THE TAXATION LAWS (AMENDMENT) BILL, 2005

74 of 2005

A bill further to amend the Income-tax Act, 1961, the Customs Act, 1962, the Customs Tariff Act, 1975, the Central Excise Act, 1944 and the Central Sales Tax Act, 1956.

Be it enacted by Parliament in the Fifty-sixth Year of the Republic of India as follows:—

CHAPTER I

Preliminary

Short title and commencement.

1. (1) This Act may be called the Taxation Laws (Amendment) Act, 2005.

(2) Save as otherwise provided in this Act, sections 2 to 16 (except sections 2, 7 and 11 to 16) shall be deemed to have come into force on the 1st day of April, 2005.

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,—

(a) 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, 2005 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, 2005 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, in sub-section (1), with effect from the 1st day of April, 2006,—

(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 notificaiton 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,";

(d) 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 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, 2005 receives the assent of the President, shall, at any time, have effect for such assessment year or years, not exceeding three assessment years" shall be substituted;

(e) 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, 2005 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:".

Amendment of section 40.

6. 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 194-1;

(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.

7. 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.

8. In section 56 of the Income-tax Act, in sub-section (2),—

(a) 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:—

"(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 —

(a) from any relative; or

(b) on the occasion of the marriage of the individual; 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 139.

9. In section 139 of the Income-tax Act, with effect from the 1st day of April, 2006,—

(a) in sub-section (4C), in clause (e),—

(i) for the word, brackets and figures "sub-clause (vi)", the words, brackets and figures, "sub-clause (iiiad) or sub-clause (vi)" shall be substituted;

(ii) for the word, brackets and figures "sub-clause (via)", the words, brackets and figures, "sub-clause (iiiae) or sub-clause (via)" shall be substituted;

(b) after sub-section (4C), the following sub-section shall be inserted, namely:—

"(4D) Every university, college or other institution referred to in clause (ii) and clause (iii) of sub-section (1) of section 35, which is not required to furnish return of income or loss under any other provision of this section, shall furnish the return in respect of its income or loss in every previous year and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be furnished under sub-section (1).".

Amendment of section 143.

10. In section 143 of the Income-tax Act, in sub- section (3), after the proviso, the following proviso shall be inserted, with effect from the 1st day of April, 2006, namely:—

"Provided further that where the Assessing Officer is satisfied that the activities of the university, college or other institution referred to in clause (ii) and clause (iii) of sub-section (1) of section 35 are not being carried out in accordance with all or any of the conditions subject to which such university, college or other institution was approved, he may, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned university, college or other institution, recommend to the Central Government to withdraw the approval and that Government may by order, withdraw the approval and forward a copy of the order to the concerned university, college or other institution and the Assessing Officer.".

Amendment of section 155.

11. In section 155 of the Income-tax Act, after sub-section (11), the following sub section shall be inserted, namely:—

"(11A) Where in the assessment for any year, the deduction under section 10A or section 10B or section 10BA has not been allowed on the ground that such income has not been received in convertible foreign exchange in India, or having been received in convertible foreign exchange outside India, or having been converted into convertible foreign exchange outside India, has not been brought into India, by or on behalf of the assessee with the approval of the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange and subsequently such income or part thereof has been or is received in, or brought into, India in the manner aforesaid, the Assessing Officer shall amend the order of assessment so as to allow deduction under section 10A or section 10B or section 10BA, as the case may be, in respect of such income or part thereof as is so received in, or brought into, India, and the provisions of section 154 shall, so far as may be, apply thereto, and the period of four years shall be reckoned from the end of the previous year in which such income is so received in, or brought into, India.".

Amendment of section 194-I.

12. In section 194-1 of the Income-tax Act, in the Explanation, for clause (i), the following clause shall be substituted, namely:—

'(i) "rent" means any payment, by whatever name called, under any lease, sublease, tenancy or any other agreement or arrangement for the use of (either separately or together) any, —

(a) land; or

(b) building (including factory building); or

(d) machinery; or

(e) plant; or

(f) equipment; or

(g) furniture; or

(h) fittings,

whether or not any or all of the above are owned by the payee;'.

Amendment of section 194-J.

13. In section 194 J of the Income-tax Act, in sub-section (1),—

(i) in clause (b), the word "or" shall be inserted at the end;

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

"(c) royalty, or

(d) any sum referred to in clause (va) of section 28,";

(iii) in the first proviso, in clause (B),—

(a) in sub-clause (ii), for the words and brackets "clause (b):", the words and brackets "clause (b), or" shall be substituted;

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

"(iii) twenty thousand rupees, in the case of royalty referred to in clause (c), or

(iv) twenty thousand rupees, in the case of sum referred to in clause (d)"

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

'(ba) "royalty" shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9;'

Amendment of section 246-A.

14. In section 246A of the Income-tax Act, in sub-section (1), after clause (j), the following clause shall be inserted, namely:

"(Ja) an order of imposing or enhancing penalty under sub-section (1A) of section 275;".

Amendment of section 275.

15. In section 275 of the Income-tax Act, after sub-section (1), the following sub section shall be inserted, namely:—

"(1A) In a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253 or an appeal to the High Court under section 260A or an appeal to the Supreme Court under section 261 or revision under section 263 or section 264 and an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty is passed before the order of the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court-is received by the Chief Commissioner or the Commissioner or the order of revision under section 263 or section 264 is passed, an order imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty may be passed on the basis of assessment as revised by giving effect to such order of the Commissioner (Appeals) or, the Appellate Tribunal or the High Court, or the Supreme Court or order of revision under section 263 or section 264:

Provided that no order of imposing or enhancing or reducing or cancelling penalty or dropping the proceedings for the imposition of penalty shall be passed—

(a) unless the assessee has been heard, or has been given a reasonable opportunity of being heard;

(b) after the expiry of six months from the end of the month in which the order of the Commissioner (Appeals) or the Appellate Tribunal or the High Court or the Supreme Court is received by the Chief Commissioner or the Commissioner or the order of revision under section 263 or section 264 is passed:

Provided further that the provisions of sub-section (2) of section 274 shall apply in respect of the order imposing or enhancing or reducing penalty under this sub-section."

Substitution of new section for section 288B. Rounding off amount payable and refund due.

16. In Income-tax Act, for section 2S8B, the following section shall be substituted, namely:—

"288B. Any amount payable, and the amount of refund due, under the provisions of this Act shall be rounded off to the nearest multiple of ten rupees and for this purpose any part of a rupee consisting of paise shall be ignored and thereafter if such amount is not a multiple often, then, if the last figure in that amount is five or more, the amount shall be increased to the next higher amount which is a multiple often and if the last figure is less than five the amount shall be reduced to the next lower amount which is a multiple often.".

STATEMENT OF OBJECTS AND REASONS

Several suggestions on amendments to Direct Tax Laws and Indirect T:\x Laws have been received in the course of the current year and after due consideration, some of these have been accepted. It is proposed to take up these suggestions in this Bill, which will thereby supplement the proposals made through the Finance Bill, 2005. The Bill, inter alia, proposes to carry out certain amendments in the Income-tax Act, 1961, the Customs Act, 1962, the Customs Tariff Act, 1975, the Central Excise Act, 1944 and the Central Sales Tax Act, 1956 with the object of rationalizing and simplifying certain procedures, widening of tax base and plugging loopholes leading to leakage of revenue.

2. The Bill seeks to amend the Income-tax Act, 1961 so as to streamline the approval and monitoring process for certain charitable entities, scientific research associations, etc., prescribing filing of return by certain charitable entities with aggregate annual receipts below one crore rupees, requiring payment exceeding twenty thousand rupees by way of an account payee cheque or account payee bank draft, prescribing TDS on renting of plant and machinery, equipment, royalty and non-compete fee and phased withdrawal of exemption to North-Eastern Finance Development Corporation Limited over the next five years. It is further proposed to exclude (from the previous year 2004-2005) any sum received from a charitable entity or a local authority without consideration from the ambit of 'income from other sources'. It is also proposed to aggregate the said sums received without consideration (from the previous year 2006-2007) and to enhance the existing limit of twenty-five thousand rupees to fifty thousand rupees for the purpose of inclusion under 'income from other sources' .Certain other amendments such as rounding off of demands or refunds to the nearest multiple often rupees, empowering the Tax Recovery Officer to exercise limited powers of the Assessing Officer, allowing for revision of penalty orders on receipt of appellate orders regarding assessment, etc., are also proposed to be carried out in the Income-tax Act.

3.The Bill also seeks to carry out certain amendments in the Customs Act, 1962, Customs Tariff Act, 1975 and Central Excise Act, 1944 which inter alia facilitates voluntary payment of tax dues so as to provide a mechanism for resolving disputes at the earliest, to facilitate recovery of amount due as revenue to the Government and to incorporate certain measures to curb evasion of Customs and Central Excise duties.

4. The Bill also seeks to amend the Central Sales Tax Act, 1956 so as to expeditiously and smoothly resolve inter-State disputes, regarding levy of Central Sales Tax by the State Governments by ensuring that all pending proceedings are transferred to the Authority notified under sub-section (1) of section 24 of the said Act.

5. The Bill seeks to achieve the above objects. The notes on clauses explain the various provisions of the Bill.

New Delhi; P.CHIDAMBARAM.

The 9th May, 2005.

PRESIDENTS RECOMMENDATION UNDER ARTICLE 117 AND 274 OF THE
CONSTITUTION OF INDIA

[Copy of letter No. F. No. 4/TLAB/2005-TPL, dated the 9th May, 2005 from Shri P. Chidambaram, Minister of Finance to the Secretary-General, Lok Sabha].

The President, having been informed of the subject matter of the Taxation Laws (Amendment) Bill, 2005 recommends under Article 117(1) and (3) and 274(1) of the Constitution of India, introduction and consideration of the above Bill by the Lok Sabha.

Notes on clauses

Income-tax

Clause 2 of the Bill seeks to amend section 2 of the Income-tax Act relating to definitions.

The existing provisions contained in clause (44) of the said section provides that "Tax Recovery Officer" means any Income-tax Officer who may be authorised by the Chief Commissioner or Commissioner, by general or special order in writing, to exercise the powers of a Tax Recovery Officer.

It is proposed to amend the said clause so as to provide that the Tax Recovery Officer may also exercise or perform such powers and functions which are conferred on, or assigned to, an Assessing Officer under the Income-tax Act and which may be prescribed.

This amendment will take effect from the date on which the Bill receives the assent of the President.

Clause 3 seeks to amend section 10 of the Income-tax Act relating to incomes which shall not be included in total income.

Under the existing provision contained in section 10 of the Income-tax Act, any income falling within the various clauses of that section shall not be included in computing the total income of a previous year of any person.

It is proposed to insert a new clause (23BBE) in section 10 so as to provide that any income of the North-Eastern Development Finance Corporation Limited, a company formed and registered under the Companies Act, 1956, shall not be included in computing its total income. It is further provided that the income of the North-Eastern Development Finance Limited shall be included in the total income to the extent of the percentage of its total income specified in the proposed clause (23BBE).

Under the existing provisions contained in the eighth proviso to clause (23C) of section 10, any notification issued by the Central Government under sub-clause (iv) or sub-clause (v) of the said clause (23C), shall, at any one time, have effect for any assessment year or years not exceeding three assessment years including an assessment year or years commencing before the date on which such notification is issued.

It is proposed to amend the eighth proviso to clause (23C) of the said section so as to provide that where the notification is issued under sub-clause (iv) or sub-clause (v) of said clause (23C) before the Taxation Laws (Amendment) Bill, 2005 receives the assent of the President, such notification shall continue to be effective for a period of three assessment years including an assessment year or years not exceeding three assessment years commencing before the date on which such notification is issued.

Under the existing provisions contained in the first proviso to clause (23C) of section 10, 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) of said clause (23C) shall make an application in the prescribed form and in the manner to the prescribed authority for the purpose of grant of exemption under those sub-clauses. However, no time limit has been provided for grant of approval or issue of notification under the said sub-clauses.

It is. proposed to insert ninth proviso after the eighth proviso so as to provide that where any application for issue of notification or grant of approval under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) of clause (23C) is filed on or after the date on which this Bill receives the assent of the President, every such notification shall be issued or order granting approval or order rejecting the application shall be passed before the expiry of twelve months from the end of the month in which the application was received.

Under the existing provisions contained in second proviso of clause (23C), the Central Government or the prescribed authority before notifying or approving the entities referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) may call for such documents including audited annual accounts. However, there is no stipulation for getting their accounts audited by an accountant or furnishing the audit report along with the return of income.

It is further proposed to insert tenth proviso after the ninth proviso as so inserted so as to provide 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 of clause (23C), exceeds the maximum amount which is not chargeable to tax in any previous year, such trust or institution or university or other educational institution or hospital or other medical institution shall get its accounts audited 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 audited accounts and 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.

These amendments will take effect from 1st day of April, 2006 and will, accordingly, apply to assessment year 2006-2007 and subsequent years.

Clause 4 seeks to amend section 12Aof the Income-tax Act relating to conditions as to registration of trusts, etc.

Under the existing provisions contained in section 12A of the Income-tax Act, where the total income of the trust or institution as»computed under that Act without giving effect to the provisions of sections 11 and 12 exceeds fifty thousand rupees in any previous year, the accounts of the trust or institution for that year shall be audited and such audit report shall be furnished along with the return of income.

It is proposed to amend the said section so as to provide that the accounts of the trust or institution for that year shall be audited and such audit report shall be furnished along with the return of income if the total income of such trust or institution exceeds the maximum amount which is not chargeable to income-tax in any previous year.

This amendment will take effect from 1st day of April, 2006 and will, accordingly, apply in relation to the assessment year 2006-2007 and subsequent years.

Clause 5 seeks to amend section 35 of the Income-tax Act relating to expenditure on scientific research.

Under the existing provisions contained in the proviso to clause (ii) and the proviso to clause (iii) of sub-section (1) of section 35 of the Income-tax Act, the Central Government grants the approval to an association, university, college or other institution. These provisions do not provide for the manner, guidelines and the conditions subject to which approval is required to be granted.

It is proposed to amend the proviso to clause (ii) and the proviso to clause (iii) of subsection (1) of section 35 so as to empower the Central Board of Direct Taxes to lay down, by rules, the manner in which an association, university, college or other .institution is to be granted approval and the guidelines and conditions to be fulfilled for grant of such approval by the Central Government.

Under the second proviso to the aforesaid sub-section (1), the Central Government before granting approval may call for any documents or information and may also make such inquiries as it may deem necessary. Under the third proviso to the aforesaid sub-section (/), the approval granted at any one time has effect for three assessment years.

It is proposed to amend the second proviso to the said sub-section (1) so as to provide that the Central Government may make such inquiries as it may deem necessary. It is further proposed to amend the third proviso to the said sub-section (1) so as to provide that there would be no requirement for renewal of the approval where the approval is granted before the date on which the Bill receives assent of the President, such approval granted before that date shall remain effective for the period for which the approval was granted. It is also proposed to provide for disposing the application for approval within twelve months of receipt of the same.

This amendment will take effect from the 1st day of April, 2006 and will, accordingly apply in relation to the assessment year 2006-07 and subsequent years.

Clause 6 seeks to amend section 40 of the Income-tax Act relating to amounts not deductible.

Under the existing provisions contained in sub-clause (ia) of clause (a) of section 40, non-deduction of tax on payment of interest, commission or brokerage, fees for professional services or fees for technical services, or amounts payable to a contractor or sub-contractor, results in the disallowance of the sum, in the computation of income of the payer, on which tax is required to be deducted under Chapter XVII-B.

It is proposed to amend sub-clause (ia) of clause (a) of section 40 so as to extend the provisions thereof to payments of royalty and rent. It is also proposed to provide for the definition of the terms "royalty" and "rent" in the explanation to the sub-clause.

This amendment will take effect from 1st day of April, 2006 and will, accordingly, apply in relation to the assessment year 2006-2007 and subsequent years.

Clause 7 seeks to amend section 40A of the Income-tax Act relating to expenses or payments not deductible in certain circumstances.

Under the existing provisions contained in sub-section (3) and sub-section (4) of section 40A, it is provided that any payment exceeding twenty thousand rupees not made by way of a crossed cheque or crossed bank draft shall attract a disallowance to the extent of twenty per cent, of such sum, in the computation of income of the payer.

It is proposed to amend sub-section (3) and sub-section (4) so as to provide that a disallowance to the extent of twenty per cent, of the sum of payment shall be made where any payment exceeding the limit of twenty thousand rupees is made otherwise than by an account payee cheque or account payee bank draft.

These amendments will take effect from the date on which the Bill receives assent of the President.

Clause 8 seeks to amend section 56 of the Income-tax Act relating to income from other sources.

Under the existing provision contained in clause (v) of sub-section (2) of section 56 of the Income-tax Act, where any sum of money exceeding twenty five thousand rupees is received by an individual or a Hindu undivided family without consideration from any person on or after the 1st day of September, 2004, the whole of such sum is included in the total income in the hands of the recipient. As per the proviso to the said clause, this clause shall not apply to any sum of money received from any relative or on the occasion of the marriage of the individual or under a will or by way of inheritance or in contemplation of the death of the payer.

It is proposed to amend the proviso to clause (v) of sub-section (2) of section 56 so as to provide that this clause shall not apply to any sum of money received from any local authority as defined in the Explanation to clause (20) of section 10 or 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 from any trust or institution registered under section 12AA.

This amendment will take effect retrospectively from the 1st day of April, 2005 and will, accordingly, apply in relation to the assessment year 2005-2006 and subsequent years.

It is further proposed to amend clause (v) of sub-section (2) of section 56 so as to provide that the said clause shall be applicable to any sum of money exceeding twenty five thousand rupees received by an individual or Hindu undivided family without consideration from any person before the 1st day of April, 2006.

This amendment will take effect from 1^st day of April, 2006 and will, accordingly, apply in relation to the assessment year 2006-2007 and subsequent years.

It is also proposed to insert a new clause (vi) after clause (v) of sub-section (2) of section 56 so as to provide that 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 shall be included in the total income.

This amendment will take effect from 1st day of April, 2007 and will, accordingly, apply to assessment years 2007-2008 and subsequent years.

Clause 9 seeks to amend section 139 of the Income-tax Act relating to return of income.

Under the existing provisions contained in sub-clause (e) of clause (4C) of section 139 of the Income-tax Act, every fund or institution referred to in sub-clause (iv) or trust or institution referred to in sub-clause (v) or any university or other educational institution referred to in sub-clause (vi) or any hospital or other medical institution referred to in sub-clause (via) shall furnish their return of income if the total income without giving effect to the provisions of section 10 exceeds the maximum amount which is not chargeable to tax.

It is proposed to amend the said sub-clause (e) of clause (4C) of section 139 so as to provide that any university or other educational institution referred to in sub-clause (iiiad) or any hospital or other medical institution referred to in sub-clause (iiiae) of clause (23C) of section 10 shall furnish their return of income if their total income without giving effect to the provisions of section 10 exceeds the maximum amount which is not chargeable to tax.

This amendment will take effect from 1st day of April, 2006 and will, accordingly, apply in relation to the assessment year 2006-2007 and subsequent assessment years.

Sub-clause (b) of the said clause seeks to insert sub-section (4D) requiring a university, college or other institution referred to in clause (ii) and clause (iii) of sub-section (1) of section 35 to furnish return of income.

This amendment will take effect from the 1^st day of April, 2006 and will, accordingly, apply in relation to the assessment year 2006-2007 and subsequent years.

Clause 10 seeks to amend section 143 of the Income-tax Act relating to assessment.

It is proposed to insert a proviso after the first proviso in sub-section (3) of section 143 to provide that during the course of assessment proceedings the assessing officer should satisfy himself regarding the activities of the university, college or other institution whether these are being carried out in accordance with all or any of the guidelines and conditions subject to which approval was granted and may recommend to the Central Government to withdraw the approval.

This amendment will take effect from the 1st day of April, 2006 and will, accordingly, apply in relation to the assessment year 2006-2007 and subsequent years.

Clause 11 seeks to amend section 155 of the Income-tax Act relating to other amendments.

The existing provisions of section 155, inter alia, provide for rectification of an assessment order wherein deduction under section 80HHC, 80HHD, 80HHE, etc., has not been allowed on the ground that export income has not been received in convertible foreign exchange in India, or having been received in convertible foreign exchange outside India, has not been brought into India, by or on behalf of the assessee before completion of assessment and such income is subsequently brought into India with the approval of the Reserve Bank of India or such other competent authority within the prescribed time.

It is proposed to insert a new sub-section (11A) in the said section so as to provide that the Assessing Officer shall amend the order of assessment to allow deduction under section 10A or section 10B or section 10BA, as the case may be, in respect of export income or part thereof, which is received in, or brought into, India with the approval of the Reserve Bank of India or such other competent authority within the prescribed time. It is also proposed that the provisions of section 154 shall, so far as may be, apply thereto, and the period of four years for rectification of assessment shall be reckoned from the end of the previous year in which such income is so received in, or brought into, India.

This amendment will take effect from the date on which the Bill receives the assent of the President.

Clause 12 seeks to amend section 194-I of the Income-tax Act relating to tax deduction at source on rent.

Under the existing provisions contained in section 194-I, tax is required to be deducted at source on payment of rent. The term "rent" has been defined in the Explanation to the said section to, inter alia, mean payment for use of any building (including factory building) together with furniture, fittings and the land appurtenant thereto whether or not such building is owned by the payee.

It is proposed to amend the definition of "rent" in the Explanation to section 194-I so as to provide that the provisions of the said section are applicable whether the items are rented separately or together. It is also proposed to expand the list of items by including machinery, plant arid equipment. This section is proposed to be made applicable whether or not any or all of the items are owned by the payee.

This amendment will take effect from, the date on which the Bill receives assent of the President.

Clause 13 seeks to amend section 194J of the Income-tax Act relating to fees for professional or technical services.

Under the existing provisions contained in sub-section (1), tax is required to be deducted at source on any payment of a sum to a resident exceeding twenty thousand rupees by way of fees for professional services or fees for technical services at the rate of five per cent, of such sum.

It is proposed to amend sub-section (1) of section 194J so as to include "royalty" and "any sum referred to in clause (va) of section 28" for applicability of the provisions of the said sub-section. The term "royalty" is proposed to be defined in the explanation to the section.

These amendments will take effect from the date on which the Bill receives assent of the President.

Clause 14 seeks to amend section 246A of the Income-tax Act relating to appealable orders before Commissioner (Appeals).