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FINANCE ACT 1972

Ministry of Law and Justice

Act nº 16 of 1972


  • Chapter I
  • Chapter II
  • Chapter III
  • Chapter IV
  • Chapter V
  • Schedules
  • Act nº 16 of 1972

Preamble

THE FINANCE ACT, 1972

[Act No. 16 of 1972]

[28th May 1972]

PREAMBLE

An Act to give effect to the financial proposals of the Central Government for the financial year 1972-73

Be it enacted by Parliament in the Twenty-third Year of the Republic of India as follows :-

Chapter I

Section 1. Short Title and Commencement

(1) This Act may be called the Finance Act, 1972.

(2) Save as otherwise provided in this Act, sections 2 to 60 shall be deemed to have come into force on the 1st day of April, 1972.

Chapter II

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, 1972, 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 that 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 Paragraph 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, 1972, 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 and 195 of the Income-tax Act at the rates in force, the deduction shall be made at the rates specified in Part II of the First Schedule.

(5) 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 65 per cent., "advance tax" shall be computed at that rate.

(6) 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 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, 1972, 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 enganged 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 enganged 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 51 per cent. of such total income;

(d) "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;

(e) 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 III

Section 3. Amendment of 2

In section 2 of the Income-tax Act, -

(a) in clause (14), for sub-clause (ii), the following sub-clause shall be substituted with effect from the 1st day of April, 1973, namely :-

(ii) personal effects, that is to say, movable property (including wearing apparel and furniture, but excluding jewellery) held for personal use by the assessee or any member of his family dependent on him.

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;";

(b) in clause (24), -

(i) after sub-clause (ii), the following sub-clause shall be inserted with effect from the 1st day of April, 1973, namely :-

(iia) voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes, not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution.

Explanation : For the purposes of this sub-clause, "trust" includes any other legal obligation;;

(ii) after sub-clause (viii), the following sub-clause shall be inserted, namely :-

"(ix) any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever;";

(c) in clause (37A), in sub-clause (ii), for the figures and letter "194A", the figures and letters "194A, 194B" shall be substituted.

Section 4. Amendment of 10

In section 10 of the Income-tax Act, -

(a) for clause (3), the following clause shall be substituted, namely :-

"(3) any receipts which are of a casual and non-recurring nature, not being winning from lotteries, to the extent such receipts do not exceed one thousand rupees in the aggregate :

Provided that this clause shall not apply to -

(i) capital gains chargeable under the provisions of section 45; or

(ii) receipts arising from business or the exercise of a profession or occupation; or

(iii) receipts by way of addition to the remuneration of an employee;;

(b) in clause (10), with effect from the 1st day of April, 1973, -

(i) for the words ",a local authority or a corporation established by a Central, State or Provincial Act", the words "or a local authority" shall be substituted;

(ii) for the portion beginning with the words "or any other gratuity" and ending with the words "whichever is less;", the following shall be substituted, namely :-

"any other gratuity received by an employee on his retirement or on his becoming incapacitated prior to such retirement or on termination of his employment, or any gratuity received by his widow, children or dependants on his death, to the extent it does not, in either case, exceed one-half month salary for each year of completed service, calculated on the basis of the average salary for the three years immediately preceding the year in which the gratuity is paid, subject to a maximum of twenty-four thousand rupees or 15 months salary so calculated, whichever is less;";

(c) in clause (25), after sub-clause (iii), the following sub-clause shall be inserted with effect from the 1st day of April, 1973, namely :-

"(iv) any income received by the trustees on behalf of an approved gratuity fund;".

Section 5. Amendment of 11

In section 11 of the Income-tax Act, in clause (c) of sub-section (1), for the words "income from property held under trust", the words "income derived from property held under trust" shall be substituted with effect from the 1st day of April, 1973.

Section 6. Substitution of new sections for 12

For section 12 of the Income-tax Act, the following sections shall be substituted with effect from the 1st day of April, 1973, namely :-

"12. Income of trusts or institutions from contributions. -Any voluntary contributions received by a trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes (not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution) shall for the purposes of section 11 be deemed to be income derived from property held under trust wholly for charitable or religious purposes and the provisions of that section and section 13 shall apply accordingly.

12A. Conditions as to registration of trusts, etc. - The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely :-

(a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later :

Provided that the Commissioner may, in his discretion, admit an application for the registration of any trust or institution after the expiry of the period aforesaid;

(b) where the total income of the trust or institution as computed under this Act without giving effect to the provisions of section 11 and section 12 exceeds twenty-five thousand rupees in any previous year, the accounts of the trust or institution for that year have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes 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.".

Section 7. Amendment of 13

In section 13 of the Income-tax Act, with effect from the 1st day of April, 1973, -

(a) in sub-section (1), -

(i) in the opening portion, for the words and figures "Nothing contained in section 11", the words and figures "Nothing contained in section 11 or section 12" shall be substituted;

(ii) the following Explanation shall be inserted at the end, namely :-

"Explanation : For the purposes of sub-clause (ii) of clause (c), in determining whether any part of the income or any property of any trust or institution is during the previous year used or applied, directly or indirectly, for the benefit of any person referred to in sub-section (3), in so far as such use or application relates to any period before the 1st day of July, 1972, no regard shall be had to the amendments made to this section by section 7 [other than sub-clause (ii) of clause (a) thereof] of the Finance Act, 1972.";

(b) in sub-section (2), for clause (g), the following clause shall be substituted, namely :-

"(g) if any income or property of the trust or institution is diverted during the previous year in favour of any person referred to in sub-section (3) :

Provided that this clause shall not apply where the income, or the value of the property or, as the case may be, the aggregate of the income and the value of the property, so diverted does not exceed one thousand rupees;";

(c) in sub-section (3), -

(i) after clause (c), the following clause shall be inserted, namely :-

"(cc) any trustee of the trust or manager (by whatever name called) of the institution;";

(ii) in clause (d), for the words "or member", the words "member, trustee or manager" shall be substituted;

(iii) in clause (e), for the brackets and letter "(c)", the brackets and letters "(c), (cc)" shall be substituted;

(d) in sub-section (4), for the word and figures "section 11", the words and figures "section 11 or section 12" shall be substituted;

(e) for Explanation 1, the following Explanation shall be substituted, namely :-

Explanation 1 : For the purposes of section 11, 12, 12A and this section," trust" includes any other legal obligation and for the purposes of this section "relative", in relation to an individual, means -

(i) spouse of the individual;

(ii) brother or sister of the individual;

(iii) brother or sister of the spouse of the individual;

(iv) any lineal ascendant or descendant of the individual;

(v) any lineal ascendant or descendant of the spouse of the individual;

(vi) spouse of a person referred to in sub-clause (ii), sub-clause (iii), sub-clause (iv) or sub-clause (v);

(vii) any lineal descendant of a brother or sister of either the individual or of the spouse of the individual..

Section 8. Amendment of 45

In section 45 of the Income-tax Act, for the words, figures and letter "sections 53, 54 and 54B", the words, figures and letters "sections 53, 54, 54B and 54C" shall be substituted with effect from the 1st day of April, 1973.

Section 9. Insertion of New 54C

In the Income-tax Act, after section 54B, the following section shall be inserted with effect from the 1st day of April, 1973, namely :-

54C. Capital gain on transfer of jewellery held for personal use not to be charged in certain cases. - Where the capital gain arises from the transfer of a capital asset, being jewellery held for personal use by the assessee or any member of his family dependent on him, and the assessee has, within a period of six months after such transfer, acquired any other jewellery for personal use by the assessee or any member of his family dependent on him, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say, -

(i) if the cost of the jewellery so acquired is not less than full value of the consideration received or accruing in respect of the transferred jewellery, the whole of such capital gain shall not be charged under section 45; or

(ii) if the cost of the jewellery so acquired is less than the full value of the consideration received or accruing in respect of the transferred jewellery, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the jewellery so acquired bears to the full value of the consideration received or accruing in respect of the transferred jewellery shall not be charged under section 45.

Explanation : For the purposes of this section, "jewellery" shall have the same meaning as is assigned to it in the Explanation to sub-clause (ii) of clause (14) of section 2..

Section 10. Amendment of 56

In section 56 of the Income-tax Act, in sub-section (2), after clause (ia), the following clause shall be inserted, namely :-

"(ib) income referred to in sub-clause (ix) of clause (24) of section 2;".

Section 11. Insertion of New 74A

In the Income-tax Act, after section 74, the following section shall be inserted, namely :-

74A. Losses from certain specified sources falling under the head "Income from other sources". - (1) Where the net result of the computation made for any assessment year in respect of any source falling under the head "Income from other sources" and being a source specified in sub-section (2), is a loss, such loss shall not be set off except against income, if any, from the same source.

(2) The sources referred to in sub-section (1) are -

(a) lotteries;

(b) crossword puzzles;

(c) races including horse races;

(d) card games;

(e) other games of any sort;

(f) gambling or betting of any form or nature whatsoever not falling under any of the foregoing clauses..