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FINANCE ACT 1973

Ministry of Law and Justice


  • Chapter 1
  • Chapter 2
  • Chapter 3
  • Chapter 4
  • Schedules
  • Finance Act 1973

Chapter 1

Section 1. Short Title and Commencement

(1) This Act may be called the Finance Act, 1973.

(2) Save as otherwise provided in this Act, sections 2 to 23 shall be deemed to have come into force on the 1st day of April, 1973.

Chapter 2

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, 1973, income-tax shall be charged at the rates specified in Part I of the First Schedule and shall be increased, -

('a) in the cases to which Paragraphs A, Band D of the Part apply, by a surcharge for purposes of the Union;

(b) in the cases to which Paragraph C of that Part applies, by a surcharge for purposes of the Union and a special surcharge for purposes of the Union; and

(c) in the cases to which Paragraphs E and F of that Part apply, by a surcharge,

calculated in each case in the manner provided therein.

(2) In making any assessment for the assessment year commencing on the 1st day of April, 1973, where the total income of a company, other than the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), includes any profits and gains from life insurance business, the income-tax payable by it shall be the aggregate of the income-tax calculated -

(i) on the amount of profits and gains from life insurance business so included, at the rate applicable in the case of the Life Insurance Corporation of India, in accordance with Paragraph E of Part I of the First Schedule, to that part of its total income which consists of profits and gains from life insurance business; and

(ii) on the remaining part of its total income, at the rate applicable to the company on its total income.

(3) In cases to which Chapter XII or section 164 of the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as the Income-tax Act), applies, the tax chargeable shall be determined as provided in that Chapter or that section, and with reference to the rates imposed by sub-section (1) or the rates as specified in that Chapter or section, as the case may be.

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

(5) Subject to the provisions of sub-section (6), in cases in which income-tax has to be calculated under the first proviso to sub-section (5) of section 132 of the Income-tax Act or charged under sub-section (4) of section 172 or sub-section (2) of section 174 or section 175 or sub-section (2) of section 176 of the said Act or deducted under section 192 of the said Act from income chargeable under the head "Salaries" or deducted under sub-section (9) of section 80E of the said Act from any payment referred to in the said sub-section (9) or in which the "advance tax" payable under Chapter XVII-C of the said Act has to be computed, at the rate or rates in force, such income-tax or, as the case may be, "advance tax" shall be so calculated, charged, deducted or computed at the rate or rates specified in Part III of the First Schedule :

Provided that in respect of any income chargeable to tax under section 164 of the Income-tax Act at the rate of sixty-five per cent., "advance tax" shall be computed at that rate.

(6) In the cases to which Sub-Paragraph I or Sub-Paragraph II of 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, in addition to total income, and the total income exceeds five thousand rupees, then, in calculating income-tax under the first proviso to sub-section (5) of section 132 of the Income-tax Act or in charging income-tax under sub-section (2) of section 174 or section 175 or sub-section (2) 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 five thousand rupees of the total income but without being liable to tax), only for the purpose of calculating, charging or computing such income-tax or, as the case may be, "advance tax" in respect of the total income; and

(b) such income-tax or, as the case may be, "advance tax" shall be so calculated, charged or computed as follows :-

(i) the total income and the net agricultural income shall 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 Sub-Paragraph I or, as, the case may be, Sub-Paragraph II of 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 five 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 Sub-Paragraph I or, as the case may be, Sub-Paragraph II of the said Paragraph A, as if the net agricultural income as so increased were the total income;

(iii) the amount by which income-tax or, as the case may be, "advance tax determined in accordance with sub-clause (i) exceeds the amount of income-tax or "advance tax" determined in accordance with sub-clause (ii) shall be the income-tax "advance tax" in respect of the total income :

Provided that in cases where Sub-Paragraph I of the said Paragraph A applies, -

(A) where the aggregate income referred to in sub-clause (i) exceeds fifteen thousand rupees but does not exceed fifteen thousand one hundred and eighty rupees, the provisions of that Sub-Paragraph relating to surcharge on income-tax shall, for the purposes of determining the amount of income-tax or "advance tax" under sub-clause (ii), apply subject to the modifications that such surcharge shall be calculated at the rate arrived at by dividing the amount of surcharge on income-tax calculated in respect of the aggregate income by the amount of the income-tax (excluding surcharge) calculated in respect of the aggregate income and that the provisions of the proviso at the end of that Sub-Paragraph shall not apply;

(B) where the aggregate income referred to in sub-clause (i) exceeds fifteen thousand one hundred and eighty rupees, the provisions of that Sub-Paragraph relating to surcharge on income-tax shall, for the purposes of determining the amount of income-tax or "advance tax" under sub-clause (ii), apply subject to the modifications that such surcharge shall be calculated at the rate of fifteen per cent. and that the provisions of the proviso at the end of that Sub-Paragraph shall not apply.

(7) For the purposes of this section and the First Schedule, -

(a) "company in which the public are substantially interested" means a company which is such a company as is referred as is referred to in section 108 of the Income-tax Act;

(b) "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, 1973, 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 in accordance with the provisions of section 194 of that Act;

(c) "industrial company" means a company which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining.

Explanation : For the purposes of this clause, a company shall be deemed to be mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining, if the income attributable to any one or more of the aforesaid activities included in its total income of the previous year (as computed before making any deduction under Chapter VIA of the Income-tax Act) is not less than fifty-one per cent. of such total income;

(d) "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);

(e) "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;

(f) "tax-free security" means any security of the Central Government issued or declared to be income-tax free, or any security of a State Government issued income-tax free, the income-tax whereon is payable by the State Government;

(g) 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

Section 3. Amendment of 2

In section 2 of the Income-tax Act, -

(a) in clause (37A), in sub-clause (ii), after the figures and letter "194B", the figures and letter", 194D" shall be inserted;

(b) in clause (42A), for the portion beginning with the words "short-term capital asset" means a capital asset and ending with the words "notwithstanding that such capital asset has been held by the assessee for not more than twenty-four months immediately preceding the date of its transfer.", the following shall be substituted with effect from the 1st day of April, 1974, namely :-

"short-term capital asset" means a capital asset held by an assessee for not more than sixty month immediately preceding the date of its transfer..

Section 4. Amendment of 28

In section 28 of the Income-tax Act, in clause (ii), after sub-clause (c), the following sub-clause shall be inserted, and shall be deemed to have been inserted, with effect from the 1st day of April, 1972, namely :-

"(d) any person, for or in connection with the vesting in the Government, or in any corporation owned or controlled by the Government, under any law for the time being in force, of the management of any property or business;".

Section 5. Amendment of 35B

In section 35B of the Income-tax Act, in sub-section (1), -

(a) the Explanation shall be numbered, and shall be deemed to have been numbered, as Explanation 1, with effect from the 1st day of April, 1968; and

(b) after Explanation 1 as so numbered, the following Explanation shall be inserted, and shall be deemed to have been inserted, with effect from the 1st day of April, 1968, namely :-

"Explanation 2 : For the purposes of sub-clause (iii) and sub-clause (viii) of clause (b), expenditure incurred by an assessee engaged in the business of -

(i) operation of any ship or other vessel, aircraft or vehicle, or

(ii) carriage of, or making arrangements for carriage of, passengers, livestock, mail or goods,

on or in relation to such operation or carriage to arrangements for carriage (including in each case expenditure incurred on the provision of any benefit, amenity or facility to the crew, passengers or livestock) shall not be regarded as expenditure incurred by the assessee on the supply outside India of services or facilities.".

Section 6. Amendment of 45

In section 45 of the Income-tax Act [as amended by section 8 of the Finance Act, 1972 (16 of 1972)], for the words, figures and letters "sections 53, 54, 54B, 54C", the words, figures and letters "sections 53, 54, 54B, 54C and 54D" shall be substituted with effect from the 1st day of April, 1974.

Section 7. Insertion of New 54D

After section 54C (inserted by section 9 of the Finance Act, 1972) (16 of 1972) of the Income-tax Act, the following section shall be inserted with effect from the 1st day of April, 1974, namely :-

"54D. Capital gain on compulsory acquisition of lands and buildings not to be charged in certain cases. - Where the capital gain arises from the transfer by way of compulsory acquisition under any law of a capital asset, being land or building or any right in land or building, forming part of an industrial undertaking belonging to the assessee which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee for the purposes of the business of the said undertaking, and the assessee has within a period of three years after that date purchased any other land or building or any right in any other land or building or constructed any other building for the purposes of shifting or re-establishing the said undertaking or setting up another industrial undertaking, then, instead of the capital gain being charged to income-tax as the income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say, -

(i) if the amount of the capital gain is greater than the cost of the land, building or right so purchased or the building so constructed (such land, building or right being hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or

(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain.".

Section 8. Amendment of 80C

In section 80C of the Income-tax Act, with effect from the 1st day of April, 1974, -

(a) for sub-section (1), the following sub-section shall be substituted, namely :-

"(1) In computing the total income of an assessee, there shall be deducted, in accordance with and subject to the provisions of this section, an amount calculated, with reference to the aggregate of the sums specified in sub-section (2), at the following rates, namely :-

(a) where such aggregate does not exceed Rs. 2,000

The whole of such aggregate;

(b) where such aggregate exceeds Rs. 2,000 but does not exceed Rs. 5,000

Rs. 2,000 plus 50 per cent. of the amount by which such aggregate exceeds Rs. 2,000;

(c) where such aggregate exceeds Rs. 5,000

Rs. 3,500 plus 40 per cent. of the amount by which such aggregate exceeds Rs. 5,000.";

(b) in sub-section (2), -

(i) for sub-clause (ii) of clause (a), the following sub-clause shall be substituted, namely :-

"(ii) to effect or to keep in force a contract for a deferred annuity on the life of the assessee or on the life of the wife or husband or any child of the assessee :

Provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lieu of the payment of the annuity;;

(ii) in clause (g), for item (2) of sub-clause (i), the following item shall be substituted, namely :-

"(2) to effect or to keep in force a contract for a deferred annuity on the life of any member of such association or body or any child of any of the members of such association or body :

Provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lien of the payment of the annuity; or".

Section 9. Amendment of 80G

In section 80G of the Income-tax Act, with effect from the 1st day of April, 1974, -

(a) in sub-section (5), -

(i) in clause (i), after the words, brackets, figures and letter "or clause (22A)", the words, brackets and figures "or clause (23)" shall be inserted;

(ii) in clause (v), after the words "or affiliated to any University established by law", the following words, brackets and figures shall be inserted, namely :-

", or is an institution approved by the Central Government for the purposes of clause (23) of section 10,";

(b) after Explanation 3 below sub-section (5), the following Explanation shall be inserted, namely :-

"Explanation 4 : For the purposes of this section, an association approved by the Central Government for the purposes of clause (23) of section 10 shall also be deemed to be an institution, and every association or institution approved by the Central Government for the purposes of the said clause shall be deemed to be an institution established in India for a charitable purpose.".

Section 10. Amendment of 80J

In section 80J of the Income-tax Act, clause (c) of sub-section (6) shall be omitted with effect from the 1st day of April, 1974.

Section 11. Amendment of 80S

In section 80S of the Income-tax Act, for the words, brackets and figures "provisions of clause (ii) of section 28,", the words, brackets, letters and figures "provisions of sub-clause (a) or sub-clause (b) or sub-clause (c) of clause (ii) of section 28," shall be substituted, and shall be deemed to have been substituted, with effect from the 1st day of April, 1972.

Section 12. Amendment of 104

In section 104 of the Income-tax Act, with effect from the 1st day of April, 1974, -

(a) in sub-section (1), after the words "the amount of dividends actually distributed, if any", the words ",within the said period of twelve months" shall be inserted;

(b) in sub-section (2), in clauses (i) and (ii), after the words "the payment of a dividend or a large dividend than that declared", the words, brackets and figure "within the period of twelve months referred to in sub-section (1)" shall be inserted.