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FINANCE (NO.2) ACT, 1991

Ministry of Law and Justice

Act nº 49 of 1991


  • Chapter I
  • Chapter II
  • Chapter III
  • Chapter V
  • Schedules
  • Act nº 49 of 1991

Preamble

THE FINANCE (NO.2) ACT, 1991

[Act, No. 49 of 1991]

[27th September, 1991]

PREAMBLE

An Act to give effect tot the financial proposals of the Central Government for the financial year 1991-92.

BE it enacted by Parliament in the Forty-second Year of the Republic of India as follows:

Chapter I

Section 1. Short title and commencement

(1) This Act may be called the Finance (No. 2) Act, 1991.

(2) Save as otherwise provided in this Act, Sections 2 to 119 and 126 (except Sections 45, 47, 62, 66, 67, 69, 75, 76, 78, 79, 87, 88 and 1120) shall be deemed to have come into force on the 1st day of April, 1991.

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, 1991, income-tax shall be charged at the rates specified in Part I of the First Schedule and such tax as reduced by the rebate of income-tax calculated under Chapter VIII-S of the Income-tax Act, 1961 (hereinafter referred to as the Income-tax Act) shall be increased,--

(a) in the cases to which Paragraphs A, B, C and D of that Part apply, by a surcharge for purposes of the Union; and

(b) in the cases to which Paragraph E of that Part applies, by a surcharge, calculated in each case in the manner provided therein:--

(2) In the cases to which Sub-Paragraph I or Sub-Paragraph II of Paragraph A of Part I of the First Schedule applies, where the assessee has, in the previous year, any net agricultural income exceeding six hundred rupees in addition to total income, and the total income exceeds --

(i) in a case to which the said Sub-Paragraph I applies, twenty-two thousand rupees, and

(ii) in a case to which the said Sub-Paragraph II applies, twelve thousand rupees,

then,-

(a) the net agricultural income shall be taken into account, in the manner provided in clause (b) (that is to say, as if the net agricultural income were comprised in the total income after,--

(i) in a case to which the said Sub-Paragraph I applies, the first, twenty-two thousand rupees, and

(ii) in a case to which the said Sub-Paragraph II applies, the first twelve thousand rupees, of the total income but without being liable to tax], only for the purpose of charging income-tax in respect of the total income; and

(b) the income-tax chargeable shall be calculated as follows:--

(i) the total income and the net agricultural income shall be aggregated and the amount of income-tax shall be determined in respect of the aggregate income at the rates specified in 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,--

(A) in a case to which the said Sub-Paragraph I applies, by a sum of twenty-two thousand rupees; and

(B) in a case to which the said Sub-Paragraph II applies, by a sum of twelve thousand rupees,

and the amount of income-tax shall be determined in respect of the net agricultural income as so increased at the rates specified in 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 of income-tax determined in accordance with sub-clause (i) shall be reduced by the amount of income-tax determined in accordance with sub-clause (ii) and the sum so arrived at shall be the income-tax in respect of the total income:

Provided that the amount of income-tax so arrived at, as reduced by the rebate of income-tax calculated under Chapter VIII-A of the Income-tax Act, shall, in the case of every person having a total income exceeding seventy-five thousand rupees, be increased by a surcharge for purposes of the Union calculated at the rate of twelve per cent. of such income-tax and the sum so arrived at shall be the income-tax in respect of the total income.

(3) In cases to which the provisions of Chapter XII or Chapter XII-A or sub-section (1A) of Section 161 or Section 164 or Section 164A or Section 167B of the Income-tax Act apply, 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:

Provided that in respect of any income chargeable to tax under section 115B or section 115BB of the Income-tax Act,--

(a) the income-tax computed under Section 115B shall be increased by a surcharge calculated at the rate of fifteen per cent of such income-tax; and

(b) the income-tax computed under Section 115BB shall be increased,--

(i) in the case of a person other than a company, being a resident in India, by a surcharge for purposes of the Union calculated at the rate of twelve per cent of such income-tax; and

(ii) in the case of a domestic company, by a surcharge calculated at the rate of fifteen per cent of such income-tax.

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

(a) the cases to which the provisions of sub-item (a) of item I of that Part apply, by a surcharge for purposes of the Union; and

(b) in the cases to which the provisions of sub-item (a) of Item 2 of that Part apply, by a surcharge,

calculated n each case in the manner provided therein.

(5) In cases in which tax has to be deducted under sections 194C, 194EE, 194G and 194H of the Income-tax Act, the deduction shall be made at the rates specified in those sections and shall be increased by a surcharge for purposes of the Union calculated at the rate of twelve per cent. of such deduction;

Provided that in the case of an assessee, being a domestic company, the provisions of this sub-section shall have effect, as if for the words "twelve per cent", the words "fifteen per cent", had been substituted.

(6) In cases in which tax has to be collected under section 206C of the Income-tax Act, the collection shall be made at the rate specified in that section and shall be increased by a surcharge for purposes of the Union calculated at the rate of twelve per cent. of such collection;

Provided that in the case of a buyer, being a domestic company, the provisions of this sub-section shall have effect, as if for the words "twelve per cent.", the words "fifteen per cent." had been substituted.

(7) Subject to the provisions of sub-section (8), 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 in which the "advance tax" payable under 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 and such tax as reduced by the rebate of income-tax calculated under Chapter VIII-A of the said Act shall be increased,--

(a) in the cases to which Paragraphs A, B, C and D of that Part apply, by a surcharge for purposes of the Union; and

(b) in the cases to which Paragraph E of that Part applies, by a surcharge,

calculated in each case in the manner provided therein:

Provided that in cases to which the provisions of Chapter XII or Chapter XII-A or sub-section (1A) of section 161 or Section 164 or Section 164-A or Section 167-B of the Income-tax Act apply, "advance tax" shall be computed with reference to the rates imposed by this sub-section or the rates as specified in that Chapter or section, as the case may be:

Provided further that in respect of any income chargeable to tax under section 115B of the Income-tax Act, the "advance tax" computed under the first proviso shall be increased by a surcharge for purposes of the Union calculated at the rate of fifteen per cent of such "advance tax".

(8) 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 exceeding six hundred rupees, in addition to total income and the total income exceeds,--

(i) in a case to which the said Sub-Paragraph I applies, twenty-two thousand rupees, and

(ii) in a case to which the said Sub-Paragraph II applies, twelve 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)l [that is to say, as if the net agricultural income were comprised in the total income after,--

(i) in a case to which the said Sub-Paragraph I applies, the first twenty-two thousand rupees, and

(ii) in a case to which the said Sub-Paragraph II applies, the first twelve 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,--

(A) in a case to which the said Sub-Paragraph I applies, by a sum of twenty-two thousand rupees; and

(B) in a case to which the said Sub-Paragraph II applies, by a sum of twelve thousand rupees,

and the amount of income-tax or "advance tax" shall be determined in respect of the net agricultural income as so increased at the rates specified in the said Sub-Paragraph I or, as the case may be, the said Sub-Paragraph II as if the net agricultural income as so increased were the total income;

(iii) the amount of income-tax or "advance tax" determined in accordance with sub-clause (i) shall be reduced by the amount of income-tax or, as the case may be, "advance tax" determined in accordance with sub-clause (ii) and the sum so arrived at shall be the income-tax or, as the case may be, "advance tax" in respect of the total income;

Provided that the amount of income-tax or "advance tax" so arrived at, as reduced by the rebate of income-tax calculated under Chapter VIII-A of the said Act, shall, in the case of every person having a total income exceeding seventy-five thousand rupees, be increased by a surcharge of r purposes of the Union calculated at the rate of twelve per cent. of such income-tax or, as the case may be, "advance tax" and the sum so arrived at shall be the income-tax or, as the case may be, "advance tax" in respect of the total income.

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

(a) "company in which the public are substantially interested" means a company within the meaning of clause (18) of section 2 of the Income-tax Act, and includes a subsidiary of such company if the whole of the share capital of such subsidiary company has been held by the parent company or by its nominees throughout the previous year;

(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, 1991, 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 the Act;

(c) "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);

(d) "investment company" means a company whose gross total income (as defined in section 80B of the Income-tax Act) consists mainly of income which is chargeable under the heads "Income from house property", "Capital gains" and "Income from other sources", or of income by way of interest on securities;

(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 ins payable by the State Government;

(g) "trading company" means a company whose business consists mainly in dealing in goods or merchandise manufactured, produced or processed by a person other than that company and whose income attributable to such business included in its gross total income [as defined in section 80B of the Income-tax Act) is not less than fifty one per cent. of the amount of such gross total income;

(h) all other words and expressions used in this section or in 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 to 72. Income-Tax

INCOME-TAX

Ss. 3 to 72.--

Of this Act amended the following sections of the Income-tax Act, which are being incorporated in the Principal Act and hence not printed hereat. Sections affected are: 2; 9; 10; 11; 12A; 13; 17; 29; 32; 35; 35AC (ins.); 36; 43D (ins.); 44D; 45; 47; 48; 49; 54H (ins.); 57; 71(subst.); 74; 80CCA; 80G; 80GGA; 80HHC; 80HHD; 80HHE (ins.); 80I; 80IA (ins.); 80L; 80O; 80Q; (ins.); 80QQA; 80U(subst.); 88; 90; 115A; 115AB (ins.); 119; 132, 139; 140A; 153; 155; 161; 193; 194; 194A; 194BB; 194EE (ins.); 194G and 194H (ins.); 195; 196A; 196B (ins.); 197A; Ss. 198 to 200, 202, 203; 203A abd 205; 204; 206; 234C; 244A; 245BA; 245D; 254; 272A; 273A; 279; Twelfth Sec. (ins.); section 72, made consequential amendments in certain sections.

Section 73. Amendment of section 5

In section 5 of the Wealth-tax Act, 1957 (hereinafter referred to as the Wealth-tax Act), in sub-section (1),--

(a) for clause (xviia), the following clause shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 1984, namely:--

"(xviia) the amount standing to the credit of --

(a) an individual; or

(b) a Hindu undivided family; or

(c) an association of persons or body of individuals consisting, in either case, only of husband and wife governed by the system of community of property in force in the State of Goa and the union territories of Dadra and Nagar Haveli and Daman and Diu,

in any provident fund set up by the Central Government and notified by it in this behalf in the Official Gazette";

(b) in clause (xxvb), for the words "the National Savings Scheme referred to in", the words, brackets and figures "any scheme referred to in clause (i) of sub-section (1) of" shall be substituted with effect from the 1st day of October, 1991.

Section 74. Amendment of section 16

In section 16 of the Wealth-tax Act, with effect from the 1st day of October, 1991,--

(a) in sub-section (2), for the proviso, the following proviso shall be substituted, namely:--

"Provided that no notice under this sub-section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished.";

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

"Explanation.- an intimation sent to the assessee under sub-section (1) or sub-section (1B) shall be deemed to be an order for the purposes of sub-section (1) of section 25".

Section 75. Amendment of section 17A

In section 17A of the Wealth-tax Act, in Explanation 1, the following proviso shall be inserted at the end, namely:--

"Provided that where immediately after the exclusion of the aforesaid time or period, the, the period of limitation referred to in sub-sections (1), (2) and (3) available to the Assessing Officer for making an order of assessment or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly".

Section 76. Amendment of section 18B

In section 18B of the Wealth-tax Act, in sub-section (3), the following proviso shall be inserted at the end, namely:--

"Provided that where an order has been made in favour of any person under sub-section (1) on or before the 24th day of July, 1991, such person shall be entitled to further relief only once in relation to other assessment year or years if he makes an application to the wealth-tax authority referred to in sub-section (4) at any time before the 1st day of April, 1992".

Section 77. Amendment of section 22BA

In section 22BA of the Wealth-tax Act, with effect from the 1st day of October, 1991;

(a) after sub-section (5), the following sub-section shall be inserted, namely:--

"(5A) Notwithstanding anything contained in the foregoing provisions of this section, the Chairman may, for the disposal of any particular case, constitute a Special Bench consisting of more than three Members".

(b) in sub-section (6), the following shall be inserted at the end, namely:-

"and the Special Bench shall sit at a place to be fixed by the Chairman".

Section 78. Amendment of section 22D

In section 22D of the Wealth-tax Act,--

(a) in sub-section (1), after the first proviso, the following proviso shall be inserted, namely:--

"Provided further that the Commissioner shall furnish the report within a period of one hundred and twenty days of the receipt of communication from the Settlement Commission in case of all applications made under section 22C on or after the date on which the Finance (No.2) Act, 1991 receives the assent of the President and if the Commissioner fails to furnish the report within the said period, the Settlement Commission may make the order without such report".

(b) sub-section (1A) shall be omitted.

Section 79. Amendment of section 27

In section 27 of the Wealth-tax Act, in sub-section (1), after the word and figures "section 26", the words, brackets, letter and figures "or clause (e) of sub-section (1) of section 35" shall be inserted.

Section 80. Amendment of section 34A

In section 34A of the Wealth-tax Act, in sub-section (4B), in clause (a), the words "and a half" shall be omitted with effect from the 1st day of October, 1991.