The Income tax act, 1995

(ii) the performance by a cultivator or receiver of rent in kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market; or

(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in paragraph (ii) of this sub-clause;

(c) any income derived from any building owned and occupied by the receiver of the rent or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind, of any land with respect to which, or the produce of which, any process mentioned in paragraphs (ii) and (iii) of sub-clause (b) is carried on:

1[Provided that –

(i) the building is on or in the immediate vicinity of the land, and is a building which the receiver of the rent or revenue or the cultivator, or the receiver of rent-in-kind, by reason of his connection with the land, requires as a dwelling house, or as a store-house, or other out-building, and

(ii) the land is either assessed to land revenue in India or is subject to a local rate assessed and collected by officers of the Government as such or where the land is not so assessed to land revenue or subject to a local rate, it is not situated –

(A) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or

(B) in any area within such distance, not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (A), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification2 in the Official Gazette.]

3[Explanation.-For the removal of doubts, it is hereby declared that revenue derived from land shall not include and shall be deemed never to have included any income arising from the transfer of any land referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of this section;]

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1 Substituted by the Taxation Laws (Amendment) Act, 1970, w.r.e.f. 1-4-1962.

2 Inserted by the Finance Act, 1989 w.r.e.f. 1-4-1970.

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2(1B) "amalgamation", in relation to companies, means the merger of one or more companies with another company or the merger of two or more companies to form one company (the company or companies which so merge being referred to as the amalgamating company or companies and the company with which they merge or which is formed as a result of the merger, as the amalgamated company) in such a manner that –

(i) all the property of the amalgamating company or companies immediately before the amalgamation becomes the property of the amalgamated company by virtue of the amalgamation;

(ii) all the liabilities of the amalgamating company or companies immediately before the amalgamation become the liabilities of the amalgamated company by virtue of the amalgamation;

(iii) shareholders holding not less than nine-tenths in value of the shares in the amalgamating company or companies (other than shares already held therein immediately before the amalgamation by, or by a nominee for, the amalgamated company or its subsidiary) become shareholders of the amalgamated company by virtue of the amalgamation, otherwise than as a result of the acquisition of the property of one company by another company pursuant to the purchase of such property by the other company or as a result of the distribution of such property to the other company after the winding up of the first- mentioned company;]

(2) "annual value", in relation to any property, means its annual value as determined under section 23;

3[(3) Omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from 1 April, 1988.]

(4) "Appellate Tribunal" means the Appellate Tribunal constituted under section 252;

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1. Inserted by the Finance (No. 2) Act, 1967 w.e.f. 1-4-1967.

2. Renumbered for "(1A)" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989.

3. Prior to the omission, clause (3), as originally enacted, read as under: "(3) "Appellate Assistant Commissioner" means a person appointed to be an Appellate Assistant Commissioner of Income-tax under sub-section (1) of section 117;"

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(5) "approved gratuity fund" means a gratuity fund which has been and continues to be approved by the 1[Chief Commissioner or Commissioner] in accordance with the rules contained in Part C of the Fourth Schedule;

(6) "approved superannuation fund" means a superannuation fund or any part of a superannuation fund which has been and continues to be approved by the 2[Chief Commissioner or Commissioner] in accordance with the rules contained in Part B of the Fourth Schedule;

(7) "assessee" means a person by whom 3[any tax] or any other sum of money is payable under this Act, and includes-

(a) every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the income of any other person in respect of which he is assessable, or of the loss sustained by him or by such other person, or of the amount of refund due to him or to such other person;

(b) every person who is deemed to be an assessee under any provision of this Act;

4[(7A) "Assessing Officer" means the Assistant Commissioner or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act, and the Deputy Commissioner who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act;]

(8) "assessment" includes reassessment;

(9) "assessment year" means the period of twelve months commencing on the 1st day of April every year;

5[(9A) "Assistant Commissioner" means a person appointed to be an Assistant Commissioner of Income-tax under sub-section (1) of section 117;]

(10) "average rate of income-tax" means the rate arrived at by dividing the amount of income-tax calculated on the total income, by such total income;

(11) "block of assets" means a group of assets falling within a class of assets, being buildings, machinery, plant or furniture, in respect of which the same percentage of depreciation is prescribed;]

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1. Substituted for 'Commissioner' by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

2. Ibid.

3. Substituted for "income-tax or super-tax" by the Finance Act, 1965, w.e.f. 1-4-1965.

4. Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

5. Ibid.

6. Inserted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986, w.e.f. 1-4-1988. Earlier, the original clause was omitted by the Finance Act, 1965, w.e.f. 1-4-1965.

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(12) "Board" means the 1[Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 19632 (54 of 1963)];

(13) "business" includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture;

(14) "capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include –

(i) any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession;

3[(ii) 4 personal effects, that is to say, movable property (including wearing apparel and furniture, but excluding jewellery) held for personal use by the assessee or any member of his family dependent on him.

Explanation.-For the purposes of this sub-clause, "jewellery" includes –

(a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semiprecious stone, and whether or not worked or sewn into any wearing apparel;

(b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel;]

5[(iii) agricultural land in India, not being land situate –

(a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or

6(b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette;]

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1. Substituted for "Central Board of Revenue constituted under the Central Board of Revenue Act, 1924 (4 of 1924)" by the Central Boards of Revenue Act, 1963, w.e.f. 1-1-1964.

2. Substituted by the Finance Act, 1972, w.e.f. 1-4-1973.

3 . Substituted for "(iii) agricultural land in India" by the Finance Act, 1970, w.e.f.1-4-1970.

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1[(iv) 6 1/2 per cent Gold Bonds, 1977, 2[or 7 per cent Gold Bonds, 1980,] 1[or National Defence Gold Bonds, 1980,] issued by the Central Government;]

4[(V) Special Bearer Bonds, 1991, issued by the Central Government;]

(15) 5 "charitable purpose" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility 6[* * *];

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1. Inserted by the Taxation Laws (Amendment) Act, 1962, w.e.f. 13-12-1962.

2. Inserted by the Finance (No. 2) Act, 1965, w.e.f. 1-4-1965.

3. Inserted by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1965, w.e.f. 4-12-1965.

4. Inserted by the Special Bearer Bonds (Immunities and Exemptions) Act, 1981, w.e.f. 12-1-1981.

5. The words 'not involving the carrying on of any activity for profit' omitted by the Finance Act, 1983, w.e.f. 1-4-1984.

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(15A) "Chief Commissioner" means a person appointed to be a Chief Commissioner of Income-tax under sub-section (1) of section 117;

(15B) "child", in relation to an individual, includes a step-child and an adopted child of that individual;]

(16) "Commissioner" means a person appointed to be a Commissioner of Income-tax under sub-section (1) of section 117;

(16A) "Commissioner (Appeals)" means a person appointed to be a Commissioner of Income-tax (Appeals) under sub-section (1) of section 117;

7[(17) "company" means –

(i) any Indian company, or

(ii) any body corporate incorporated by or under the laws of a country outside India; or

(iii) any institution, association or body which is or was assessable or was assessed as a company for any assessment year under the Indian Income-tax Act, 1922 (11 of 1922), or which is or was assessable or was assessed under this Act as a company for any assessment year commencing on or before the 1st day of April, 1970, or

(iv) any institution, association or body, whether incorporated or not and whether Indian or non-Indian, which is declared by general or special order of the Board to be a company:

Provided that such institution, association or body shall be deemed to be a company only for such assessment year or assessment years (whether commencing before the 1st day of April, 1971, or on or after that date) as may be specified in the declaration;]

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1. Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

2. Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976.

3. Renumbered for "(15A)" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

4. Substituted by the Finance Act, 1970, w.e.f. 1-4-1970.

5. The words " and includes a person appointed to be an Additional Commissioner of Income-tax under that sub-section" omitted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

6. Inserted by the Finance (No. 2) Act, 1977, w.e.f. 10-7-1978.

7. Substituted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1971.

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(18) "company in which the public are substantially interested" a company is said to be a company in which the public are substantially interested –

2[(a) if it is a company owned by the Government or the Reserve Bank of India or in which not less than forty per cent of the shares are held (whether singly or taken together) by the Government or the Reserve Bank of India or a corporation owned by that bank; or]

3[(aa) if it is a company which is registered under section 25 of the Companies Act, 19564 (1 of 1956); or

(ab) if it is a company having no share capital and if, having regard to its objects, the nature and composition of its membership and other relevant considerations, it is declared by order of the Board to be a company in which the public are substantially interested:

Provided that such company shall be deemed to be a company in which the public are substantially interested only for such assessment year or assessment years (whether commencing before the 1st day of April, 1971, or on or after that date) as may be specified in the declaration; or]

5[(ac) if it is a mutual benefit finance company, that is to say, a company which carries on, as its principal business, the business of acceptance of deposits from its members and which is declared by the Central Government under section 620A of the Companies Act, 19566 (1 of 1956), to be a Nidhi or Mutual Benefit Society; or]

7[(ad) if it is a company, wherein shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than fifty per cent of the voting power have been allotted unconditionally to, or acquired unconditionally by, and were throughout the relevant previous year beneficially held by, one or more co-operative societies;]

8[(b) if it is a company which is not a private company as defined in the Companies Act, 19569 (1 of 1956), and the conditions specified either in item (A) or in item (B) are fulfilled, namely –

(A) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) were, as on the last day of the relevant previous year, listed in a recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 1 (42 of 1956), and any rules made there under;

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2. Substituted by the Finance Act, 1964, w.e.f. 1-4-1964.

3. Inserted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1971.

4. Inserted by the Finance Act, 1985, w.r.e.f. 1-4-

5. Inserted by the Finance Act, 1992, w.e.f. 1-4-1993.

6. Substituted by the Finance Act, 1969, w.e.f. 1-4-1970.

Earlier, it was amended by the Finance Act, 1965, w.e.f. 1-4-1965 and the Finance Act, 1966, w.e.f. 1-4-1966.

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2[(B) shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than fifty per cent of the voting power have been allotted unconditionally to or acquired unconditionally by, and were throughout the relevant previous year beneficially held by –

(a) the Government, or

(b) a corporation established by a Central, State or Provincial Act, or

(c) any company to which this clause applies or any subsidiary company of such company 1[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.

Explanation.-In its application to an Indian company whose business consists mainly in the construction of ships or in the manufacture or processing of goods or in mining or in the generation or distribution of electricity or any other form of power, item (B) shall have effect as if for the words "not less than fifty per cent", the words "not less than forty per cent" had been substituted;]

(19) "co-operative society" means a co-operative society registered under the Co-operative Societies Act, 1912 4 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies;

(19A) "Deputy Commissioner" means a person appointed to be a Deputy Commissioner of Income-tax 6[or an Additional Commissioner of Income-tax] under sub-section (1) of section 117;

(19B) "Deputy Commissioner (Appeals)" means a person appointed to be a Deputy Commissioner of Income-tax (Appeals) 7 [or an Additional Commissioner of Income-tax (Appeals)] under sub-section (1) of section 117;]

8[(19c) "Deputy Director" means a person appointed to be a Deputy Director of Income-tax or an Additional Director of Income-tax under sub-section (1) of section 117;]

(20) "director", "manager" and "managing agent", in relation to a company, have the meanings respectively assigned to them in the Companies Act, 1956 1 (1 of 1956);

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2. Substituted by the Finance Act, 1983, w.e.f. 2-4-1983.

3. Substituted for 'where such subsidiary company fulfils the conditions laid down in clause (b) of section 108' by the Finance Act, 1987, w.e.f. 1-4-1988.

4. Inserted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988.

5. serted by the Finance Act, 1994, w.e.f. 1-6-1994.

6. bid.

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2[(21) "Director General or Director" means a person appointed to be a Director General of Income-tax or, as the case may be, a Director of Income-tax, under sub-section (1) of section 117, and includes a person appointed under that sub-section to be 3[an Additional Director of Income-tax or] a Deputy Director of Income-tax or an Assistant Director of Income-tax;]

(22) 4"dividend" includes –

(a) any distribution by a company of accumulated profits, whether capitalised or not, if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company;

(b) any distribution to its shareholders by a company of debentures, debenture-stock, or deposit certificates in any form, whether with or without interest, and any distribution to its preference shareholders of shares by way of bonus, to the extent to which the company possesses accumulated profits, whether capitalised or not;

(c) any distribution made to the shareholders of a company on its liquidation, to the extent to which the distribution is attributable to the accumulated profits of the company immediately before its liquidation, whether capitalised or not;

(d) any distribution to its shareholders by a company on the reduction of its capital, to the extent to which the company possesses accumulated profits which arose after the end of the previous year ending next before the 1st day of April, 1933, whether such accumulated profits have been capitalised or not;

(e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) 5[made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern, in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern)] or any payment by any such company on behalf, or for- the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits;

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1. Substituted by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. Prior to the substitution, clause (21) read as under: (21) 'Director of Inspection' means a person appointed to be a Director of Inspection under sub-section (1) of section 117, and includes a person appointed to be an Additional Director of Inspection, a Deputy Director of Inspection or an Assistant Director of Inspection;'

3. Inserted by the Finance Act, 1994, w.e.f. 1-6-1994.

5. Substituted for 'by way of advance or loan to a shareholder, being a person who has a substantial interest in the company,' by the Finance Act, 1987, w.e.f. 1-4-1988.

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but "dividend" does not include –

(i) a distribution made in accordance with sub-clause (c) or sub-clause (d)in respect of any share issued for full cash consideration, where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets; 1[(ia)a distribution made in accordance with sub-clause (c) or sub-clause (d) in so far as such distribution is attributable to the capitalised profits of the company representing bonus shares allotted to its equity shareholders after the 31st day of March, 1964, 2[and before the 1st day of April, 1965];]

(ii) any advance or loan made to a shareholder 3[or the said concern] by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company;

(iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clause (e), to the extent to which it is so set off.

Explanation 1.-The expression "accumulated profits", wherever it occurs in this clause, shall not include capital gains arising before the 1st day of April, 1946, or after the 31st day of March, 1948, and before the 1st day of April, 1956.

Explanation 2.-The expression "accumulated profits" in sub-clauses (a), (b), (d) and (e), shall include all profits of the company up to the date of distribution or payment referred to in those sub-clauses, and in subclause (c) shall include all profits of the company up to the. date of liquidation, 4[but shall not, where the liquidation is consequent on the compulsory acquisition of its undertaking by the Government or a corporation owned or controlled by the Government under any law for the time being in force, include any profits of the company prior to three successive previous years immediately preceding the previous year in which such acquisition took place].

Explanation 3.-For the purposes of this clause –