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COMPULSORY DEPOSIT SCHEME (INCOME TAX PAYERS) ACT, 1974,

Ministry of Law and Justice

Act nº 38 of 1974


  • Schedules
  • Amending Acts
  • Act nº 38 of 1974

Preamble

THE COMPULSORY DEPOSIT SCHEME (INCOME TAX PAYERS) ACT, 1974

[Act, No. 38 of 1974]

[1st September, 1974]

PREAMBLE

An Act to provide, in the interest of national economic development, for compulsory deposit by certain classes of income-tax payers and for the framing of a scheme in relation thereto, mid for matters connected there with or incidental thereto.

BE it enacted by Parliament in the Twenty-fifth Year of the Republic of India as follows :--

Section 1. Short title, extent and commencement

(1) This Act may be called The Cumpulsory Deposit Scheme (Income-tax Payers) Act 1974.

(2) It extends to the whole of India.

(3) It shall he deemed to have come into force on the 17th day of July, 1974.

Section 2. Definitions

In this Act, unless the context otherwise requires, --

(a) "compulsory deposit' means compulsory deposit under this Act;

(b) "deposit" means a deposit of money.

(c) "depositor" means a person who is liable to make a compulsory deposit;

(d) "Income-tax Act" means the Income-tax Act, 1961;

1[(dd) "Income-tax Officer" has the same meaning as in Clause (25) of Section 2 of the Income-tax Act, and includes an Inspecting Assistant Commissioner who exercises or performs the powers or functions conferred on or assigned to him under Section 125 or Section 125A of the said Act.]

(e) all other words and expressions used herein but not defined and defined in the Income-tax Act shall have the meanings, respectively assigned to them in that Act.

1 . Inserted and deemed to have been inserted w.e.f. 10-7-1978 by the Finance (No. 2) Act (44 of 1980),section53(a)


Section 3. Persons liable to make compulsory deposits

(1) Subject to the provisions of this Act, the persons specified in Sub-section (2) shall be liable to make compulsory deposits1[for the assessment year commencing on the 1st day of April, 1975 and every subsequent assessment year (not being an assessment year commencing on or after the1[1st day of April, 1986].

(2) The persons referred to in Sub-section (1) are the following namely: --

(a) every person, being --

(i) an individual, who is a citizen of India;

(ii) a Hindu undivided family;

(iii) a trustee appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise (including any Wakf deed which is valid under the Mussulman Wakf Validating Act, 1913), if the income in respect of which the trustee is liable to income-tax as a representative assessee or any part thereof is not specifically receivable on behalf or for the benefit of any one person or where the individual shares of the persons on whose behalf or for whose benefit such income or such part thereof is receivable are indeterminate or unknown; and

(b) every person who is assessable under the Income-tax Act in respect of the total income of an individual, or a Hindu undivided family or a trustee specified in Clause (a).

2(3) Notwithstanding anything contained in Sub-section (1),--

(a) an individual specified in Sub-clause (i) of Clause (a) of Sub-section (2), or

(b) any person specified in Clause (b) of Sub-section (2) who is assessable under the Income-tax Act in respect of, the total income of the individual aforesaid,

shall not be liable to make any compulsory deposit for any assessment year where, in either case, such individual is more than3[sixty-five years of age on the first day of the financial year immediately preceding that assessment year.]

1 . Substituted for certain words and figures by Act 29 of 1977,section 36(a)(i) w.e.f. 1-4-77.

2 . Inserted, by Act 29 of 1977,section36(a)(ii) w.e.f. 1-4-1977.

3 . Substituted for the words "Seventh year", by Act 29 of 1977, Section 59(a)(ii) w.e.f. 1-6-1983.


Section 4. Requirement as to compulsory deposit

(1) Where, in relation to an assessment year referred to in Sub-section (1) of Section 3, the current income of any person, being an individual or a Hindu undivided family or a trustee specified in Clause (a) of Sub-section (2) of that section, exceeds fifteen thousand rupees such person, or if any other person is assessable under the Income-tax Act in respect of the total income of such person, the person so assessable, shall make, in accordance with and subject to the provisions of this Act and any scheme framed thereunder,1[a compulsory deposit,--

(i) for the assessment year commencing on the 1st day of April, 1975 and the assessment year commencing on the 1st day of April, 1976, at the rates specified in Paragraph A of the Schedule,2[* *]

(ii) for the assessment year commencing on the 1st day of April, 1977 and the assessment year commencing on the 1st day of April, 1978, at the rates specified in Paragraph Bof the Schedule;3[* *]

4(iii) for the assessment year commencing on the 1st day of April, 1979, the assessment year commencing on the 1st day of April, 1980 and the assessment year commencing on the 1st day of April, 1981, at the rates specified in Paragraph C of the Schedule; and

(iv) for the assessment year commencing on the 1st day of April, 19825[and every subsequent assessment year (not being an assessment year commencing on or after the 1st day of April, 1986), at the rates specified in Paragraph D of the Schedule.]]

(2) Where in the case of any person specified in Sub-section (2) of Section 3, a deduction is required to be made under the Additional Emoluments (Compulsory Deposit) Ordinance, 1974, the amount of the compulsory deposit which such person is liable to make under this Act for any assessment year shall be reduced by the amount deducted under that Ordinance during the financial year immediately preceding that assessment year; and where such deduction is equal to or exceeds the amount of such compulsory deposit, it shall not be necessary for such person to make a compulsory deposit for that assessment year.

Explanation.-- When any Central Act repeals and replaces (with or without any modification) the Additional Emoluments (Compulsory Deposit) Ordinance, 1974, the references to the said Ordinance in this sub-section shall be construed as references to such Central Act.

(3) For the purposes of this section, "current income", in relation to an assessment year, means,--

(a)2[in a case where a statement is sent by the person under Clause (a) of Sub-section (1) of Section 209A of the Income-tax Act in the financial year immediately preceding that assessment year or where the Income-tax Officer has made an order under Sub-section (1) or Sub-section (3) of Section 210 of that Act requiring the person to pay advance tax during the financial year immediately preceding that assessment year and the person has not sent an estimate under Section 209A or, as the case may be, Section 212 of that Act;]

(i) if the total income of the lastest previous year in respect of which the person has been assessed by way of regular assessment forms basis of computation of advance tax payable by him, such total income5[exclusive of capital gains and income referred to in Sub-clause (ix) of Clause (24) of Section 25[and in Clause (c) of Section 115C] of the Income-tax Act] as increased by the net agricultural income, if any, which has been taken into account for the purposes of charging income-tax for the assessment year relevant to that previous year; or

(ii) if the total income of the previous year on the basis of which income-tax has been paid by the person under Section 140A of the Income-tax Act forms the basis of computation of advance tax, such total income [exclusive of capital gains and income referred to in Sub-clause (ix) of Clause (24) of Section 25[and in Clause (c) of Section 115C] of the Income-tax Act] as increased by the net agricultural income, if any, returned by the person in the return of income for the assessment year relevant to that previous year;

(b) in a case where an estimate is sent by the person under2[Section 209A or Section 212] of the Income-tax Act, the total income [exclusive of capital gains and income referred to in Sub-clause (ix) of Clause (24) of Section 25[and in Clause (c) of Section 115C] of the Income-tax Act] as estimated by him, of the period which would be the previous year for that assessment year, as increased by the net agricultural income, if any, of that period as estimated by him;

(c) in any other case, if the total income of the person, as estimated by him, of the period which would be the previous year for that assessment year exceeds the maximum amount not chargeable to income-tax in his case, such total income [exclusive of capital gains and income referred to in Sub-clause (ix) of Clause (24) of Section 25[and in Clause (c) of Section 115C] of the Income-tax Act] as increased by the net agricultural income, if any, of that period as estimated by him.

Explanation.-- In this sub-section, "net agricultural income" means the net agricultural income as defined in the Finance Act of the relevant year.

1 . Substituted for words "a compulsory deposit for that assessment year at the rates specified in the Schedule" by Act 66 of 1976, Section 43(b) w.e.f.1-4-76.

2 . Word "and" omitted and clauses (ii) and (iii) in Sub-section (1) as also Clause (a) of Sub-section (3), and certain words in Section 3(b) substituted by Act 19 of 1978, Section 40(A) and (B) w.e.f.1-4-78.

3 . Word "and' in Clause (ii) omitted and Clause (iii) substituted by the Compulsory Deposit Scheme (Income-lax Payer) Amendment Act (23 of 1981), Section 2 w.e.f. 1-7-1981.

4 . Substituted for the words, figures and letters "and the assessment year commencing on the 1st day of April, (sic)3 by the Finance Act (11 of 1983), Section 59(b) (i) w.e.f.1-4-1983.

5 Reported, by the Finance Act (11 of 1983),section 59(b)(ii) w.e.f. 1-6-1983.


Section 5. Time for making compulsory deposit

A deposit shall make the compulsory deposit for an assessment year referred to in Sub-section (1) of Section 3,--

(a) in a case where such depositor is required to pay advance tax under the Income-tax Act in the financial year immediately preceding that assessment year at any time (in one sum or in instalments of his choice) before the expiry of the date on which the last instalment of advance tax is payable by him in accordance with the provisions of1[Section 211 or Sub-section (4) of Section 209A] or, as the case may be, Sub-section (3A) of Section 212 of that Act;

(b) in ny other case, at any time (in one sum or in instalments of his choice) before the end of the financial year immediately preceding that assessment year.

1. Substituted for words "Section 211" by Act 19 of 1978, Section 40(b) w.e.f.1-4-1978.


Section 6. Order by Income-tax Officer for compulsory deposit in certain cases

(1) If, in relation to an assessment year referred to in Sub-section (1) of Section 3, the correct income of a person falling under Clause (c) of Sub-section (3) of section 4 exceeds Fifteen thousand rupees and such person has failed to make the compulsory deposit for that assessment year, the income-tax officer shall, by order in writing, direct that such person shall make the compulsory deposit with reference to his correct income.

(2) For the purposes of this section, "correct income" of a person, in relation to an assessment year, means--

(i) in a case where the person has furnished the return of income under Section 139 of the Income-tax Act, the total income [exclusive of capital gains and income referred to in Sub-section (ix) of Clause (24) of Section 2 a[and in Clause (c) of Section 11(sic)C] of the Income-tax Act] returned by him, as increased by the net agricultural inc(sic)rae, if any, returned by him;

(ii) in a case where the person has failed to furnish the return of income under Section 139 of the Income-tax Act and assessment is made under Section 144 of that Act, the total income [exclusive of capital gains and income referred to in Sub-clause (ix) of Clause (24) of Section 21[and in Clause (c) of Section 115C] of the Income-tax Act] determined on assessment as increased by the net agricultural income, if any, determined on assessment.

Explanation.-- In this sub-section, "net agricultural income" has the meaning assigned to it in the Explanation to Sub-section (3) of section 4.

1. Inserted by the Finance Act (11 of 1983), Section 59(c) w.e.f. 1-6-1983.


Section 7. Compulsory deposit to carry simple interest

(1) Every compulsory deposit made by or recovered from a depositor shall carry simple interest at a rate equal to the bank deposit rate.

Explanation.-- In this sub-section, "bank deposit rate" means the highest of the maximum rates at which interest may be paid on different classes of deposits (other than those maintained in savings account or those maintained by charitable or religious institutions) by different classes of scheduled banks in accordance with the directions given or issued to banking companies (sic)enerally by the Reserve Bank of India under the Banking Regulation Act, 1949.

(2) The interest shall be calculated in such manner as may be specified in the sch(sic) framed under Section 19.

(3) For the purposes of the deduction under Section 80L of the Income-tax Act, interest received on a compulsory deposit shall be deemed to be interest received on a deposit within a banking company to which the Banking Regulation Act, 1949, applies.

Section 7A. Compulsory deposit to be exempt for purposes of wealth-tax

1[7A. Compulsory deposit to be exempt for purposes of wealth-tax.--

For the purposes of exemption under section 5 of the Wealth-tax Act, 1957(27 of 1957), the amount of compulsory deposit shall be deemed to be a deposit, with a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies.]

1. Inserted and deemed to have been inserted w.e.f. 1-4-1975 by the Finance Act (44 of 1980), Section 3(b).


Section 8. Repayment of compulsory deposit

1[(1) The amount of compulsory deposit made by or recovered from a depositor in any financial year shall be repayable in five equal annual instalments commencing from the expiry of two years from the end of that financial year, together with the interest due on the whole or, as the case may be, part of the amount of the compulsory deposit which has remained unpaid :

2[Provided that no depositor shall be entitled to withdraw before the expiry of the financial year 1985-86 any amount which, in accordance with the foregoing provisions of this sub-section, is repayable or payable during that financial year and the provisions of Sub-section (2) shall apply in relation to such amount as they apply in relation to any amount referred to in that sub-section.]

2[Provided further that] nothing in this section shall prevent earlier repayment of the deposit or any instalment thereof together with the interest due in any case in which the Income-tax Officer is satisfied that extreme hardship will be caused unless such repayment is made.

3[(1A) Notwithstanding anything contained in Sub-section (1),--

(a) the amount of compulsory deposit made by or recovered from an individual; or

(b) the amount of compulsory deposit made by or recovered from any person who is assessable under the Income-tax Act in respect of the total income of an individual, on behalf of such individual,

shall, to the extent it has remained unpaid, be repayable, together with interest thereon,--

4[(i) where such individual has attained the age of sixty-five years before the 1st day of April, 1983, on the 1st day of June, 1983; and

(ii) in any other case, on the first day of the financial year immediately succeeding the financial year in which such individual attained sixty-five years of age.]

1[(2) where any amount has become repayable or payable under Sub-section (1)3[or Sub-­section (1A)] the depositor may, at his option, not withdraw such amount after it has become so repayable or payable, and if he does so, such amount shall carry interest for the period it is not withdrawn as if it were a compulsory deposit, and the provisions of this Act shall, so far as may be, apply in relation to such amount or interest thereon as they apply in relation to a compulsory deposit or as the case may be, interest on such deposit.]

1. Section 8 renumbered as Sub-section(1) thereof and after Sub-section (1) so renumbered, Sub-section (2) inserted by Financial (No. 1) Act (44 of 1980),section 53(c) w.e.f. 1-4-1981.

2. Substituted for the words "provided that" and proviso inserted by the Compulsory Deposit Scheme (Income-tax Payers) Amendment Act (25 of 1985),section2 w.e.f. 30-3-1985.

3. Inserted by the Finance Act (16 of 1981),section 53(c) w.e.f. 1-6-1981.

4. Substituted for Clauses (i) and (ii) by the Finance Act (11 of 1983),section 59(d) w.e.f. 1-6-1983.


Section 9. Intimation regarding compulsory deposit

Every depositor shall send to the Income-tax Officer, along with the return of income for the assessment year for which he is liable to make a compulsory deposit, proof of the fact of such deposit having been made.

Section 10. Penalty for failure to make compulsory deposit

(1) If, in relation to an assessment year referred to in Sub-section (1) of Section 3, any person who is liable to make a compulsory deposit [being a person falling under Clause (a) or Clause (b) of Sub-section (3) of section 4]--

(a)1[has, without reasonable cause, failed to make] the compulsory deposit within the time allowed under section 5, or

(b) has made the compulsory deposit within such time but the deposit so made falls short of2[the requisite amount and there is no reasonable cause for making such short payment], the3[Income-tax Officer may], by order in writing, direct that such person shall pay, by way of penalty, a sum--

(i) which, in the case referred to in Clause (a), shall be equal to twenty-five per cent of the compulsory deposit which he is liable to make; and

(ii) which, in the case referred to in Clause (b), shall be equal to twenty-five per cent of the amount by which the compulsory deposit made by him falls short of the requisite amount.

(2) If, in relation to an assessment year referred to in Sub-section (1) of Section 3, the correct income of a person falling under Clause (c) of Sub-section (3) of Section 4, exceeds fifteen thousand rupees and such person,--

(a)1[has, without reasonable cause, failed to make] the compulsory deposit within the time allowed under Section 5, or

(b) has made the compulsory deposit within such time on the basis of his own estimate but the deposit so made4[falls short of] seventy-five per cent of the compulsory deposit which he would have been liable to make on the basis of2[his correct income and there is no reasonable cause for making such short payment], the3[Income-tax Officer may], by order in writing direct that such person shall pay by way of penalty a sum--

(i) which, in the case referred to in Clause (a) shall be equal to twenty-five percent of the compulsory deposit calculated with reference to his correct income; and

(ii) which, in the case referred to in Clause (b), shall be equal to twenty-five percent of the amount by which the compulsory deposit made by him falls short of the compulsory deposit calculated with reference to his correct income.

Explanation.-- In this sub-section, "correct income" has the meaning assigned to it in Sub-section (2) of Section 6.

(3) No order imposing a penalty under this section shall be made against any person unless such person has been heard or has been given a reasonable opportunity of being heard.

1. Substituted for the words "has failed to make" by the Finance Act (44 of 1980),section53 w.e.f. 1-4-1975.

2. Substituted for the words "the requisite amount "in Clause (b) of Sub-section (1) and the words "his correct income"in Clause, (b) of Sub-section (2), by the Finance Act (44 of 1980),section53 w.e.f. 1-4-1975.

3. Substituted for the words "Income-tax Officer shall", by the Finance Act (44 of 1980),section53 w.e.f. 1-4-1975.

4. Substituted for the words "is less than", by the Finance Act (44 of 1980),section53 w.e.f. 1-4-1 975.


Section 11. Authorities

(1) Every Director of Inspection, Commissioner of Income-tax,1[Commissioner of Income-tax (Appeals)], Appellate Assistant Commissioner of Income-tax, Inspecting Assistant Commissioner of Income-tax, Income-tax Officer and Inspector of Income-tax, shall have the like powers and perform the like functions under this Act as he has and performs under the Income-tax Act and the exercise of his powers and the performance of his functions, his jurisdiction under this Act shall be the same as he has under the Income-tax Act and for this purpose compulsory deposit under this Act shall be deemed to be tax chargeable under that Act.

(2) All officers and persons employed in the execution of this Act shall observe and follow the orders, instructions and directions of the Board :

Provided that no such orders, instructions or directions shall be issued--

(a) so as to require any authority referred to in Sub-section (1) to dispose of a particular case in a particular manner; or

(b) so as to interfere with the discretion of the2[Commissioner (Appeals) or the Appellate Assistant Commissioner] in the exercise of his appellate functions.

(3) Every Income-tax Officer employed in the execution of this Act shall observe and follow the orders, instructions and directions, issued for his guidance by the Director of Inspection or by the Commissioner or by the Inspecting Assistant Commissioner within whose jurisdiction he performs his functions.

1. Substituled for the words "Additional Commissioner of Income-tax" by the Finance (No. 2) Act (44 of 1980),section 53 w.e.f. 10-7-1978.

2. Substituted for the words "Appellate Assistant Commissioner", by the Finance (No. 2) Act (44 of 1980),section 53 w.e.f. 10-7-1978.


Section 12. Appeals and revisions

1[(1)2[Subject to the provisions of Sub-section (2), any] aggrieved by any order of the Income-tax Officer imposing a penalty under Section 10, may appeal to the Appellate Assistant Commissioner and the provisions of the Income-tax Act relating to appeals, reference and revision shall so far as may be, apply in relation to such order as they apply in relation to an order of the Income-tax Officer imposing a penalty under Section 221 of that Act.

1[(2) Where an order referred to in Sub-section (1) is made by an Inspecting Assistant Commissioner in exercise of the powers or functions conferred on or assigned to him under Section 125 or Section 125 A of the Income-tax Act, the provisions of that sub-section shall have effect as if for the words "Appellate Assistant Commissioner" the words and brackets "Commissioner (Appeals)" were substituted.]

1. Section 12 renumbered as Sub-section (1) and after Sub-section (1) so renumbered, Sub-section (2) inserted by the Finance (No. 2) Act (44 of 1980),section 53 w.e.f. 10-7-1978.

2. Substituted for the words "Any depositor", by the Finance (No. 2) Act (44 of 1980),section 53 w.e.f. 10-7-1978.


Section 12A. Special review in certain cases

1[12A. Special review in certain cases.--

(1) Where any order imposing a penalty under Section 10 made by the Income-tax Officer before the date on which the Finance (No. 2) Act, 1980, received the assent of the President such order (being hereafter in this section referred to as pre-amendment penalty order) has not been made the subject-matter of any subsequent proceeding by way of appeal or revision under this Act, then, the depositor aggrieved by such order may, if he considers that no such penalty would have been levied if the amendments made to Section 10 by the Finance (No. 2) Act, 1980, had been in force on the date of passing of such order, make an application to the Income-tax Officer for a special review.

(2) Where a pre-amendment penalty order has been made the subject-matter of any subsequent proceeding by way of an appeal or revision under this Act, the depositor aggrieved by the order passed in any such proceeding or, as the case may be, the last of such proceedings may, if he considers that no such penalty would have been levied if the amendments made to Section 10 of the Finance (No. 2) Act, 1980, had been in force on the date of passing of the pre-amendment penalty order, make an application to the authority which passed the order in such proceeding or, as the case may be, the last of such proceedings for a special review.

(3) The application referred to in Sub-section (1) or Sub-section (2) shall be presented before the 1st day of January, 1981 :

Provided that the Income-tax Officer or the other authority to whom an application for special review is made may admit such application after the said date if he or it is satisfied that the depositor had sufficient cause for not presenting it before the said date.

(4) The Income-tax Officer or other authority to whom the application for special review is made under Sub-section (1) or Sub-section (2), may make such enquiry or cause such enquiry to be made and, subject to the provisions of this Act, may pass such order as he or it thinks fit.

(5) The provisions of Section 12 shall, so far as may be, apply in relation to an order passed under Sub-section (4) as they apply in relation to a pre-amendment penalty order or, as the case may be, an order passed by any other authority under that section.

(6) The special review under this section shall be in addition to and not in derogation of any other remedy which an aggrieved depositor may have under this Act.

Explanation.--For the purposes of this section, "authority" includes the Appellate Tribunal.]

1. Inserted by the Finance (No. 2) Act (44 of 1980),section 53 w.e.f.1-9-1980.