INCOME-TAX RULES, 1962

[SO 969, DATED 26-3-1962]

In exercise of the powers conferred by section 295 of the Income-tax Act, 1961 (43 of 1961), and rule 15 of Part A, rule 11 of Part B and rule 9 of Part C of the Fourth Schedule to that Act, the Central Board of Revenue hereby makes the following rules namely :--

PART I

PRELIMINARY

1. Short title and commencement.--

(1)     These rules may be called the Income-tax

(2)     They shall come into force on the 1st day of April, 1962. 

2. Definitions.--

(1)     In these rules, unless the context otherwise requires,--

(2)     "Act" means the Income-tax Act, 1961 (43 of 1961);

(3)     ?"authorised bank" means any bank as may be appointed by the Reserve Bank of India as its agent under the provisions of sub?section (1) of section 45 of the Reserve Bank of India Act, 1934 (2 of 1934);

(4)     ?"Chapter", "section" and "Schedule" means respectively Chapter and section of, and Schedule to, the Act.

(5)     All references to "Forms" in these rules shall be construed as references to the forms set out in Appendix II hereto.

PART II

DETERMINATION OF INCOME

A.--Salaries

2A.- Limits for the purposes of section 10(13A).

The amount which is not to be included in the total income of an assessee in respect of the special allowance referred to in clause (13A) of section 10 shall be--

(a)     the actual amount of such allowance received by the assessee in respect of the relevant period;? or

(b)     the amount by which the expenditure actually incurred by the assessee in payment of rent in respect of residential accommodation occupied by him exceeds one-tenth of the amount of salary due to the assessee in respect of the relevant period; or

(c)      an amount equal to?

(d)     where such accommodation is situate at Bombay, Calcutta, Delhi or Madras, one-half of the amount of salary due to the assessee in respect of the relevant period; and

(e)     where such accommodation is situate at any other place, two-fifth of the amount of salary due to the assessee in respect of the relevant period,

(f)      Omitted by the IT (Fourth Amdt.)

(g)     whichever is the least.

Explanation : In this rule--

(h)     "salary" shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule;

(i)       "relevant period" means the period during which the said accommodation was occupied by the assessee during the previous year.

(j)      Omitted by the IT (Fourth Amdt.)

2B.- Conditions for the purpose of section 10(5).

(1)     The amount exempted under clause (5) of section 10 in respect of the value of travel concession or assistance received by or due to the individual from his employer or former employer for himself and his family, in connection with his proceeding,--

(a)    on leave to any place in India;

(b)   to any place in India after retirement from service or after the termination of his service; shall be the amount actually incurred on the performance of such travel subject to the following conditions, namely :--

(c)    [1][where the journey is performed on or after the 1st day of October, 1997, by air, an amount not exceeding the air economy fare of the national carrier by the shortest route to the place of destination;

(d)   where places of origin of journey and destination are connected by rail and the journey is performed on or after the 1st day of October, 1997, by any mode of transport other than by air, an amount not exceeding the air-conditioned first class rail fare by the shortest route to the place of destination; and

(e)    where the places of origin of journey and destination or part thereof are not connected by rail and the journey is performed??? on or after the 1st day of October, 1997, between such places, the amount eligible for exemption shall be :--

(f)     where a recognised public transport system exists, an amount not exceeding the 1st class? or deluxe class fare, as the case may he, on such transport by the shortest route to the place of destination; and

(g)   where no recognised public transport system exists, an amount equivalent to the air-conditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail.

(2)     The exemption referred to in sub-rule (1) shall be available to an individual in respect of two journeys performed in a block of four calendar years commencing from the calendar year 1986 :

[2][Provided that nothing contained in this sub-rule shall apply to the benefit already availed of by the assessee in respect of any number of journeys performed before the 1st day of April, 1989 except to the extent that the journey or journeys so performed shall be taken into account for computing the limit of two journeys specified in this sub-rule.]

(3)     Where such travel concession or assistance is not availed of by the individual during any such block of four calendar years, an amount in respect of the value of the travel concession or assistance, if any, first availed of by the individual during first calendar year of the immediately succeeding block of four calen?dar years shall be eligible for exemption.

Explanation : The amount in respect of the value of the travel concession or assistance referred to in this sub-rule shall not be taken into account in determining the eligibility of the amount in respect of the value of the travel con?cession or assistance in relation to the number of journeys under sub-rule (2).

(4)     [3][The exemption referred to in sub-rule (1) shall not be available to more than two surviving children of an individual after 1st October, 1998 :

Provided that this sub-rule shall not apply in respect of children born before 1st October, 1998, and also in case of multiple births after one child.]

   2BA.- [4][Guidelines for the purposes of section 10(10C). The amount received by an employee of?

(i)       a public sector company; or

(ii)      any other company; or

(iii)    an authority established under a Central, State or Provincial Act; or

(iv)    ?a local [5][authority; or]

(v)     [6][a co-operative society; or

(vi)    ?a University established or incorporated by or under a Central, State or Provincial Act and an institution declared to be a University under section 3 of the University Grants Commission Act, 1956 (3 of 1956); or

(vii)   an Indian Institute of Technology within the meaning of clause (g) of section 3 of the Institutes of Technology Act, 1961 (59 of 1961); or

(viii)  [7][an institution,? having importance throughout India or in any State or States, as the Central Government may, by notification in the Official Gazette, specify in this behalf; or]

(ix)      ?such institute of management as the Central Government may, by notification in the Official Gazette specify in this behalf,at the time of his voluntary retirement [8][or voluntary separation] shall be exempt under clause (10C) of section 10 only if the scheme of voluntary retirement framed by the aforesaid company or authority [9][or co-operative society or University or institute], as the case may be [10][or if the scheme of voluntary separation framed by a public sector company,] is in accordance with the following requirements, namely :--

(x)     it applies to an employee [11][***] who has completed 10 years of service or completed 40 years of age;

(xi)    [12][it applies to all employees (by whatever name called) including workers and executives of a company or of an authority or of a co?operative society, as the case may be, excepting directors of a company or of a co-operative society;]

(xii)   the scheme of voluntary retirement [13][or voluntary separation] has been drawn to result in overall reduction in the existing strength of the employees [14][***];

(xiii)  the vacancy caused by the voluntary retirement [15][or voluntary separation] is not to be filled up;

(xiv)  the retiring employee of a company shall not be employed in another company or concern belonging to the same management;

(xv)   the amount receivable on account of voluntary retirement [16][or voluntary separation] of the employee does not exceed the amount equivalent to [17][three months] salary for each completed year of service or salary at the time of retirement multiplied by the balance months of service left before the date of his retirement on superannua?tion:

[18][Provided that requirement of (i) above would not be applicable in case of amount received by an employee of a public sector company under the scheme of voluntary separation framed by such public sector company]

Explanation : In this rule, the expression "salary" shall have the same meaning as is assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule.

 2BB.- [19][Prescribed allowances for the purposes of clause (14) of section 10.

(1)     For the purposes of sub-clause (i) of clause (14) of section 10, prescribed allowances, by whatever name called, shall be the following, namely:--

(a)     any allowance granted to meet the cost of travel on tour or on transfer;

(b)     any allowance, whether, granted on tour or for the period of journey in connection with transfer, to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty;

(c)      any allowance granted to meet the expenditure incurred on convey?ance in performance of duties of an office or employment of profit :

Provided that free conveyance is not provided by the employer;

(d)     any allowance granted to meet the expenditure incurred on a helper where such helper is engaged for the performance of the duties of an office or employment of profit;

(e)     any allowance granted for encouraging the academic, research and training pursuits in educational and research institutions;

(f)      any allowance granted to meet the expenditure incurred on the purchase or maintenance of uniform for wear during the performance of the duties of an office or employment of profit.

Explanation : For the purpose of clause (a), "allowance granted to meet the cost of travel on transfer" includes any sum paid in connection with transfer, packing and transportation of personal effects on such transfer.

(2)     For the purposes of sub-clause (ii) of clause (14) of section 10, the prescribed allowances, by whatever name called, and the extent thereof shall be the following, namely :--

TABLE

[41][2BBA.? Circumstances and conditions for the purposes of clause (19) of section 10.

(1)     For the purposes of clause (19) of section 10, the circumstances of death of a member of the armed forces (including para-militray forces) of the Union in the course of operational duties shall be the following, namely :-

(i)       ?acts of violence or kidnepping or attacks by terrorists or anti-social elements;

(ii)       action against extremists or anti-social elements;

(iii)    enemy action in international war;

(iv)    action during deployment with a peace keeping mission abroad;

(v)     border skirmishes;

(vi)    laying or clearance of mines including enemy mines as also mine sweeping operations;

(vii)   explosions of mines while laying operationally oriented mine-fields or lifting or negotiation mine fields laid by the enemy or own forces in operational areas near international borders or the line of control ;

(viii)  in the aid of civil power in dealing with natural calamities and rescue operations;

(ix)    in the aid of civil power in quelling agitation or riots or revolts by demonstrators.

(2)     It shall be certified by the Head of the Department where the deceased member of the armed forces (including para-military forces) last served, or the service headquarters, as the case may be, that the death of such member has occurred in the course of operational duties in circumstances mentioned in sub-rule (1). 

2BC.- [42][Amount of annual receipts for the purposes of sub-clauses (iiiad) and (iiiae) of clause (23C) of section 10.

(1)     For the purposes of sub-clause (iiiad) of clause (23C) of section 10, the amount of annual receipts on or after the 1st day of April, 1998, of any university or other educational institution, existing solely for educational purposes and not for purposes of profit, shall be one crore rupees.

(2)     For the purposes of sub-clause (iiiae) of clause (23C) of section 10, the amount of annual receipts on or after the 1st day of April, 1998, of any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during conva?lescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, shall be one crore rupees. Application under section 10(23) and under sub-clauses (iv) and (v) of section 10 clause (23C)

[43][2C. Guidelines for approval under sub-clauses (iv) and (v) of clause (23C) of section 10.

(1)     [44]The prescribed authority under sub-clauses (iv) and (v) of clause (23C) of section 10 shall be the Chief Commissioner or Director General, to whom the application shall be made as provided in sub-rule (2).

(2)     The application to be furnished under sub-clauses (iv) and (v) of clause (23C) of section 10 by a fund, trust or institution shall be in Form No. 56.

Explanation. For the purposes of this rule, Chief Commissioner or Director General means the Chief Commissioner or Director General whom the Central Board of Direct Taxes may, authorise to act as prescribed authority for the purposes of sub-clause (iv) or sub-clause (v) of clause (23C) of section 10 in relation to any fund or trust or institution.]

2CA.- [45][GuideIines for approval under sub-clauses (vi) and (via) of clause (23C) of section 10.

(1)     The prescribed authority under sub-clauses (vi) and (via) of clause (23C) of section 10 shall be the Chief Commissioner or Director General, to whom the application shall be made as provided in sub-rule (2).

(2)     The prescribed authority under sub-clauses (vi) and (via) of clause (23C) of section 10 shall be the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of 1963) for applications received prior to 3rd day of April, 2001.

[46][Provided that in case of applications received prior to 3rd day of April, 2001 where no order has been passed granting approval or rejecting the application as on 31st day of May, 2007, the prescribed authority under sub-clauses (vi) and (via) of clause (23C) of section 10 shall be the Chief Commissioner or Director General.]

(3)     An application for approval shall be made in Form No. 56D by any university or other educational institution or any hospital or other medical institution referred to in sub-clause (vi) or sub-clause (via) of clause (23C) of section 10.

(4)     [47][The approval of the Central Board of Direct Taxes or Chief Commissioner or Director General, as the case may be, granted before the 1st day of December, 2006 shall at any one time have effect for a period not exceeding three assessment years.]

[48][Explanation. For the purposes of this rule, Chief Commissioner or Director General means the Chief Commissioner or Director General whom the Central Board of Direct Taxes may, authorise to act as prescribed authority, for the purposes of sub-clause (vi) or sub-clause (via) of clause (23C) of section 10, in relation to any university or other educational institution or any hospital or other medical institution.] 

2D.- [49]Guidelines for approval under clause (23F) of section 10.

(1)     For the purposes of clause (23F) of section 10, the prescribed authority shall be the Director of Income-tax (Exemptions) having jurisdiction over the venture capital fund or the venture capital company who makes application for approval under sub-rule (2).

(2)     An application for approval shall be made in Form No.56A by a venture capital fund or a venture capital company to the Director of Income-tax (Exemptions) referred to in sub-rule (1).

(3)     Every application under sub-rule (2) may be made in any previous year in which any income by way of dividend or long-term capital gains of a venture capital fund or a venture capital company from investments made by way of equity shares in a venture capital undertaking shall not be included in computing the total income of such venture capital fund or venture capital company.

(4)     Every application for approval under sub-rule (2) shall be accompanied by the following documents, namely :--

(a)     a copy of trust deed or certificate of incorporation under Companies Act, 1956 (1 of 1956); balance sheets and profit and loss account for three previous years immediately preceding the previous year in which the application is made;

(b)     Forms 56B and 56C duly filled in and signed by the applicant; and

(c)      a copy of the certificate of registration issued by the Securities and Exchange Board of India.

(5)     The Director of Income-tax (Exemptions) shall approve the venture capital fund or the venture capital company, as the case may be, subject to the following conditions, namely:--

(a)     the venture capital fund or the venture capital company, as the case may be, is registered with the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of1992):

(b)       [50][***]

(c)        [51][***]

(d)     a venture capital fund or a venture capital company, as the case may be, shall not invest more than [52][twenty] per cent of its total monies raised ?or total paid-up share capital in one venture capital undertaking;

(e)     a venture capital fund or a venture capital company, as the case may be, shall not make investment of more than forty per cent in the equity capital of one venture capital undertaking;

(f)      every venture capital fund and venture capital company, shall maintain books of account and get such books audited by an accountant, as defined in Explanation to sub-section (2) of section 288 and furnish the report of such audit duly signed and verified by such accountant to the Director of Income-tax (Exemptions) before the due date of filing of the return under sub-section (1) of section 139.

(6)     The Director of Income-tax (Exemptions) shall pass an order in writing granting approval or refusing approval to the venture capital fund or venture capital company, as the case may be :

Provided that the Director of Income-tax (Exempt ions) shall not refuse the approval except in concurrence with the Director-General of Income-tax (Exemptions):

Provided further that every venture capital fund or venture capital company, as the case may be, shall be given an opportunity of being heard before passing an order under this rule.

(7)     The Director of Income-tax (Exemptions) shall withdraw the approval granted under sub-rule (6) in the following circumstances, namely :--

(a)     if the venture capital fund or the venture capital company?

(b)        fails to make investments in the manner specified in sub-rule (5);

(c)      invests more than [53][twenty]per cent of the monies raised by a venture capital fund or [54][twenty] per cent of paid-up share capital of the venture capital company, as the case may be, in one venture capital undertaking;

(d)     makes an investment of more than forty per cent in the equity capital in one venture capital undertaking; fails to maintain books of account and get such accounts audited by an accountant or fails to file the audit report required in clause (f) of sub-rule (5);

(e)     violates the provisions of the Act or rules made there under;

(f)         if the certificate of registration granted under section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), to a venture capital fund or a venture capital company is suspended or cancelled by the Securities and Exchange Board of India. 

  2DA.- [55][Guidelines for approval under clause (23FA) of section 10.

(1)     An application for approval shall be made in Form No. 56AA by a venture capital fund or a venture capital company to the Central Government.

(2)     Every application under sub-rule (1) may be made in any previous year in which ?any income by way of dividend or long-term capital gains of a venture capital fund or a venture capital company from investments made by way of equity shares in a venture capital undertaking shall not be included in computing the total income of such venture capital fund or venture capital company.

(3)     Every application for approval under sub-rule (1) shall be accompanied by the following documents, namely :--

(4)     A copy of the trust deed registered under the provision of the Registration Act, 1908 or a certificate of?? incorporation under the Companies Act, 1956 (1 of 1956)

(5)     Balance sheets and profit and loss accounts for three previous years immediately preceding the previous year in? which the application is made;

(6)     Forms 56BA and 56CA duly filled in and signed by the applicant; and

(7)       A copy of the certificate of registration issued by the Securities and Exchange Board of India under sub-section (1) of section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) .

(8)       The Central Government may approve the venture capital fund or the venture capital company, as the case may be, subject to the following conditions, namely:--

(9)     A venture capital fund or a venture capital company, as the case may be, is registered with the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992)

(10)   A venture capital fund or a venture capital company, as the case may be, shall not invest more than twenty-five per cent of its total monies raised or total paid-up share capital in one venture capital undertaking;

(11)   Every venture capital fund and venture capital company, shall maintain books of account and get such books audited by an accountant, as defined in Explanation to sub-section (2) of section 288 of the Act and, furnish the report of such audit duly signed and verified by such accountant to the Central Government before the due date of filing of the return under sub-section (1) of section 139 of the Act.

(12)   The Central Government may pass an order in writing granting approval or refusing approval to the venture capital fund or venture capital company, as the case may be :

(13)   Provided that no order refusing the approval shall be passed unless an opportunity of being heard has been given to the venture capital fund or the venture capital company.

(14)   The approval of the Central Government under sub-rule (5) shall at any one time has effect for such assessment year or years, not exceeding three assessment years.

(15)   The Central Government shall withdraw the approval granted under sub-rule (5) in the following circumstances :--

(16)   If the venture capital fund or the venture capital company?

(17)   Fails to make investments in the manner specified in sub-rule (4) ;

(18)   Invests more than twenty-five per cent of the monies raised by a venture capital fund or twenty-five per cent of paid-up share capital of the venture capital company, as the case may be, in one venture capital undertaking;

(19)   Fails to maintain books of accounts and get such accounts audited by an accountant or fails to file the audit report required in clause (d) of sub-rule (4) ;

(20)   Violates the provisions of the Act or rules made there under;

(21)   If the certificate of registration granted under section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) , to a venture capital fund or a venture capital company is suspended or cancelled by the Securities and Exchange Board of India.

[56][2E. Guidelines for approval under clause (23G) of section 10. -

(1)     An application for approval shall be made on or after the 1st day of June 1998 in Form No. 56E by an enterprise to the Central Government.

(2)     Every application for approval made under sub-rule (1) shall be accompanied by the following documents, namely: ?

(3)     a copy of certificate of incorporation under the Companies Act, 1956 (1 of 1956) or a copy of the document evidencing the constitution of the enterprise and its legal status;

(4)     a copy of the project report or agreement in respect of the eligible business duly approved by the Central Government or any State Government or any local authority or any other statutory body, as the case may be;

(5)     ?balance sheets and profit and loss accounts for the three previous years immediately preceding the previous year in which the application has been made and also for the relevant part of the previous year in which the application has been made :

Provided that an application made under sub-rule (1) may be accompanied by the balance sheets and profit and loss accounts for less than three previous years where an enterprise has been formed at any time during the three previous years immediately preceding the previous year in which the application has been made and also for the relevant part of the previous year in which the application has been made.

(6)     The Central Government shall approve an enterprise for the purposes of clause (23G) of section 10, if such enterprise is wholly engaged in the eligible business.

(7)     The Central Government may, before approving an enterprise, call for such documents (including audited annual accounts) or information from the enterprise, as it thinks necessary in order to satisfy itself that such enterprise is wholly engaged in the eligible business and that Government may also make such enquiries as it may deem necessary in this behalf.

(8)     The Central Government shall pass an order in writing while granting approval or refusing approval to the enterprise:

Provided that no order refusing the approval shall be passed unless an opportunity of being heard has been given to the enterprise.

(9)     Every enterprise approved under sub-rule (5) shall maintain books of account and get such books audited by an accountant, as defined in Explanation to subsection (2) of section 288 and furnish the report of such audit duly signed and verified by such accountant to the Chief Commissioner of Income-tax under whose jurisdiction it is assessed, before the due date of filing of the return under subsection (1) of section 139.

(10)   Where the enterprise,-

(11)   ceases to carry on the eligible business; or

(12)   fails to maintain books of account and get such accounts audited by an accountant as required by sub-rule (6); or

(13)   fails to furnish the audit report as required by sub-rule (6);

(14)   the Chief Commissioner of Income-tax shall, after making such enquiries as he may deem necessary, furnish a report on the circumstances referred to in clause (a), (b) and (c) to the Central Government, within six months from the due date of filing of return under sub-section (1) of section 139.

(15)   The Central Government, on being satisfied that any or all of the circumstances referred to in clauses (a), (b) and (c) of sub-rule (7) exist, shall withdraw the approval granted under sub-rule (5).

Provided that no order withdrawing the approval shall be passed unless an opportunity of being heard has been given to the enterprise.

Explanation: For the purposes of this rule, ?

(16)   the expression ?enterprise? means any enterprise wholly engaged in the eligible business ;

(17)   the expression ?eligible business? means the business referred to in sub-section(4) of section 80 IA or a housing project referred to in sub-section (10) of section 80- IB and which fulfils the conditions specified in the said sub-sections or a hotel project or a hospital project as defined in clauses (g) and (h) of Explanation 1 to clause (23G) of Section 10.]  

(18)   [57][The Infrastructure Debt Fund shall be set up as a Non-Banking Financial Company conforming to and satisfying the conditions provided by the Reserve Bank of India in the Infrastructure Development Fund - Non Banking Financial Companies (Reserve Bank) Directions, 2011, vide notification No. DNBS.233/CGM (US)-2011, dated the 21st November, 2011.

(19)   The funds of Infrastructure Debt Fund shall be invested only in the Public Private Partnership Infrastructure Projects and Post Commencement Operation Date Infrastructure Projects which have completed at least one year of satisfactory commercial operation and such Infrastructure Debt Fund is a party to tripartite agreement with the concessionaire and the project authority for ensuring compulsory buy out and termination payment.

(20)   The Infrastructure Debt Fund shall issue rupee denominated bonds or foreign currency bonds in accordance with the directions of Reserve Bank of India (RBI) and the relevant regulations under the Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000, as amended from time to time.

(21)   The terms and conditions of any bond issued by the Infrastructure Debt Fund shall be in accordance with the said directions of the Reserve Bank of India and the regulations referred to in sub-rule (3).

(22)   In case of an investor in the aforesaid bond being a non-resident, the original or initial maturity of bond, at time of first investment by such non-resident investor, shall not be less than a period of five years.

Provided that the investment made by a non-resident investor in such bonds shall be subject to a lock in period of not less than three years, but the non-resident investor may transfer the bond to another non-resident investor within such lock in period.

(23)   The investment made by the Infrastructure Debt Fund in an individual project or project belonging to a group at any time, shall not exceed twenty percent, of the corpus of the fund.

(24)   No investment shall be made by the Infrastructure Debt Fund in any project where its sponsor or the associate enterprise or the group of such sponsor has a substantial interest.

(25)   The Infrastructure Debt Fund shall file its return of income as required by sub-section (4C) of section 139 on or before the due date.

(26)   In case the Infrastructure Debt Fund does not fulfill any of the conditions provided in this rule or directions of the Reserve Bank of India, all provisions of the Act shall apply as if it is not an Infrastructure Debt Fund referred to in clause (47) of section 10 of the Act.

Explanation.- For the purpose of this rule,-

(27)   "associate enterprise" shall have the same meaning as assigned to it in section 92A of the Act;

(28)   "concern" shall have the same meaning as in clause (a) of Explanation 3 of sub-section (22) of section 2 of the Act;

(29)   "concessionaire", "tripartite agreement" and "project authority" respectively shall have the same meaning as assigned to them in the Infrastructure Debt Fund-Non-Banking Financial Company (Reserve Bank) Directions, 2011;

(30)   "corpus" means the total funds of the Infrastructure Debt Fund raised for the purpose of investment;

(31)   "group" means a group as defined in clause (mm) of section 2 of Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.

(32)   a person shall be deemed to have substantial interest in-

(a)     a company if he is the beneficial owner (including beneficial ownership held by one or more of his relatives, in case the person is an individual) of shares (not being the shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than 10 percent of the voting power; or

(b)     a concern other than a company if he is, at any time during the previous year, beneficially entitled to not less than 20 percent of the income of such concern.

(33)   "relative", in relation to an individual, means-

(a)     spouse of the individual;

(b)     brother or sister of the individual;

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

(d)     brother or sister of either of the parents of the individual;

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

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

(g)     spouse of the persons referred to in sub-clauses (b) to (f); or

(h)     any lineal descendant of a brother or sister of either the individual or of the spouse of the individual;

(34)   "sponsor" means a non-banking financial company, or a bank which is allowed to act as sponsor of Infrastructure Debt Fund in accordance with the directions of Reserve Bank of India.]

[58][3. Valuation of perquisites 

[59][For the purpose of computing the income chargeable under the head Salaries, the value of perquisites provided by the employer directly or indirectly to the assessee (hereinafter referred to as employee) or to any member of his household by reason of his employment shall be determined in accordance with the following sub-rules, namely:-

(1)     [60]The value of residential accommodation provided by the employer during the previous year shall be determined on the basis provided in the Table below :-

TABLE - I

Provided that nothing contained in this sub-rule shall apply to any accommodation provided to an employee working at a mining site or an on-shore oil exploration site or a project execution site, or a dam site or a power generation site or an off-shore site-

(2)     [65]which, being of a temporary nature and having plinth area not exceeding 800 square feet, is located not less than eight kilometers away from the local limits of any municipality or a cantonment board; or

(3)     which is located in a remote area:

Provided further that where on account of his transfer from one place to another, the employee is provided with accommodation at the new place of posting while retaining the accommodation at the other place, the value of perquisite shall be determined with reference to only one such accommodation which has the lower value with reference to the Table above for a period not exceeding 90 days and thereafter the value of perquisite shall be charged for both such accommodations in accordance with the Table.

Explanation.- For the purposes of this sub-rule, where the accommodation is provided by the Central Government or any State Government to an employee who is serving on deputation with any body or undertaking under the control of such Government,-

(4)     the employer of such an employee shall be deemed to be that body or undertaking where the employee is serving on deputation; and

(5)     [66]the value of perquisite of such an accommodation shall be the amount calculated in accordance with Sl. No. (2)(a) of Table I, as if the accommodation is owned by the employer.

(6)     The value of perquisite by way of use of motor car to an employee by an employer shall be determined in accordance with the following Table, namely:-

TABLE II

VALUE OF PERQUISITE PER CALENDAR MONTH

[76]Provided that where one or more motor-cars are owned or hired by the employer and the employee or any member of his household are allowed the use of such motor-car or all of any of such motor-cars (otherwise than wholly and exclusively in the performance of his duties), the value of perquisite shall be the amount calculated in respect of one car in accordance with Sl. No. [77](1)(c)(i) of Table II as if the employee had been provided one motor-car for use partly in the performance of his duties and partly for his private or personal purposes and the amount calculated in respect of the other car or cars in accordance with Sl. No. (1)(b) of Table II as if he had been provided with such car exclusively for his private or personal purposes.

(7)     Where the employer or the employee claims that the motor-car is used wholly and exclusively in the performance of official duty or that the actual expenses on the running and maintenance of the motor-car owned by the employee for official purposes is more than the amounts deductible in Sl. No. 2(ii) or 3(ii) of Table II, he may claim a higher amount attributable to such official use and the value of perquisite in such a case shall be the actual amount of charges met or reimbursed by the employer was reduced by such higher amount attributable to official use of the vehicle provided that the following conditions are fulfilled:-

(8)     the employer has maintained complete details of journey undertaken for official purpose which may include date of journey, destination, mileage, and the amount of expenditure incurred thereon;

(9)     the employer gives a certificate to the effect that the expenditure was incurred wholly and exclusively for the performance of official duties.

Explanation.- For the purposes of this sub-rule, the normal wear and tear of a motor-car shall be taken at 10% per annum of the actual cost of the motor-car or cars.

(10)   The value of benefit to the employee or any member of his household resulting from the provision by the employer or services of a sweeper, a gardener, a watchman or a personal attendant, shall be the actual cost to the employer. The actual cost in such a case shall be the total amount of salary paid or payable by the employer or any other person on his behalf for such services as reduced by any amount paid by the employee for such services.

(11)   The value of the benefit to the employee resulting from the supply of gas, electric energy or water for his household consumption shall be determined as the sum equal to the amount paid on that account by the employer to the agency supplying the gas, electric energy or water. Where such supply is made from resources owned by the employer, without purchasing them from any other outside agency, the value of perquisite would be the manufacturing cost per unit incurred by the employer. Where the employee is paying any amount in respect of such services, the amount so paid shall be deducted from the value so arrived at.

(12)   The value of benefit to the employee resulting from the provision of free or concessional educational facilities for any member of his household shall be determined as the sum equal to the amount of expenditure incurred by the employer in that behalf or where the educational institution is itself maintained and owned by the employer or where free educational facilities for such member of employees household are allowed in any other educational institution by reason of his being in employment of that employer, the value of the perquisite to the employee shall be determined with reference to the cost of such education in a similar institution in or near the locality. Where any amount is paid or recovered from the employee on that account, the value of benefit shall be reduced by the amount so paid or recovered:

Provided that where the educational institution itself is maintained and owned by the employer and free educational facilities are provided to the children of the employee or where such free educational facilities are provided in any institution by reason of his being in employment of that employer, nothing contained in this sub-rule shall apply if the cost of such education or the value of such benefit per child does not exceed one thousand rupees per month.

(13)   The value of any benefit or amenity resulting from the provision by an employer who is engaged in the carriage of passengers or goods, to any employee or to any member of his household for personal or private journey free of cost or at concessional fare, in any conveyance owned, leased or made available by any other arrangement by such employer for the purpose of transport of passengers or goods shall be taken to be the value at which such benefit or amenity is offered by such employer to the public as reduced by the amount, if any, paid by or recovered from the employee for such benefit or amenity:

Provided that nothing contained in this sub-rule shall apply to the employees of an airline or the railways.

(14)   In terms of provisions contained in sub-clause (viii) of clause 2 of section 17, the following other benefits or amenities and value thereof shall be determined in the manner provided hereunder:

(15)   The value of the benefit to the assessee resulting from the provision of interest-free or concessional loan for any purpose made available to the employee or any member of his household during the relevant previous year by the employer or any person on his behalf shall be determined as the sum equal to the interest computed at the rate charged per annum by the State Bank of India, constituted under the State Bank of India Act, 1955 (23 of 1955), as on the 1st day of the relevant previous year in respect of loans for the same purpose advanced by it on the maximum outstanding monthly balance as reduced by the interest, if any, actually paid by him or any such member of his household:

Provided that no value would be charged if such loans are made available for medical treatment in respect of diseases specified in rule 3A of these

Provided further that where the benefit relates to the loans made available for medical treatment referred to above, the exemption so provided shall not apply to so much of the loan as has been reimbursed to the employee under any medical insurance scheme.

(16)   The value of traveling, touring, accommodation and any other expenses paid for or borne or reimbursed by the employer for any holiday availed of by the employee or any member of his household, other than concession or assistance referred to in rule 2B of these rules, shall be determined as the sum equal to the amount of the expenditure incurred by such employer in that behalf. Where such facility is maintained by the employer, and is not available uniformly to all employees, the value of benefit shall be taken to be the value at which such facilities are offered by other agencies to the public. Where the employee is on official tour and the expenses are incurred in respect of any member of his household accompanying him, the amount of expenditure so incurred shall also be a fringe benefit or amenity:

Provided that where any official tour is extended as a vacation, the value of such fringe benefit shall be limited to the expenses incurred in relation to such extended period of stay or vacation. The amount so determined shall be reduced by the amount, if any, paid or recovered from the employee for such benefit or amenity.

(17)   The value of free food and non-alcoholic beverages provided by the employer to an employee shall be the amount of expenditure incurred by such employer. The amount so determined shall be reduced by the amount, if any, paid or recovered from the employee for such benefit or amenity:

Provided that nothing contained in this clause shall apply to free food and non-alcoholic beverages provided by such employer during working hours at office or business premises or through paid vouchers which are not transferable and usable only at eating joints, to the extent the value thereof either case does not exceed fifty rupees per meal or to tea or snacks provided during working hours or to free food and non-alcoholic beverages during working hours provided in a remote area or an off-shore installation.

(18)   The value of any gift, or voucher, or token in lieu of which such gift may be received by the employee or by member of his household on ceremonial occasions or otherwise from the employer shall be determined as the sum equal to the amount of such gift:

Provided that where the value of such gift, voucher or token, as the case may be, is below five thousand rupees in the aggregate during the previous year, the value of perquisite shall be taken as nil.

(19)   The amount of expenses including membership fees and annual fees incurred by the employee or any member of his household, which is charged to a credit card (including any add-on-card) provided by the employer, or otherwise, paid for or reimbursed by such employer shall be taken to be the value of perquisite chargeable to tax as reduced by the amount, if any paid or recovered from the employee for such benefit or amenity:

Provided that there shall be no value of such benefit where expenses are incurred wholly and exclusively for official purposes and the following conditions are fulfilled:

(20)   complete details in respect of such expenditure are maintained by the employer which may, inter alia, include the date of expenditure and the nature of expenditure;

(21)   the employer gives a certificate for such expenditure to the effect that the same was incurred wholly and exclusively for the performance of official duties.

(22)   The value of benefit to the employee resulting from the payment or reimbursement by the employer of any expenditure incurred (including the amount of annual or periodical fee) in a club by him or by an member of his household shall be determined to be the actual amount of expenditure incurred or reimbursed by such employer on that account. The amount so determined shall be reduced by the amount, if any paid or recovered from the employee for such benefit or amenity:

Provided that where the employer has obtained corporate membership of the club and the facility is enjoyed by the employee or any member of his household, the value of perquisite shall not include the initial fee paid for acquiring such corporate membership.

(23)   Nothing contained in this clause shall apply if such expenditure is incurred wholly and exclusively for business purposes and the following conditions are fulfilled:-

(a)     complete details in respect of such expenditure are maintained by the employer which may, inter alia, include the date of expenditure, the nature of expenditure and its business expediency;

(b)     the employer gives a certificate for such expenditure to the effect that the same was incurred wholly and exclusively for the performance of official duties.

(c)      Nothing contained in this clause shall apply for use of health club, sports and similar facilities provided uniformly to all employees by the employer.

(24)   The value of benefit to the employee resulting from the use by the employee or any member of his household of any movable asset (other than assets already specified in this rule and other than laptops and computers) belonging to the employer or hired by him shall be determined at 10% per annum of the actual cost of such asset or the amount of rent or charge paid or payable by the employer, as the case may be, as reduced by the amount, if any, paid or recovered from the employee for such use.

(25)   The value of benefit to the employee arising from the transfer of any movable asset belonging to the employer directly or indirectly to the employee or any member of his household shall be determined to be the amount representing the actual cost of such assets to the employer as reduced by the cost of normal wear and tear calculated at the rate of 10% of such cost for each completed year during which such asset was put to use by the employer and as further reduced by the amount, if any, paid or recovered from the employee being the consideration for such transfer:

Provided that in the case of computers and electronic items, the normal wear and tear would be calculated at the rate of 50% and in the case of motor cars at the rate of 20% by the reducing balance method.

(26)   The value of any other benefit or amenity, service, right or privilege provided by the employer shall be determined on the basis of cost to the employer under an arms length transaction as reduced by the employees contribution, if any:

Provided that nothing contained in this clause shall apply to the expenses on telephones including a mobile phone actually incurred on behalf of the employee by the employer.

(27)   For the purposes of sub-clause (vi) of clause 2 of section 17, the fair market value of any specified security or sweat equity share, being an equity share in a company, on the date on which the option is exercised by the employee, shall be determined in accordance with the provisions of clause (ii) or clause (iii).

(28)   In a case where, on the date of the exercising of the option, the share in the company is listed on a recognized stock exchange, the fair market value shall be the average of the opening price and closing price of the share on that date on the said stock exchange:

Provided that where, on the date of exercising of the option, the share is listed on more than one recognized stock exchanges, the fair market value shall be the average of opening price and closing price of the share on the recognised stock exchange which records the highest volume of trading in the share:

Provided further that where, on the date of exercising of the option, there is no trading in the share on any recognized stock exchange, the fair market value shall be

(29)   the closing price of the share on any recognised stock exchange on a date closest to the date of exercising of the option and immediately preceding such date; or

(30)   the closing price of the share on a recognised stock exchange, which records the highest volume of trading in such share, if the closing price, as on the date closest to the date of exercising of the option and immediately preceding such date, is recorded on more than one recognized stock exchange.

(31)   In a case where, on the date of exercising of the option, the share in the company is not listed on a recognised stock exchange, the fair market value shall be such value of the share in the company as determined by a merchant banker on the specified date.

(32)   For the purpose of this sub-rule,

(33)   closing price of a share on a recognised stock exchange on a date shall be the price of the last settlement on such date on such stock exchange:

Provided that where the stock exchange quotes both buy and sell prices, the closing price shall be the sell price of the last settlement.

(34)   merchant banker means category I merchant banker registered with Security and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(35)   opening price of a share on a recognised stock exchange on a date shall be the price of the first settlement on such date on such stock exchange:

Provided that where the stock exchange quotes both buy and sell prices, the opening price shall be the sell price of the first settlement.

(36)   recognised stock exchange shall have the same meaning assigned to it in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(37)   specified date means,

(38)   the date of exercising of the option; or

(39)   any date earlier than the date of the exercising of the option, not being a date which is more than 180 days earlier than the date of the exercising.

(40)   For the purposes of sub-clause (vi) of clause 2 of section 17, the fair market value of any specified security, not being an equity share in a company, on the date on which the option is exercised by the employee, shall be such value as determined by a merchant banker on the specified date.

Explanation. - For the purposes of this sub-rule, merchant banker and specified date shall have the meanings assigned to them in sub-clause (b) and sub-clause (e) respectively of clause (iv) of sub-rule (8). 

(41)   This rule shall come into force with effect from the 1st day of April, 2009.

Explanation.- For the purposes of this rule-

(42)   accommodation includes a house, flat, farm house or part thereof, or accommodation in a hotel, motel, service apartment, guest house, caravan, mobile home, ship or other floating structure;

(43)   entertainment includes hospitality of any kind and also, expenditure on business gifts other than free samples of the employers own product with the aim of advertising to the general public;

(44)   hotel includes licensed accommodation in the nature of motel, service apartment or guest house;

(45)   member of household shall include-

(a)     spouse(s),

(b)     children and their spouses,

(c)      parents, and

(d)     servants and dependants;

(46)   remote area, for purposes of proviso to this sub-rule means an area that is located at least 40 kilometres away from a town having a population not exceeding 20,000 based on latest published all-India census;

(47)   salary includes the pay, allowances, bonus or commission payable monthly or otherwise or any monetary payment, by whatever name called from one or more employers, as the case may be, but does not include the following, namely:-

(a)     dearness allowance or dearness pay unless it enters into the computation of superannuation or retirement benefits of the employee concerned;

(b)     employers contribution to the provident fund account of the employee;

(c)      allowances which are exempted from payment of tax;

(d)     the value of perquisites specified in clause (2) of section 17 of the Income-tax Act;

(e)     any payment or expenditure specifically excluded under proviso to sub-clause (iii) of clause (2) or proviso to clause (2) of section 17;

(f)      lump-sum payments received at the time of termination of service or superannuation or voluntary retirement, like gratuity, severance pay, leave encashment, voluntary retrenchment benefits, commutation of pension and similar payments;

(48)   maximum outstanding monthly balance means the aggregate outstanding balance for each loan as on the last day of each month.]

TABLE

TABLE-II

Value of Perquisite per calendar month

[Table I]

[TABLE I] 

3A.- [78][Exemption of medical benefits from perquisite value in respect of medical treatment of prescribed diseases or ailments in hospitals approved by the Chief Commissioner.

(1)     [79][In granting approval to any hospital other than a hospital for Indian system of medicine and homoeopathic treatment for the purposes of sub-clause (b)  of clause (ii)  of the proviso to sub-clause (vi)  of clause (2)  of section 17], the Chief Commissioner shall satisfy himself that the hospital is registered with the local authority and fulfils the following requirements, namely :--

(2)     The building used for the hospital complies with the municipal bye-laws in force.

(3)     The rooms are well ventilated, lighted and are kept in clean and hygienicconditions.

(4)     At least ten iron spring beds are provided for patients. (iv)  At least one properly equipped operation theatre is provided, with minimum floor space of 180 square feet and with a separate sterilization room.

(5)     At least one labour room is provided, with minimum floor space of 180 square feet, in case the hospital provides medical service for maternity cases.

(6)     Aseptic conditions are maintained in the operation theatre and the labour room.

(7)     A duty room is provided for the nursing staff on duty.

(8)     Adequate space for storage of medicines, food articles, equipments, etc., is provided.

(9)     The water used in the hospital or nursing home is fit for drinking.

(10)   Adequate arrangements are made for isolating septic and infectious patients.

(11)   The hospital is provided with and maintains :--

(12)   high pressure sterilizer and instrument sterilizer;

(13)   oxygen cylinders and necessary attachments for giving oxygen;

(14)   adequate surgical equipments, instruments and apparatus includ?ing intravenous apparatus;

(15)   a pathological laboratory for testing of blood, urine and stool;

(16)   electro-cardiogram monitoring system;

(17)   stand-by generator for use in case of power failure.

(18)   There is at least one qualified doctor available on duty round the clock for every twenty beds or fraction thereof.

(19)   In hospitals providing intensive care unit facilities, there are at least two qualified doctors available on duty round the clock exclusively for such intensive care unit. 

(20)   One nurse is on duty round the clock for every five beds or a fraction thereof.

(21)   In hospitals providing intensive care unit facilities, there are at least four nurses provided exclusively for every four beds or fraction thereof for such intensive care unit.

(22)   The hospital maintains record of health of every patient containing information about the patient's name, address, occupation, sex, age, dale of admission, date of discharge, diagnosis of disease and treatment undertaken.

(23)   [80] [In granting approval to any hospital for Indian system of medicine and homoeopathic treatment for the purposes of sub-clause (b)  of clause (ii)  of the proviso to sub-clause (vi)  of clause 2 of section 17, the Chief Commissioner shall satisfy himself that the hospital fulfils the conditions specified vide Office Memorandum dated the 6th June, 2002, by the Department of Indian Systems of Medicine and Homoeopathy, Ministry of Health and Family Welfare for approval of private hospitals for Indian system of medicine and homoeopathic treatment to Central Government Health Scheme beneficiaries and Central Government employees.]

(24)   [81][For the purpose of sub-clause (b)  of clause (ii)  of the proviso to sub-clause (vi)  of clause (2)  of section 17], the prescribed diseases or ailments shall be the following, namely :--

(25)   cancer;

(26)   tuberculosis;

(27)   acquired immunity deficiency syndrome;

(28)   disease or ailment of the heart, blood, lymph glands, bone marrow, respiratory system, central nervous system, urinary system, liver, gall bladder, digestive system, endocrine glandsor the skin, requiring surgical operation;

(29)   ailment or disease of the eye, ear, nose or throat, requiring surgical operation;

(30)   fracture in any part of the skeletal system or dislocation of vertebrae requiring surgical operation or orthopaedic treatment;

(31)   gynaecological or obstetric ailment or disease requiring surgical opera?tion, caesarean operation or laperoscopic intervention;

(32)   ailment or disease of the organs mentioned at (d) , requiring medical treatment in a hospital for at least three continuous days;

(33)   gynaecological or obstetric ailment or disease requiring medical treat?ment in a hospital for at least three continuous days;

(34)   burn injuries requiring medical treatment in a hospital for at least three continuous days;

(35)   mental disorder - neurotic or psychotic - requiring medical treatment in a hospital for at least three continuous days;

(36)   drug addiction requiring medical treatment in a hospital for at least seven continuous days;

(37)   anaphylectic shocks including insulin shocks, drug reactions and other allergic manifestations requiring medical treatment in a hospital for at least three continuous days.

Explanation : For the purpose of this rule,--

(a)     "qualified doctor" means a person who holds a degree recognised by the Medical Council of India and is registered by the Medical Council of any State;

(b)     "nurse" means a person who holds a certificate of a recognised Nursing Council and is registered under any law for the registration of nurses;

(c)      "surgical operation" includes treatment by modern methodology such as angioplasty, dialysis, lithotropsy, laser or eryo-surgery.] 

B.--Income from house property Unrealised rent.

[82]"4. Unrealised rent.-

For the purposes of the Explanation below sub-section (1) of section 23, the amount of rent which the owner cannot realise shall be equal to the amount of rent payable but not paid by a tenant of the assessee and so proved to be lost and irrecoverable where,-

(1)     the tenancy is bona fide;

(2)     the defaulting tenant has vacated, or steps have been taken to compel him to vacate the property;

(3)     the defaulting tenant is not in occupation of any other property of the assessee;

(4)     the assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid rent or satisfies the Assessing Officer that legal proceedings would be useless." 

C--Profits and gains of business or profession

5. Depriciation

(1)     Subject to the provisions of sub-rule (2), the allowance under clause (ii) of sub?section (I) of section 32 in respect of depreciation of any block of assets shall be calculated at the percentages specified in the second column of the Table in Appendix I to these rules on the written down value of such block of assets as are used for the purposes of the business or profession of the assessee at any time during the previous year.

(2)     [83][The allowance under clause (i) of sub-section (1) of section 32 of the Act in respect of depreciation of assets acquired on or after 1st day of April,? 1997 shall be calculated at the percentage specified in the second column of the Table in Appendix IA of these rules on the actual cost thereof to the assessee as are used for the purposes of the business of the assessee at any time during the previous year :

Provided that the aggregate depreciation allowed in respect of any asset for different assessment years shall not exceed the actual cost of the said asset :

Provided further that the undertaking specified in clause (i) of sub-section (1) of section 32 of the Act may, instead of the depreciation specified in Appendix IA, at its option, be allowed depreciation under sub-rule (1) read with Appendix I, if such option is exercised before the due date for furnishing the return of income under sub-section (f) of section 139 of the Act,

(3)     for the assessment year 1998-99, in the case of an underlaking which began to generate power prior to 1st day of April, 1997; and

(4)     for the assessment year relevant to the previous year in which it begins to generate power, in case of any other undertaking :

Provided also that any such option once exercised shall be final and shall apply to all the subsequent assessment years.]

(5)     Where any new-machinery or plant is installed during the previous year relevant to the assessment year commencing on or after the 1st day of April, 1988, for the purposes of business of manufacture or production of any article or thing and such article or thing?

(6)     is manufactured or produced by using any technology (including anyprocess) or other know-how developed in,or

(7)     is an article or thing invented in a laboratory owned or financed by the Government or a laboratory owned by a public sector company or a University or an institution recognised in this behalf by the Secretary, Department of Scientific and Industrial Research, Government of India, such piant or machinery shall be treated as a part of block of assets qualifying for depreciation at the rate of [84][40] per cent of written down value, if the following conditions are fulfilled, namely :--

(8)     the right to use such technology (including any process) or other know-how or to manufacture or produce such article or thing has been acquired from the owner of such laboratory or any person deriving title from such owner ;

(9)     the return furnished by the asscssee for his income, or the income of any other person in respect of which he is assessable, for any previous year in whieh the said machinery or plant is acquired, shall be accompanied by a certificate from the Secretary, Department of Scientific and Industrial Research, Government of India, to the effect that such article or thing is manufactured or produced by using such technology (includ?ing any process) or other know-how developed in such laboratory or is an article or thing invented in such laboratory ; and

(10)   the machinery or plant is not used for the purpose of business of manufacture or production of any article or thing specified in the list in the Eleventh Schedule to the Act.

Explanation : For the purposes of this sub-rule,--

(11)   "laboratory financed by the Government" means a laboratory owned by any body  including a society registered under the Societies Registration Act, 1860 (21 of 1860)], and financed wholly or mainly by the Govern?ment ;

(12)   "public sector company" means any corporation established by or under any Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956) ; and

(13)   "University" means a University established or incorporated by or under a Central, State or Provincial Act and includes an institution declared under section 3 of the University Grants Commission Act, 1956 (3 of 1956), to be a University for the purposes of that Act.  

[85][5A. -Form of report by an accountant for claiming deduction under section 32(1)(iia)

The report from an accountant which is required to be furnished by the assessee under the third proviso to clause (iia) of sub-section (1) of section 32 shall be in Form No. 3AA.]

[86][5AA].- Prescribed authority for investment allowance.

For the purposes of sub-section (2B) of section 32A, the "prescribed authority" shall be the Secretary, Department of Scientific and Industrial Research, Government of India.

5AB.- Report of audit of accounts to be furnished under section 32AB(5).

The report of audit of the accounts of an assessec, which is required to be furnished under sub-section (5) of section 32AB shall be in [87][Form No. 3AAA]. 

5AC.- [88][Report of audit of accounts to be furnished under section 33AB(2).

The report of audit of the accounts of an assesses, which is required to be furnished under sub-section (2) of section 33AB. shall be in Form No. 3AC.]

5AD.- [89]Report of audit of accounts to be furnished under section 33ABA(2).

The report of audit of the accounts of an assesses, which is required to be furnished under sub-section (2) of section 33ABA, shall be in Form No. 3AD.] 

5B.- Development rebate.

The deduction to be allowed by way of development rebate in respect of any ship or machinery or plant referred to in sub-section (1A) of section 33 shall be a sum equivalent to--

(a)     in the case of any such ship?

(b)     where the ship is acquired by the assessee at any time before the expiry of seven years from the date she was built, thirty per cent of the actual cost of the ship to the assessee ; and

(c)      in any other case, twenty per cent of the actual cost of the ship to the assessee;

(d)     in the case of any such machinery or plant installed after the 31st day of March, 1964?

(e)     where it is installed before the 1st day of April, 1966, for the purposes of business of mining coal, twenty per cent of the actual cost of the machinery or plant to the assessee ; and

(f)      in any other case, ten per cent of the actual cost of the machinery or plant to the assessee.

Explanation : In this rule, "actual cost" shall have the meaning assigned to it in clause (1) of section 43.]

[90][5C. Guidelines, form and manner in respect of approval under clause (ii) and clause (iii) of sub-section (1) of section 35-

(1)     An application for approval,

(2)     under clause (ii) [91][or clause (iii)] of sub-section (1) of section 35 by a [92][***] research association in duplicate in Form No. 3CF-I;

(3)     under clause (ii) or clause (iii) of sub-section (1) of section 35 by a university, college or other institution in duplicate in Form No. 3CF-II shall be made, at any time during the financial year immediately preceding the assessment year from which the approval is sought, to the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the applicant.

(4)     Annexure to the application in Form No. 3CF-I shall be filled out if the association claims exemption under clause (21) of section 10 of the Income-tax Act.

(5)     The applicant shall send a copy of the application in Form No. 3CF-I or, as the case may be, Form No. 3CF-II to Member (IT), Central Board of Direct Taxes? accompanied by the acknowledgement receipt as evidence of having furnished the application Form in duplicate in the office of the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the case.

(6)     The period of one year, as specified in the fourth proviso to sub-section (1) of section 35, before the expiry of which approval is to be granted or the application is to be rejected by the Central Government shall be reckoned from the end of the month in which the application Form from the applicant for approval is received in the office of Member (IT), Central Board of Direct Taxes.

(7)     If any defect is noticed in the application in Form No. 3CF-I or Form No. 3CF-II or if any relevant document is not attached thereto, the Commissioner of Income-tax or, as the case may be, the Director of Income-tax shall serve a deficiency letter on the applicant, before the expiry of one month from the date of receipt of the application Form in his office.

(8)     The applicant shall remove the deficiency within a period of fifteen days from the date of service of the deficiency letter or within such further period which, on an application made in this behalf may be extended, so however, that the total period for removal of deficiency does not exceed thirty days, and if the applicant fails to remove the deficiency within the period of thirty days so allowed, the Commissioner of Income-tax or, as the case may be, the Director of Income-tax shall send his recommendation for treating the application as invalid to the Member (IT), Central Board of Direct Taxes.

(9)     The Central Government, if satisfied, may pass an order treating the application as invalid.

(10)   If the application Form is complete in all respects, the Commissioner of Income-tax or, as the case may be, the Director of Income-tax, may make such inquiry as he may consider necessary regarding the genuineness of the activity of the association or university or college or other institution and send his recommendation to the Member (IT) for grant of approval or rejection of the application before the expiry of the period of three months to be reckoned from the end of the month in which the application Form was received in his office.

(11)   The Central Government may before granting approval under clause (ii) or clause (iii) shall call for such documents or information from the applicant as it may consider necessary and may get any inquiry made for verification of the genuineness of the activity of the applicant.

(12)   The Central Government may, under sub-section (1) of section 35, issue the notification to be published in the Official Gazette granting approval to the association or university or college or other institution or for reasons to be recorded in writing reject the application.

(13)   The Central Government may withdraw the approval granted under clause (ii) or clause (iii) of sub-section (1) of section 35 if it is satisfied that the [93][***] research association or university or college or other institution has ceased its activities or its activities are not genuine or are not being carried out in accordance with all or any of the conditions under rule 5D or rule 5E.

(14)   No order treating the application as invalid or rejecting the application or withdrawing the approval, shall be passed without giving a reasonable opportunity of being heard to the [94][***] research association or university or college or other institution.

(15)   A copy of the order invalidating or rejecting the application or withdrawing the approval shall be communicated to the applicant, the Assessing Officer and the Commissioner of Income-tax or, as the case may be, the Director of Income-tax.

[95][5D. Conditions subject to which approval is to be granted to a research association under clause (ii) or clause (iii) of sub-section (1) of section 35.--

(1)     The sole object of the applicant research association shall be to undertake scientific research or research in social science or statistical research as the case may be.]

(2)     The applicant research association shall carry on the research activity by itself.

(3)     The research association seeking approval under clause (ii) or clause (iii) of sub-section (1) of section 35 shall maintain books of account and get such books audited by an accountant as defined in the Explanation to sub-section (2) of section 288 and furnish the report of such audit duly signed and verified by such accountant to the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the case, by the due date of furnishing the return of income under sub-section (1) of section 139.

(4)     The research association shall maintain a separate statement of donations received and amount applied for scientific research or research in social science or statistical research and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to in sub-rule (3).

(5)     The research association shall, by the due date of furnishing the return of income under sub-section (1) of section 139, furnish a statement to the Commissioner of Income-tax or Director of Income-tax containing?

(i)       a detailed note on the research work undertaken by it during the previous year;

(ii)      a summary of research articles published in national or international journals during the year;

(iii)    any patent or other similar rights applied for or registered during the year;

(iv)    programme of research projects to be undertaken during the forthcoming year and the financial allocation for such programme.

(6)     If the Commissioner of Income-tax or the Director of Income-tax is satisfied that the research association,?

(a)     is not maintaining books of account, or

(b)     has failed to furnish its audit report, or

(c)      has not furnished its statement of the sums received and the sums applied for scientific research or research in social science or statistical research or a statement referred to in sub-rule (5), or

(d)     has ceased to carry on its research activities, or its activities are not genuine, or

(e)     is not fulfilling the conditions subject to which approval was granted to it, he may after making appropriate enquiries furnish a report on the circumstances referred to in clauses (a) to (e) above to the Central Government within six months from the date of furnishing the return of income under sub-section (1) of section 139.]

5E.?? Conditions subject to which approval is to be granted to a University, College or other Institution under clause (ii) and clause (iii) of sub-section (1) of section 35. 

(1)     The sum paid to a university, college or other institution shall be used for scientific research and research in social science or statistical research.

(2)     The applicant university, college or other institution shall carry out scientific research, research in social science or statistical research through its faculty members or its enrolled students.

(3)     A university or college or other institution approved under clause (ii) or clause (iii) of sub-section (1) of section 35 shall maintain separate books of account in respect of the sums received by it for scientific research or, as the case may be, for research in social science or statistical research, reflect therein the amount used for carrying out research, get such books of account audited by an accountant, as defined in the Explanation to sub-section (2) of section 288 and furnish the report of such audit duly signed and verified by such accountant to the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the case, by the due date of furnishing the return of income under sub-section (1) of section 139.

(4)     The university or college or other institution shall maintain a separate statement of donations received and the amount used for research and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to in sub-rule (3).

(5)     [96][The university, college or other institution shall, by the due date of furnishing the return of income under sub-section (1) of section 139, furnish a statement to the Commissioner of Income-tax or Director of Income-tax containing.-

(i)       a detailed note on the research work undertaken by it during the previous year;

(ii)      a summary of research articles published in national or international journals during the year;

(iii)    any patent or other similar rights applied for or registered during the year;

(iv)    programme of research projects to be undertaken during the forthcoming year and the financial allocation for such programme]

(6)     If the Commissioner of Income-tax or the Director of Income-tax is satisfied that the university or college or other institution,-

(a)     is not maintaining separate books of account for research activities, or

(b)     has failed to furnish its audit report, or

(c)      has not furnished its statement of the sums received and the sums used for research [97][or a statement referred to in sub-rule (4A)], or

(d)     has ceased to carry on its research activities, or its activities are not genuine, or

(e)     is not fulfilling the conditions subject to which approval was granted to it,he may after making appropriate enquiries furnish a report on the circumstances referred to in clauses (a) to (e) above to the Central Government within six months from the date of furnishing the return of income under section 139(1).]

[98][5F. Prescribed authority, guidelines, form, manner and conditions for approval under clause (iia) of sub-section (1) of section 35.--

(1)     For the purposes of clause (iia) of sub-section (1) of section 35, the prescribed authority shall be the Chief Commissioner of Income -tax having jurisdiction over the applicant.

(2)     Guidelines, form and manner in respect of approval under clause (iia) of sub-section (1) of section 35 shall be as under: ?

(a)     An application for approval under clause (iia) of sub-section (1) of section 35 by a company shall be made in duplicate in Form No. 3CF-III, to the Commissioner of Income -tax having jurisdiction over the applicant, at any time during the financial year immediately preceding the assessment year from which the approval is sought.

(b)     The applicant shall send a copy of the application in Form No. 3CF-III to the prescribed authority, accompanied by the acknowledgement receipt as evidence of having furnished the application form in duplicate in the office of the Commissioner of Income -tax having jurisdiction over the case.

(c)      Every notification under clause (iia) of sub-section (1) of section 35 shall be issued or an order rejecting the application shall be passed within a period of twelve months from the end of the month in which the application was received in the office of the Chief Commissioner of Income-tax.

(d)     If any defect is noticed in the application in Form No. 3CF -III or if any relevant document is not attached thereto, the Commissioner of Income -tax shall serve a deficiency letter on the applicant before the expiry of one month from the date of receipt of the application form in his office.

(e)     The applicant shall remove the deficiency within a period of fifteen days from the date of service of the deficiency letter or within such further period which, on an application made in this behalf may be extended, so however, that the total period for removal of deficiency does not exceed thirty days, and if the applicant fails to remove the deficiency within the period of thirty days so allowed, the Commissioner of Income -tax shall send his recommendation to the Chief Commissioner of Income- tax for treating the application as invalid.

(f)      The Chief Commissioner of Income -tax may, after examining the recommendations referred to in clause (e), pass an order that the application is invalid.

(g)     If the application form is complete in all respects, the Commissioner of Income -tax may, make such inquiry as he may consider necessary regarding the genuineness of the activity of the company and send his recommendation to the Chief Commissioner of Income -tax for grant of approval or rejection of the application before the expiry of the period of three months to be reckoned from the end of the month in which the application form was received in his office.

(h)     The Chief Commissioner of Income -tax may, before granting approval under clause (iia) of sub-section (1) of section 35, call for such documents or information from the applicant as it considers necessary and may get any inquiry made for verification of the genuineness of the activity of the applicant.

(i)       The Chief Commissioner of Income -tax may, under sub-section (1) of section 35, issue the notification to be published in the Official Gazette granting approval to the company or for reasons to be recorded in writing reject the application.

(j)      The Chief Commissioner of Income -tax may withdraw the approval granted under clause ( iia ) of sub-section (1) of section 35 if he is satisfied that the company has ceased to carry on its activities or its activities are not genuine or are not being carried on in accordance with all or any of the conditions under this rule:

Provided that no order treating the application as invalid or rejecting the application or withdrawing the approval shall be passed without giving a reasonable opportunity of being heard to the company.

(k)     A copy of the order invalidating or rejecting the application or withdrawing the approval shall be communicated to the applicant, the Assessing Officer and the Commissioner of Income -tax.

(3)     Approval to a company under clause ( iia ) of sub-section (1) of section 35 shall be subject to the following conditions, namely:?

(a)     The sum paid to the company shall be used for scientific research;

(b)     The applicant company shall carry on scientific research through its own employees using its own assets;

(c)      A company approved under clause (iia ) of sub-section (1) of section 35 shall maintain separate books of account in respect of the sums received by it for scientific research, reflect therein the amount used for carrying on research, get such books of account audited by an accountant, and furnish the report of such audit duly signed and verified by such accountant to the Commissioner of Income -tax having jurisdiction over the case, by the due date of furnishing the return of income under sub-section (1) of section 139.

Explanation .- For the purpose of this clause "accountant" shall have the same meaning as assigned to it in Explanation to sub-section (2) of section 288 of the Act.

(d)     The company shall maintain a separate statement of donations received and the amount used for research and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to in sub-rule (3).

(e)     Subsequent to approval, the company shall, every year, by the due date of furnishing the return of income under sub-section (1) of section 139, furnish a statement to the Commissioner of income-tax containing the following information, namely: ?

(f)      a detailed note on the research work undertaken by it during the previous year;

(g)     a summary of research articles published in national or international journals during the year;

(h)     any patents or other similar rights applied for or registered during the year;

(i)       programme of research projects to be undertaken during the forthcoming year and the financial allocation for such subjects.

(j)      If the Commissioner of Income -tax is satisfied that the company,?

(k)     is not maintaining separate books of account for research activities, or

(l)       has failed to furnish its audit report, or

(m)    has not furnished its statement of the sums received and the sums used for research, or a statement referred to in sub-clause (e),or

(n)     has ceased to carry on its research activities, or its activities are not genuine, or

(o)     is not fulfilling the conditions subject to which approval was granted to it, he may after making appropriate enquiries, furnish a report on the circumstances referred to in sub-clauses (i) to (v) to the jurisdictional Chief Commissioner o f Income ?tax within six months from the date of furnishing the return of income under sub-section (1) of section 139.]

6. Prescribed authority for expenditure on scientific research.--

(1)     For the purposes of? [[99] [clause (i)  of]sub-section (1)  and sub-section (2A)  of] section 35, the prescribed authority shall be the Director General (Income-tax Exemptions)  in concurrence with the Secretary, Department of Scientific and Industrial Research, Government of India.

(2)     [100][For the purposes of sub-section (2AA)  of section 35, the prescribed authority shall be-

(a)     in the case of a National Laboratory or a University or an Indian Institute of Technology the head of the National Laboratory or the University or the Indian Institute of Technology, as the case may be; and

(b)     in the case of a specified person, the Principal Scientific Adviser to the Government of India.]

(3)     [101][For the purposes of sub-section (2AB)  of section 35, the prescribed authority shall be the Secretary, Department of Scientifc and Industrial Research.

(4)     [102][***]

(5)     [103][The application for obtaining approval under sub-section (2AA)  of section 35 shall he made by a sponsor in Form No.3CG.

Explanation : For the purposes of this rule "sponsor" means a person who makes an application in Form No. 3CG.]

(6)     [104]The application required to be furnished by a company under sub-section (2AB)  of section 35 shall be in Form No. 3CK.

(7)     [105][The head of the National Laboratory or the University or the Indian Institute of Technology [106][or the Principal Scientific Adviser to the Government of India] shall, if he is satisfied that it is feasible to cany out the scientific research programme then, subject to other conditions prescribed in this rule and section 35 (2AA)  of the Act, pass an order in wnting in Form No. 3CH :