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(""  "                j\;                                        ,                      ,10,/  , ',                )j:l'(' • j 3jljb                                   i                                        i  the companies (profits) surtax bill, 1904short title and extent deftnlttonl, a blll to impose ii special ~ tm the profits of certain companies bit it enacte8 by parliament in the fifteenth year of the republic of india as follows:-' i' (1) this act may be called the companies (profits) surtax act, 1964 5 (2) it extends to the whole of india z in this act, unless the context otherwise requires,-(l) "assessee" means a person by whom surtax or any other sum of money is payable under this act and includes every person in respect of whom any proceeding under this act has 10 been taken for the assessment of his chargeable profits or of the amount of refund due to him or of the chargeable profits of any other person in respect of which he is assessable or of the amount of refund due to such other person; (2) "assessment" includes re-assessment; 15 (3) "assessment year" means the period of twelve months commencing on the 1st day of april, every year; (4) "board" means the central board of direct taxes of 1963 constituted under the central boardl of revenue act, 1963; (5) "chargeable profits" means the total income of an of 1981 20 assessee computed under the income-tax act, 1961 for any previous year or years, as the case may be, and adjusted in accordance with the provisions at the first schedule; (6) "income-tax act" means the income-tax act, 1961; (7) "prescribed" means prescribed by rules made under this 25 act; (8) "statutory deduction" means an amount equal to ten per cent of the capital of the company as computed in accordance with the provisions of the second schedule, or an amount of two hundred thousand rupees, whichever is greater: 2237 ls-l provided that where the previous year is longer or shorter than a period of twelve months, the aforesaid amount of ten per cent or, as the case may be, of two hundred thousand rupees shall be increased or decreased proportionately: provided further that where a company has cillferent previous 5 , years in respect of its income, profits and gains, the aforesaid increase or decrease, as the case may be, shan be calculated with retej:ellce·to_ the length of the previous year of the longest duration; and (9) all other words and expressions' used herein but not 10 defined and defined' in the inoointi-tax act shan have the meanings respectively assigned to them in that act tax authorities 3 (1) every director of inspectien, commissioner of income-tax, appellate assistant commissioner of income--tax, inspecting alaistant commissioner of 'inc011letax and income-tax ofilcer shall bave the 15 like powers and perform the like functions, under tllis act -s ~ ~, and performs under the in~ome-tax act, and -for the exereiae of hil powers and the performance of his functions, his jurisdiction under this act will be the same as that he has under the income-tax a,ct (2) all officers and persons employed in the execution of this act 20 shall observe and follow the orders, iilljtructions and directions of the, board: provided 'that no such orders, instructions or directions shall be given'so as to interfere with the discretiml: of-the appellate assistant commiss~9ner in the ex~rcise of his appellate functions 25 (3) every income-tax officer, employed ia the exec1jtion of this act, shall observe and follow the orders, instructions and, directions issu~d for his guidance by the di!ector of inspection or by the commissioner or by the inspecting assistant commissioner' undqr whose jwisdiction he performs his functions ", -30 char,e of tax 4 subject to the provisions contained in this act, there shall be charged on every company for every assessment year commencing on and from the first day of april, 1964, a tax (in this act referred to as the surtax) in respect of so much of its chargeable profits of the previous year or previous years, as the case may be, as exceed the 35 statutory deductibn, at the rate or rates speci1\ed iji the third schedule return ot chargeable profits 5 (1) in the case of every company whose chargeable profits assessable under this act exceeded during the previous year tae amount of statutory deduction, its principal officer, or where in the 40 case of 8 non-resident company any person has been treated as its agent under section 163 of the income-tax act, such person, shall furnish a return of the chargeable profits of the company during the previous year in the prescribed form and verified in the prescribed manner and setting forth such othier particulars as may be prescribed, before the 30th day of september of the assessment year: 5 provided that on an application made in this behalf, the incometax ofticer may, in his discretion, extend the date for the furnishing of the return (2) in the case of any company which in the income-tax officer's opinion is assessable under this act, the income-tax officer may, 10 before the end of the relevant assessment year, serve a notice upon its principal officer, or where in the case of a non-resident company any person has been treated as its agent under section 163 of the income-tax act, upon such person, requiring him to furnish within thirty days from the date of service of the notice a return of the is chargeable profits of the company during the previous year in the prescribed form and verified in the prescribed manner and settm, forth such other particulars as may be prescribed : provided that on an application made 'in this behalf, the incometax officer may, in his discretion, extend the date for the furnishing 20 of the return (3) any assessee who has not furnished a return during the time allowed under sub-section (1) or sub-section (2), or having furnished a return under sub-section (1) or sub-section (2) discovers any omission or wrong statement therein, may furnish a return or a 25 revised return, as the case may be, at any time before the assessment is made aaie  ment 6 (1) for the purposes·of making an assessment under this act, the income-tax officer may serve on any person who has furnished a return under sub-section (1) of section 5 or upon whom a potice has 30 been served under sub-section (2) of section 5 (whether a return has been furnished or not) a notice requiring him ona date therein to be specifted, to produce or cause to be produced such accounts or documents or evidence as the income-tax officer may require for the purposes of this act and may from time to time serve further 35 notices requiring the production of such further accounts or documents or other evidence as he may require (2) the income-tax officer, after considering such accounts, documents or evidence, if any, as he has obtained under subsection (1) and after taking into account any relevant material which -40 he has gathered, shall, by an order in writing, assess the chargeable 2237(b) ls-2 profits and the amount of the surtax payable on the basis of such assessment provist_al ailed-ment 7 (1) the income-tax officer, before proceeding to make an assessment under section 6 (in this section referred to as the regular asaessment) may, at any time after the expiry of the period allowed s 1ldder sub-section (1) or sub-section (2) of section 5 for the furnishing of the return and whether the return has or has not been furnished, proceed to make in a summary manner a provisional aaseasment of the chargeable profits and the amount of the surtax payable thereon 10 (2) before making such provisional assessment, the income-tax oftlcer shall give notice in the prescribed form to the person on whom the provisional assessment is to be made of his intention to do so, and shall with the notice forward a statement of the amount of the proposed assessment, and the said person shall be entitled to is deliver to the income-tax officer at any time within fourteen days of the service of the said notice a statement of his objections, if any, to the amount of the proposed assessment (3) on expiry of the said fourteen days from the date of servke of the notice referred to in sub-section (2), or earlier, if the assessee 20 agrees to the proposed provisional assessment, the income-tax officer may, after taking into account the objections, if any made under sub-section (2) make a provisional assessment, and shall furnish a copy of the order of the assessment to the assessee: provided that assent to the amount of the provisional assessment, 2s or failure to make obj,ection to it, shall in no way prejudice the assessee in relation to the regular assessment (4) there shall be no right of appeal against a provisional 'asses&-ment made under this section (5) after a regular assessment has been mede any amount paid 30 or deemed to have been paid towards the provisional assessment' made under this section shall be deemed to have been paid towards the regular assessment; end where the amount paid or deemed to have been paid towards the provisional assessment exceeds the amount payable under the regular assessment, the excess shall be 3' refunded to the assessee 8 if-(a) the income-tax officer has reason to believe that by reason of the omission or failure on the part of the assessee to make a return under section 5 for any assessment year or 'to 40 disclose fully and truly all material facts necessary for nis assessment for any assessment year, chargeable profits for that year have escaped assessment or have been under-assessed or assessed at too iowa rate or have been made the subject of 5 excessive relief under this act, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the income-tax officer has in consequence of information in his possession reason to believe that chargeable profits assessable for 10 any assessment year have escaped assessment or have been under-assessed or assessed at too low a rate or have been the subject of excessive relief under this act, he may, in cases falling under clause (a) at any time, and in cases falling under olauie (b) at any time within four years of the end of 15 that assessment year, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under section 5, and may proceed to assess or re-assess the amount chargeable to surtax, and the provisions of this act shall, so far as may be, apply as if the notice were a notice illsued under that section 20 9 if the income-tax officer, in the course of any proceedings penalu under this act, is satisfied that any person has, without reasonable cause, failed to furnish the return required under section 5, or to produce or cause to be produced the accounts, documents or other evidence required by the income-tax officer under sub-section (1) 2s of section 6, or has concealed the particulars of the chargeable profits or has furnished inaccurate particulars of such profits, he may direct that such person shall pay, by way of penalty, in addition to the amount of surtax payable, a sum not exceeding-(a) where the person has failed to furnish the return required 30 under section 5, the amount of surtax payable; (b) in any other case, the amount of surtax which would have been avoided if the return made had been accepted as correct: provided that the income-tax officer shall not impose any penalty 35 under this section without the previous authority of the inspecting assistant commissioner 10 no order imposing a penalty under section 9 shall be made gr::;-unless the assessee has been given a reasonable opportunity of being ot beinc beard heud appeals to the appellate assiatant cdmrnlaai  11 (1) any person objecting to the amount of surtax for which he is liable as assessed by the income-tax officer or denying his liability to be assessed under this act, or objecting to any penalty or fine imposed by the i~ome-tax officer, or to the amount allowed by the income-tax officer by way of any relief under any provisions 5 of this act, or to any refusal by the income-tax oftlcer to grant relief or to an order of rectification or amendment having the effect of enhancing the assessment or reducing the tefund, or to an order refusing to allow the claim made by the assessee for a rectification under section 13 or amendment under section 14 may appeal to the 10 appellate assistant commissioner (2) every appeal shall be in the prescribed form and shall be verified in the prescribed manner (3) an appeal shall be presented within thirty days of the following date, that is to say-15 (a) where the appeal relates to assessment or penalty or fine, the date of service of the notice of demand relating to the assessment or penalty or fine, or (b) in any other case, the date on which the intimation of the order sought to be appealed against is served: 20 provided that the appellate assistant commissioner may admit an appeal after the expiration of the said period if he is satisfied that the appellant had sufficient cause for not presenting it within that period (4) the appellate assistant commissioner shall hear and deter- 25 liline the appeal and, subject to the provisions of this act, pass such orders as he thinks tit and such orders may include an order enhaneidr the assessment or penalty: provided that an order enhancing the assessment or penalty thall not be made unless the person affected thereby has been given a 30 reasonable opportunity of showing cause against such enhancement (5) the procedure to be adopted in the hearing and determination of the appeals shall, with any necessary modiftcation, be in aecordabce with the procedure applicable in relation to income-tax appeals to appellete tribw1bl 12 (1) any assessee aggrieved by an order passed by a commij 35 sioner under section 16, or an order pused by an appellate assistant commissioner· under any provision of this act, may appeal to the appellate tribunal 88ainst such order (2) the commissioner may, if he ebjects to any order passed by the appellate assistant commissioner under any provision of this act, direct the income-tax officer to appeal to the appellate tribunal against the order s (3) every appeal under sub-section (1) or sub-section (2) shall be filed within sixty days of the date on which the order sought to be appealed against is communicated to the assessee or to the commissioner, as the case may be (4) the income-tax officer or the assessee, as the case may be, il) on receipt of notice that an appeal against the order of the appellate assistant commissioner has been preferred under sub-section (1) or sub-section (2) by the other party may, notwithstanding that he may not have appealed against such order or any part thereof, within thirty days of the receipt of the notice, file a memorandum of cross-15 objections, verified in the prescribed manner, against any part of the order of the appellate assistant commissioner, and such memorandum shall be disposed of by the appellate tribunal as if it were an appeal presented within the time specified in sub-section (3) (5) the appellate tribunal may admit an appeal or permit the 20 filing of a memorandum of cross-objections after the expiry of the relevant period referred to in sub-section (3) or sub-section (4), if it is satisfied that there was sufficient cause for not presenting it within that period (6) an appeal to the appellate tribunal shall be in the prescribed 25 form and shall be verified in the prescribed manner and, shall, except in the case of an appeal referred to in sub-section (2) or a memorandum of cross-objections referred to in sub-section (4), be accompanied by a fee of one hundr,ed rupees (7) subject to the provisions of , this act, in hearing and making 30 an order on any appeal under this section, the appellate tribunal shall exercise the same powers and follow the same procedure as it exercises and follows in hearing and making an order on any appeal under the income-tax act recti fication of mist,akes 13 (1) with a view to rectifying any mistake apparent from the 35 record, the commissioner, the income-tax officer, the appellate assistant commissiqder and the appellate tribunal may, of his, or its, own motion or on an application by the assessee in this behalf, amend any order passed by him or it in any proceeding under this act within four years of the date on which such order was passed (2) an amendment which has the effect of enhaddng the asaessment or reducing a refund or otherwise increasing the liability of the assessee shall not be made under this section unlms the authority concerned has given notice to the assessee of its intention 80 to do and has anowed the assessee a reasonable opportunity of being heard 5 (3) where an amendment is made under this section, the order shall be passed in writing by the authority concerned (4) subject to the other provisions of this act, where any such atnehdment has the effect of r«lucing the assessment, the income-tax ofllcer shall make any refund which may be due to such assessee 10 (5) where any such amendment has the effect of enhaneing the assessment or reducing the refund already made, the income-tax oftlcer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable other amendments 14 where as a result of any order made under section 154 or 15 section 155 of the income-tax act, it is necessary to recompute the chargeable profits det9l1ilined in any 88ie8b!ilent under this act, the income-tax offtcer may proceed to recompute the chargeable profit&, and determine the surtax payable tjr refundable on the basis of such recomputation and make the necessary amendment and the provisions 20 of section 13 shall, so far as may be, apply thereto, the period of four years specified in sub-section (1) of that section being reckoned from the date of the order passed under the af9resaid sections of the income-tax act 15 notwithstanding anything contained in clause 0) of aeetion 25 109 of the income-tax act, in computing the distributable income of a company for the pul'polres of chapter xi~d of that act, the surtax payable by the company for any assessment year shall be deductible froin the total income of the company assessable for that as!essment year 30 surtax deductible in computin~ distributable inct:'me tmder lncome-tax act revision of orders prejudicial to revenue 16 (1) the commissioner may call for and examine the record of any proceeding under this act, and if he considers that any order passed therein by the income-tax officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or 35 causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an ornpr enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment (2) no erder shall be made under sub-section (1)-(a) to revise an order of re-aase88l11ent made under section 8, or (b) after the expiry of two years from the date of the order 5 sought to be revised (3) notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the cue of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of 10 the appellate tribunal, the high court or the supreme court ezplananon-in computing the period of limitation for the purposes of sub-section (2), any period during which any proceedmg under this section is stayed by an order or injunction of any court shall be excluded revision of orders by commissioner is 1'7 (1) the commissioner may, either of his own motion or on an application by the assesaee for revision, call for the record of any proceeding under this act which has been taken by an income-tax officer or appellate assistant commissioner subordinate to him and may make such inquiry or cause such inquiry to be made and, 20 subject to the provisions of this act, may pass such order thereon, not being an order prejudicial to the assessee, as he thinks fit (2) the commissioner shall not of his own motion revise any order under this section if the order has been made more than one year previously (3) in the case of an application for revision under this section by tlw u&eibee, the application shall be made within one year from the date on which the order in question was communicated to him or the date on which he otherwise came to know of it, whichever ia earlier: 30 provided that the commissioner may, if he is satisfied that the assessee was prevented by sufficient cause from making the application within that period, admit an application made after the expiry of that period (4) the commissioner shall not revise any order under this 35 hctiod in the fouowini cases-(a) where an appeal against the order lies to the appellatl;' assistant commissioner or to the appellate tribunal but has n,,· been made and the time within which such appeal may be made has not expired, or, in the case of an appeal to the appellate 40 tribunal the assessee has not waived his right of appeal; or 2237 ls-2 (b) where the order is pending on an appeal before the appellate assistant commissioner; or (c) where the order has been made the subject of an appeal to the appellate tribunal (5) every application by an assessee for revision under this s section shall be accompanied by a' fee of twenty-five ru~s explanation 1-an order by the commissioner declining to inter£ere shall, for the purposes of this seetion, be deemed not to be an order prejudicial to the assessee explanation 2-for the purposes of this section, the appellate 10 assistant commissioner shall be deemed to be an authority subordinate to the commissioner ,application of provisions of income-tax act 18 the provisions of the following sections and schedules of the income-tax act and the income-tax (certificate proceedings) rules, 1962, as in force from time to time, shall apply with such modifica- is tions, if any, as may be prescribed, as if the said provisions and the rules referred to surtax instead of to income-tax and super-tax:-2 (44), 131 to 136 (both inclusive), 138, 140, 156, 160, 161, 162, 163, 166, 167, 170, 173, 175,176,178, 179,220 to 229 (both inclusive), 231,232,233,237 to 242 (both inclusive), 244, 245, 254 to 262 (both 20 inclusive), 265, 266, 268, 269, 281, 282, 284, 287 to 293 (both inclusive), the second schedule and the third schedule: provided that references in the said provisions and the rules to the "assessee" shall be construed as references to an assessee as defined in this act 2s 19 (1) notwithstanding anything contained in the income-t&-,: act, all information contained in any statement or return made or furnished under the provisions of that act or obtained or collected for the purposes of that act may be used for the purposes of this act incf'me-tax papers to be available for the purposes ot this act (2) all information contained in any statement or return made 30 or furnished under the provisions of this act or obtained or collected for the purposes of this act may be used for the purposes of the income-tax act | failure    ||------------|| deliver    || returns,   || etc       |20 if any person fails without reasonable cause to furnish in due time any return under sub-section (2) of section 5, or to produce, or cause to be produced, any accounts or documents required to be 3s produced under section 6, he shall be punishable with fine which may extend to five hundred rupees, and with a further fine which may extend to ten rupees for every day during which the default continues falie statements 21 if a person makes in any return furnished under section 5, any statement which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable with simple imprisonment which may extend to six months, or with 5 fine which may extend to one thousand rupees, or with both; abetment ot talse returns, etc 22 if a person makes or induces in any manner another person to make and deliver any account, statement or declaration relating to chargeable profits liable to surtax which is false and which he either knows to be false or does not believe to be true, he shall be 10 punishable with simple imprisonment which may extend to six months, or with fine which may extend to one thousand rupees, or with both 23 (1) a person shall not be proceeded against for an offence under section 20 or section 21 or section 22 or under the indian penal is code except at the instance of the commissioner institution ot proceedin,s and composition ot offed,ees (2) the commissioner may, either before or after the institution of proceedings, compound any offence punishable under section 20 or section 21 or section 22 power to make exemption, etc, in relation to certain union territories 24 if the central government considers it necessary or expedient 20 so to do for avoiding any hardship cir anomaly or removing any difficulty that may arise as a result of the application of this act to the union territories of dadra and nagar haveli, goa, daman and diu and pondicherry, the central government may, by general or special order, make an e~mption, reduction in rate or other 25 modi1icat~on in respect of surtax in favour of any class of assessees or in regard to the whole or any part of the chargeable profits of any class of assessees power to make rules 25 (1) the board may, subj,ect to the control of the central government, by notification in the official gazette, make rules for 30 carrying out the purposes of this act (2) in particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely :-(a) the form in which returns under section 5 may be 3s furnished and the manner in which they may be verified; (b) the form in which notice for making provisional assessment shall be given;  (c) the form in which appeals under section 11 or section 12 may be filed and the manner in which they shall be verified; (d) the procedure to- be fbllowed en applicationa fer rectification of mistakes and applications· for refandsj (e) any other matter which by this act is to be; or may be, prescribed (3) the central government shan cause every rule made under 5 this section to be laid as soon as may be after it ismacie before each house of parliament while it is in ession for a total pei':lod of thirty days, which may be comprised; in one session 01" id two moe_hre sessions, and if, before the expiry of the seaaior ir· w~ it is· 80 laid or the session immediately following, both houbell- agne in 10 making any modification in the rule or both heubes agree that- the rule should not be made, that rule shall thereafter have t«ect cmly in such modified form or be of no effect, as the case may be; 80 however that any such m<xiiftcatioa or aumtfmeat &bau' be without prejudice·to the validity ofoything previously dade under tutnde 15 26 nothing contained in this act shall apply to any company which has no share capital   thb first schedule esee section ~(s)]20  rules for compu'l'ing till: ckajiua8i&· iiiioi'l'hjin computing the chareeable profits of a previous year, the total income computed for that year under the income-tax act shan be idjusted as follows:-1 income, profits and gains and other sums falling within the following ~lauses shan ~ excluded from rch tlltallm:ome, 25 damely:-(i) any income chargeable under thelncom&'tu: act under the head "capital pin,s"; (ii) any compensation or other payment • is: mfernd to in clause (ii) of section 28 of the ibeom-tax alit; 30 (iii) profits and gains of any bmsines of- bfe' insurance; (iv) any income referred to in sub-section (2) of section 41 of the income-tn act; (v) the amount of profits and, gains derives from an industrial undertaking or· hotel, on which udder section 84 35 of the income-tax act incojmitax is, not payable;' '("di)inood'1e :chargeable under the income-t&x act under the hud "lnterest ,on securities" derived from any security ifjf ;the-oentral government issued ,or declared to be incometax free or from any security of a state government issued 5 income-tax free, the income-tax· whereon is payable by the :state govemment; trif)hby'sudl,ln respect of wl1ich a deduction of income-tax is allowed  under the provisions of section 88 of the lmometax act,; 10 (!viti) iincome by way' of ,dividends from an indian 'c8dlpady  ra,comp&ny -which has made the prescribed 'arl'liiljemants for tlhe daalm:athm and payment of dividends within lndia; (i,x) income by way of royalties received from govern-is )fteilt or8 :laaal authority or an,y indian concern; 1(%)'in ttre·oase!of allod1l'esicient company which has not l'ft84e the prescribed 'arnmgements for the declaration and ~t of ,dhddends within india, its income by way of an,y interest or fees for rendering technical services received 20 nom government or a loca1 authority or any indian concern; (o1ii) inthe case ofa banking company-(4) jany sum :which ~g the previous year is 'tramdi:rltid by ,it 110 :a reserve fund under sub-section ,(l-~ l{)fection 17 of theban~companiel act, 1949 or 25 is d~posited by it with the reserve bank of india under sub-clause (ii) of clause (0) of sub-section (2) of section 11 of that act, not exceeding the amount required under the aforesaid provisions to 'be so transferred or deposited, as the case may be, or 30 !(b) ailyawn tl:an&ferred by it durjng the previous ,eflr ,to any ie&erves in india including reserves not shown as such in its published balance-sheet in so far as the sums transferred to such 'reserves'are attributable to income chargeable to tax under the income--tax act 35 and have not been allowed as a deduction in -cumputing its total income under that act and in so far as the aggregate of such sums does not exceed the highest of the aggregate of such sums, -if any, bo "transferred 1taring any 'one 'of 'the three years prior to the ~pmvious year, 40 whichever is higher; (zii) the amount of ady deduction from the income-tax and super-tax chargeable on the total income allowed under the annual finance act in connection with export of any goods or merchandise out of india or the sale by a manufacturer of any articles to any person who exports them out of india 2 the balance of the total income arrived at after making s the exclusions mentioned in rule 1 shall be reduced by-(i) the amount of income-tax and super-tax payable by the company in respect of its total income under the provisions of the income-tax act after making allowance for any relief, rebate or deduction in respect of ijlcome--tax and 10 super-tax to which the company may be entitled under the provisions of the said act or the annual finance act, and after excluding from such amount-(a) the amount of income-tax and super-tax, if any, payable by the company in respect of any income is referred to in clause (i) or clause (ii) or clause (iii) or clause (viii) of rule 1 included in the total income; (b) an amount equal to the amount by which the rebate of super-tax admissible to the company under the provisions of the annual finance act is, under 20 the provisions of the said act, reduced with reference to any amount of dividends distributed by the company during the previous year relevant to the assessment year; (ii) in the case of a company which has been charged to tax in a country outside india on any portion of its income, 25 profits and gains included in its total income as computed under the income-tax act, the tax actually paid in respect of such income, profits and gains in the said country in accordance with the laws in force in that country after  allowance of every relief due under the said laws: 30 provided that the aforesaid reduction shall not be allowed unless the assessee produces evidence of the fact of the payment of the aforesaid tax in that country 3 the net amount of income calculated in accordance with rule 2 shall be increased by the aggregate of-3s (1) the amount of any interest payable by the company in respect of its debentures or moneys referred to in clause (v) of rule 1 of the second schedule for the previous year relevant to the assessment year allowed as a deduction in computing its total income; 40 (ii) any expenditure incurred on account of commission entertainment and advertisement, to the extent such expenditure, in the opinion of the income-tax officer, is excessive having regard to the circumstances of the case : 5 provided that the previous authority of the inspecting assistant commissioner is obtained for holding such  expenditure to be excessive  the second schedule [see section 2 (8) ] 10 ru13s for computing '!'he capi'l'al of a company for '1'h!: purposes of surtax1 subject to the other provisions contained in this schedule, the capital- of a company shall be the aggregate of the amounts, as on the first day of the previous year relevant to the assessment year, of-(i) its paid-up share capital; 15 u of 1922 43 of 1961 20 (ii) its reserves, if any,created under the proviso (b) to ·clause (vib) of sub-section (2) of section 10 of the indian incometax act, 1922 or under sub-section (3) of section 34 of the income -tax act, 1961; (iii) its other reserves as reduced by the amounts credited to such reserves as have been allowed as a deduction in comput~ ing the income of the company for the purposes of the indian income-tax act, 1922 or the income-tax act, 1961;  11 of 1922 43 ot 1961 25 (iv) its debentures, if any; and (v) any moneys borrowed by it from the industrial finance corporation of india or the industrial credit and investment corporation of india or any other financial institution which the central government may notify in this behalf in the official gazette or any moneys borrowed by it from any banking institution (not being a financial institution notified as aforesaid) under an agreement providing for the repayment of such moneys during a period of not less than ten years" or any moneys borrowed from any person in a country outside india for the creation of any capital asset in india 35 explanation-for t~e removal of ~oubts it is her~by declared that any amount standmg to the credit ·of any account in the books of a company as on the ftrst day of the previous year relevant to the assessment year which is of the nature of item (5) or item (6) or item (~) under the heading "reserves and surplus',' or of any item under the heading "current liabilities and provisions" :ln'the c61umn relating to~"in the "form of 13alance-shee'l'" given in part 1 of 'schedule vi to the companies act, 1956 shall not be regarded as a reserve for the purposes of computation of the capital ot a company under the provisions of this s schedule 2 where a company owns any 1lssetsthe income 'from which in accordance with clause (iii) or clawie(vi) or clause (viii) of rule 1 of the- first schedule is required to be excluded irom its total income in computing its chargeable profits, the amount of its capital as com- 10 puted under rule 1 of this schedule shall be diminished by the cost to it of the aaiq assetsas on ,the tiist day,of the prewiouslie&r selewmt to the assessment year in so faras ,such cost exceeds the aggregate of-(i) any mone'ys borrowedrotherthan uch jnodeys as rej5 referred to in clause (v) l)f rule:lj andremajning outstandi,g ~ on the first day of the said previous year; and (ii) the amount of any fund, any surplus add any such reserve as is not to be taken into account in computinj{ the capital under rule 1 20 explanation 1-a paid-up share capital or reservebroqht jnto edatence by creatini or increasmg (by revaluation or otherwise) any book asset is not capital for computing ihe ,c~italof a company for tbepurposes of this act explanation e-any premi'mn receive8 ineash by the -eompany 2s on the issue of its shares standing to the credit of the share ,premium account shall be regarded as fonning part of its paid-up share capital ,~lafuuion 3-wherea company has different previous years in respect of its income, profits and gains, the computation of c~pital under rules 1, 2 and 3 shall be made with re1erence to the previous 30 year which ,commenced first s where after theftrst day of the previous llear irelewllt :to the assessment year the capital of ' company as computed 4n :8cciiiida:nce with the foregoing niles of this schedule 18 increased byanymwunt during that 1'1"evrous year on account of tncreaseof :paid  up sare 35 capital or issue of debentures fjr bonowing ·af :any model's refened to in clause  (v~of rule 1 or -is reduced lw any;amount on account· of reciur:sion of paidup share capital or ,redemption of any debentures or repayment of any suehmoneys, such capital sball be increased or reduced, aathe cue may ,be, ~ a'ium whichbeaiw toihatjudount'40 the  me rproporfton '81 ibe -mlldber of tiys of -theprevious year daring which' the increase or the reduction remained effective bears to the total number of days in that previous year 4: where· a part of the income-, profits' and gains of a company is not includible in its total ihcome as computed under the dlcome-tax s~ act, its capital shall be the sum ascertained in accordabce with rules i, 2 and 3, diminished by an amount which bears to that sum the same proportion as the amount of the aforesaid income, profits and gains bears to the total amount of its income, profits and gains  the third scheduli:(see section 4) 10  rati'b oj' sulttax1 on the amouat by which the chargeable profits exceed the amount of the_ statutory deduction-40 per cent· is provided that where the total income of an as&eiiiiee; being an indian company or any other company which has made the prescribed arrangements for the declaration and payment of dividends within india, includes any income, profits and gains attributable to the business of generation and distribution of electricity or of manu-20 ae1ure- 011 produetion, of aay one or more of the articles specified in the, li&t in pahil'aph 2t the assessee shall be entitled ted l rebate equaj 10 a sum of ane-1ifth of the amount which be81's- to the amount 01 the surtax payable by the asseaee, the same propertion  al the amoullt of the aferesaid inclulliw -bears to· the amount of the total 25 ibcome of the· 1lfiseiiee-: provided further that if the central government, having regard to the stage of development of any industry and other relevant factors, considers it necessary or expedient so to do, it may, at any time by general or special order withdraw the benefit conferred by 30 the preceding proviso in respect of the business of generation and distribution of electricity or of manufacture or production of any article specified in the said list or extend such benefit to any other bultiness and such order shall have effect for the purposes of assessment under this act for any such assessment year (not being the 35 assessment year commencing on the first day of april, 1964) as may be specified in the said order 2237 ls-3  2  the ~; of articles referred to in paragraph 1 shall be as follows :-(1) iron and steel (metal), ferro-alloys and special steels (2) aluminium, copper, lead and zinc (3) coal, lignite, iron are and bauxite 5 (4) indu~trial machinery specified under the heading "s industrial machinery", sub-heading cia major items of specialised 'equipment used in specific industries", of the first schedule to the industries (development and regulation) act, 1951 10 85 of 1951 (5) boilers and steam generating plants, steam engines and turbines and internal combustion engines (6) equipment for the generatiwl, transmission and distribution of electricity, including transformers (7) machine tools, precision tools, dies and· jigs is (s) tractors and earth-moving machinery (9) steel castings and forgings (10) cement and refractories (11) fertilisers 20 (12) paper and pulp (13) tea, coffee and rubber (14) component parts of the articles mentioned in· items· nos (4), (5), (6) and (s), that is to say, such parts as are essential for the working of the machinery referred to in items aforesaid and have been given for that purpose some special shape or 25 quality which would not be essential for their use for ajiyother purpose and are in complete finished forin and ready for flttnent   statement of objects and reasonsthe object of this bill is to impose a special tax on companies (other than those which have no share capital) on their excess profits, namely, the amount by which the total income of a company as reduced by certain types of income and certain sums and the income-tax and super-tax payable by it exceeds a sum of ten per cent of its capital, reserves and certain borrowed moneys or a sum of rs 2 lakhs, whichev~r is higher the notes on clauses explain the wrious provisions of the bill t t krishnamachari new delhi; the 29th february, 1964  president's recommendation under article 117 of the constitution of india[copy of letter no f 3 (16) -b/64, dated the 29th february, 1964 from shri t t krishnamachari, minister of finance to the secretary, lok sabha] the president having been informed of the subject matter of the proposed bill, recommends under article 117(1) end (3) of the constitution of india, the introduction of the companies (profits) surtax bill, 1964 in the lok sabha and elso recommends to the lok sabha the consideration of the bill - - - - clause 2 contains deftnitions of the various terms and expressions used in the clauses of the bill sub-clause (3) defines "assessment year" as being the period of twelve months commencing on the 1st day of april, every year sub-clctuh (5) defines "chargeable profits" to mean the total income of the aasessee for the previous year relevant to the assessment year as computed under the income-tax act, 1961 and adjusted in accordance with the provisions of the first schedule sub-clause (8) defines the term "statutory deduction" to mean an amount equal to ten per cent of the capital of the company as computed in accordance with the second schedule or an amount of rs 2 lakhs, whichever is greater the amount of the statutory deduction is required to be adjusted in relation to the length of the previous year, if such year is longer or shorter than a period of 12 months sub-clause (9) provides that all words and expressions used inthe bill but not deftned therein and deftned in the incoldb-tax act, 1961 shall have the same meanings as in that act clause 3 seeks to give jurisdiction in respect of surtax to the same authorities as have jurisdiction under the income-tax act, 1961 clause 4 seeks to make a provision for charging a tax named "surtax" on every company for the assessment year 1964-65 and subsequent assessment years on that amount of its chargeable profits durmc the previous year or the years which exceeds the amount of statutory deduction admissible to it at the rate or rates specified in the third schedule clause 5-sub-clause (1) seeks to impose a liability on the principal officer of evoery company, and in the case of a non-resident company, also on the person who has been treated as its agent under section 163 of the income-tax act, 1961, to furnish a return of the chargeable profits of the company by the 30th day of september of the relevant assessment year, if such chargeable profits exceed the amount of the statutory deduction sub  clau9~ (2) seeks to enable the income-tax ofticer to issue a notice to 8 company requiring it to furnish a return of the chargeable profits within thirty days from the date of service of the notice under both the sub-clauses, the income-tax officer has been authorised to extend the time for furnishing the return sub-ctause (3) seeks to enable an asseslee who hu not furnished the return within the time allowed or who having furnished the return discovers any omissions therein, to file a return or a revised return, as the case may be, at any time before the completion of the assessment cia,," 6 provides that the income-tax offtcer may call for accounts, documents or other evidence from the assessee for the purpose of his assessment, and shall make the assessment after considering all the material so obtained by him clause 7 enables the income-tax officer to make a provisional assessment of the chargeable profits of an assessee at any time after the expiry of the period allowed for filing a return, subject to the issue of a 14 days' notice to him inviting his objections, if any, to the proposed assessment it has been provided that there shall be no right of appeal against such a provisional assessment and that the tax paid on the provisional assessment shall be deemed to have been paid towards the regular assessment clause 8 relates to the assessment or re-assessment of chargeable profits which have escaped assessment or have been under-assessed etc it provides that in the case of an omission or failure on the part of the assessee to file a return or to disclose fully and truly all the materials necessary for his assessment, such proceedings may be initiated at any time, and in other cases witjain four, years of the end of the relevant assessment year clause 9 seeks to make a provision for the imposition of a penalty on an assessee for his failure, without reasonable cause, to furnish a return of his chargeable profits or to produce the accounts, documents or evidence required by the income-tax officer, and for any concealment or deliberate furnishing of inaccurate particulars of his chargeable profits clause 10 provides that the assessee shall be given a reasonable opportunity of being heard before any penalty under clause 9 is imposed upon him clause 11 relates to appeals by the assessees to the appellate assistant commissioner against any order passed by the income-tax officer clause 12 relates to appeals to the appellate tribunal by assessees or by the income-tax officer under the directions of the commissioner of income-tax against any order made by the appellate assistant commissioner it has been provided that in disposing of such appeals, the tribunal shall exercise the same powers and follow the same procedure as it exercises and follows in disposing of any appeal under the income-tax act, 1961 clause 13 provides for the rectifi(!ation of mistakes apparent from the record of any proceedings by the commissioner of income-tax, the appellate assistant commissioner and the appellate tribunal, suo motu or at the instance of the assessee, within four years of the date on which the order sought to be rectified has been passed clause 14 seeks to enable the income-tax officer to recompute the chargeable profits of the assessee in consequence of any order of rectification or amendment passed under section 154 or section 155 of the income-tax act, 1961, in relation to the relevant income-tax assessment of the assessee, within four years from the date of the latter order  clause 15 seeks to provide that the surtax payable by a company for a particular assessment year shall be deducted from its total income for that assessment year in computing its distributable income for the purposes of chapter xi-d of the income-tax act, 1961 clause 16 enables the commissioner to revise any orders passed by the income-tax officer which are prejudicial to revenue, within a period of two years from the date of the order sought to be revised   clause 17 e~bles the commissioner to give relief to the assessee on revision of any orders passed by the income-tax officer or the appellate assistant commissioner subordinate to him, either of his own motion or on an application by the assessee clause 18 seeks to make applicable to the proceedings relating to surtax, certain provisions of the income-tax act, 1961 pertaining to various matters for which no separate provisions have been made in the bill, eg, issue and service of notice of demand, recovery of arrear tax dues,  assessment proeedings in the case of non-resident through an agent, liability of directors or private companies in liquidation, reference to high court, appeal to supreme court, etc it also seeks to apply the provisions of the income-tax (certificate proceedings) rules, 1962 to the proceedings of recovery of arrears of surtax clame 19 provides that all information contained in any statement or returns made by the assessees or furnished in any proceeding under the income·tax act, 1961, may be used for the purposes of proceedings relating to surtax and vice verba clouse 20 to 23 (both inczusive) relate to prosecution for various offences by way of failure to deliver returns without any reasonable cause, making of false statements, abetment of false returns, and the composition of such offences clause 24 seeks to enable the central government to make ad ~emption, reduction in rate or other modification in respect of surtax in favour of any class of assessees or in regard to the whole or any part of the chargeable profits of any class of assessees in order to remove any difficulty or avoid any hardship that may arise as a result -of application of surtax to the union territories of dadra and nagar haveli, goa, daman and diu and pondicherry clause 25 seeks to enable the central board of direct taxes to make rules for carrying out the purposes of this enactment and in this behalf, inter alia, to prescribe various forms such as the form of return of chargeable profits clause 26 seeks to exclude companies which have no share capital from the purview of surtax the first schedule lays down rules for the computation of the chargeable profits under its provisions, -'chargeable proftts' are to be computed by excluding from the assessee's total income <as computed ujlder the income-tax act) certain items of income aad sums which have been exempted from surtax; deducting from the balance amount the income-tax and super-tax payable by the company (subject t certain adjustments); and adding to the amount so arrived at, any interest payable by th~ assessee in respect of debentures, and specified loans referred to in rule 1 (v) of the second schedule, and such amount of any expenditure on commission, entertainment and advertisement which may be considered by the income-tax officer (with the approval of the inspecting assistant commissioner) to be excessive in the circumstances of the case the second schedule contains the rules for the computation of the capital of a company for the purpose of determining the amount of 'statutory deduction' admissible to a company under these rules, the apital of a company consists of the amounts, as on the first day ef the relevant previous year, of its paid-up capital, reserves (includina the reterv  required to be created under the indian income-tax act, 1922 and the income-tax act, 1961 for entitlement to development rebate), debentures and specified loans if a company possesses assets, the income from which is not taken into account in computing the chargeable profits under cer~ provisions of the first schedule, such as investments in shares of companies, the cost thereof (subject to certain adjustments f'or borrowed moneys not included in the capital of the company) is required to be deducted from the capital aforesaid the third schedule lays down that surtax shall be charged at the rate of 40 per cent of the amount by which the chargeable profits of a company for the relevant previous year exceed the amount of the statutory deduction admissible to it it also provides that an indian company or a company which has made the prescribed arrange· ments for the declaration and payment of dividends within india shall be entitled to a rebate calculated at 20 per cent of that part of the surtax which is attributable to any profits derived by it from the business of the generation and distribution of electricity or of the manufacture or production of anyone or more of the articles specified in the list contained in the said schedule it also provides that the central government may, by issue of a notification in the official gazette, exclude any articles from or add any item to the said list f01; the purposes of an assessment for any assessmert year subsequent \0 the assessment year 1964--65 the bill seeks to impose a new tax on all companies other than companies having no share capital this tax will be administered by the income-tax department but· its proceedings relating to assessment, collection and revision and appeals will be separate from that of income-tax however, some incidental expenditure on the administration of the act may be involved, the extent of which cannot be foreseen at present  m~morandum regarding delegated legisla'l'ionclause 25 empowers the board to make rules for carrying out the purposes of the act the matters in respect of which such rules may be made pertain to the form in which returns under section 5 may be ful'dished, the fonn in which notice for making proviaional ~ ment shall be given, the form in which appeals under the act may be filed and the procedure that may be followed on application for rectification of mistakes and application for refunds the matters in respect of which rules will be made are matters of procedure, form or detail the delegation of legislative power is, therefore, of a normal character  a billto impose a special tax on the profits of certain companies (shri t t krishnamachari, minister of finance) 