such expenditure; (b) where an allowance has been made in the assessment for any year in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year (hereinafter referred to as subsequent year) the assessee makes payment in respect thereof, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, the payment so made shall be deemed to be the profits and gains of business or profession and accordingly chargeable to income-tax as income of the subsequent year if the amount of payment exceeds twenty thousand rupees: Provided that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under this sub-section where any payment in a sum exceeding twenty thousand rupees is made otherwise than by an account payee cheque drawn on a bank or account payee bank draft, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors.".
SECTION 15: Insertion of new section 44DB:
After section 44DA of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 2008, namely- '44DB. Special Provision for computing deductions in the case of business reorganisation of co-operative banks.-- (1) The deduction under section 32, section 35D, section 35DD or section 35DDA shall, in a case where business reorganisation of a co-operative bank has taken place during the financial year, be allowed in accordance with the provisions of this section.
(2) The amount of deduction allowable to the predecessor co-operative bank under section 32, section 35D, section 35DD or section 35DDA shall be determined in accordance with the formula--
Section 15 TABLE
(4) The provisions of section 35D, section 35DD or section 35DDA shall, in a case where an undertaking of the predecessor co-operative bank entitled to the deduction under the said section is transferred before the expiry of the period specified therein to a successor co-operative bank on account of business reorganisation, apply to the successor co-operative bank in the financial years subsequent to the year of business reorganisation as they would have applied to the predecessor co-operative bank, as if the business reorganisation had not taken place.
(5) For the purposes of this section,-- (a) "amalgamated co-operative bank" means-- (i) a co-operative bank with which one or more amalgamating co-operative banks merge; or (ii) a co-operative bank formed as a result of merger of two or more amalgamating co-operative banks; (b) "amalgamating co-operative bank" means-- (i) a co-operative bank which merges with another co-operative bank; or (ii) every co-operative bank merging to form a new co-operative bank; (c) "amalgamation" means the merger of an amalgamating co-operative bank or banks with an amalgamated co-operative bank, in such manner that-- (i) all the assets and liabilities of the amalgamating co-operative bank or banks immediately before the merger (other than the assets transferred, by sale or distribution on winding up, to the amalgamated co-operative bank) become the assets and liabilities of the amalgamated co-operative bank; (ii) the members holding seventy-five per cent. or more voting rights in the amalgamating co-operative bank become members of the amalgamated co-operative bank; and (iii) the shareholders holding seventy-five per cent. or more in value of the shares in the amalgamating co-operative bank (other than the shares held by the amalgamated co-operative bank or its nominee or its subsidiary, immediately before the merger) become shareholders of the amalgamated co-operative bank; (d) "business reorganisation" means the reorganisation of business involving the amalgamation or demerger of a co-operative bank; (e) "co-operative bank" shall have the meaning assigned to it in clause (cci) of section 5 of the Banking Regulation Act, 1949(10 of 1949); (f) "demerger" means the transfer by a demerged co-operative bank of one or more of its undertakings to any resulting co-operative bank, in such manner that-- (i) all the assets and liabilities of the undertak
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