THE TAXATION LAWS (AMENDMENT) ACT, 2003

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An Act further to amend the Income-tax Act, 1961, the Wealth-tax Act,

1957 and the Expenditure-tax Act, 1987.

BE it enacted by Parliament in the Fifty-fourth Year of the Republic of

India as follows:-

CHAPTER I

PRELIMINARY

 

1. Short title and commencement.-(1) This Act may be called the

Taxation Laws (Amendment) Act, 2003.

(2) Save as otherwise provided in this Act, it shall be deemed to have

come into force on the 8th day of September, 2003.

 

CHAPTER II

AMENDMENTS TO THE INCOME-TAX ACT, 1961

 

2. Amendment of section 10.-In section 10 of the Income-tax Act, 1961

(43 of 1961) (hereafter in this Chapter referred to as the Income-tax

Act), in clause (15),-

(A) after sub-clause (iiia), the following sub-clause shall be inserted

and shall be deemed to have been inserted with effect from the 1st day

of April, 2001, namely:-

“(iiib) interest payable to the Nordic Investment Bank, being a

multilateral financial institution constituted by the Governments of

Denmark, Finland, Iceland, Norway and Sweden, on a loan advanced by it

to a project approved by the Central Government in terms of the

Memorandum of Understanding entered into by the Central Government with

that Bank on the 25th day of November, 1986;”;

(B) in sub-clause (iv),-

(a) in item (c), the existing Explanation shall be numbered as

Explanation 1 thereof and after Explanation 1 as so numbered, the

following Explanation shall be inserted and shall be deemed to have

been inserted with effect from the 1st day of April, 1962, namely:-

“Explanation 2.-For the removal of doubts, it is hereby declared that

the usance interest payable outside India by an undertaking engaged in

the business of ship-breaking in respect of purchase of a ship from

outside India shall be deemed to be the interest payable on a debt

incurred in a foreign country in respect of the purchase outside

India;”;

(b) in the Explanation 1 occurring below item (i), after clause (d),

the following clause shall be inserted and shall be deemed to have been

inserted with effect from the 1st day of April, 1991, namely:-

“(da) the business of ship-breaking; or”.

 

3. Insertion of new section 10BA.-After section 10B of the Income-tax

Act, the following section shall be inserted with effect from the 1st

day of April, 2004, namely:-

 

Special provisions in respect of export of certain articles or things.

 

10BA. Special provisions in respect of export of certain articles or

things.-(1) Subject to the provisions of this section, a deduction of

such profits and gains as are derived by an undertaking from the export

out of India of eligible articles or things, shall be allowed from the

total income of the assessee:

Provided that where in computing the total income of the undertaking

for any assessment year, deduction under section 10A or section 10B has

been claimed, the undertaking shall not be entitled to the deduction

under this section:

Provided further that no deduction under this section shall be allowed

to any undertaking for the assessment year beginning on the 1st day of

April, 2010 and subsequent years.

(2) This section applies to any undertaking which fulfils the following

conditions, namely:-

(a) it manufactures or produces the eligible articles or things without

the use of imported raw materials;

(b) it is not formed by the splitting up, or the reconstruction, of a

business already in existence:

Provided that this condition shall not apply in respect of any

undertaking which is formed as a result of the re-establishment,

reconstruction or revival by the assessee of the business of any such

undertaking as is referred to in section 33B, in the circumstances and

within the period specified in that section;

(c) it is not formed by the transfer to a new business of machinery or

plant previously used for any purpose.

Explanation.-The provisions of Explanation 1 and Explanation 2 to subsection

(2) of section 80-I shall apply for the purposes of this clause

as they apply for the purposes of clause (ii) of sub-section (2) of

that section;

(d) ninety per cent. or more of its sales during the previous year

relevant to the assessment year are by way of exports of the

eligible articles or things;

(e) it employs twenty or more workers during the previous year in the

process of manufacture or production.

(3) This section applies to the undertaking, if the sale proceeds of

the eligible articles or things exported out of India are received in

or brought into, India by the assessee in convertible foreign exchange,

within a period of six months from the end of the previous year or,

within such further period as the competent authority may allow in this

behalf.

Explanation.-For the purposes of this sub-section, the expression

“competent authority” means the Reserve Bank of India or such other

authority as is authorised under any law for the time being in force

for regulating payments and dealings in foreign exchange.

(4) For the purposes of sub-section (1), the profits derived from

export out of India of the eligible articles or things shall be the

amount which bears to the profits of the business of the undertaking,

the same proportion as the export turnover in respect of such articles

or things bears to the total turnover of the business carried on by the

undertaking.

(5) The deduction under sub-section (1) shall not be admissible, unless

the assessee furnishes in the prescribed form, along with the return of

income, the report of an accountant, as defined in the Explanation

below sub-section (2) of section 288, certifying that the deduction has

been correctly claimed in accordance with the provisions of this

section.

(6) Notwithstanding anything contained in any other provision of this

Act, where a deduction is allowed under this section in computing the

total income of the assessee, no deduction shall be allowed under any

other section in respect of its export profits.

(7) The provisions of sub-section (8) and sub-section (10) of section

80-IA shall, so far as may be, apply in relation to the undertaking

referred to in this section as they apply for the purposes of the

undertaking referred to in section 80-IA.

Explanation.-For the purposes of this section,-

(a) “convertible foreign exchange” means foreign exchange which is for

the time being treated by the Reserve Bank of India as convertible

foreign exchange for the purposes of the Foreign Exchange Management

Act, 1999 (42 of 1999), and any rules made thereunder or any other

corresponding law for the time being in force;

(b) “eligible articles or things” means all hand-made articles or

things, which are of artistic value and which requires the use of wood

as the main raw material;

(c) “export turnover” means the consideration in respect of export by

the undertaking of eligible articles or things received in, or brought

into, India by the assessee in convertible foreign exchange in

accordance with sub-section (3), but does not include freight,

telecommunication charges or insurance attributable to the delivery of

the articles or things outside India;

(d) “export out of India shall not include any transaction by way of

sale or otherwise, in a shop, emporium or any other establishment

situate in India, not involving clearance of any customs station as

defined in the Customs Act, 1962 (52 of 1962).. 

4. Amendment of section 115P.-In section 115P of the Income-tax Act,

for the words “one and one-fourth per cent.”, the words “one per

cent.” shall be substituted. 

5. Amendment of section 115S.-In section 115S of the Income-tax Act,

for the words “one and one-fourth per cent.”, the words “one per

cent.” shall be substituted. 

6. Amendment of section 132B.-In section 132B of the Income-tax Act, in

sub-section (4), in clause (a), for the words “eight per cent.”, the

words “six per cent.” shall be substituted. 

7. Amendment of section 158BFA.-In section 158BFA of the Income-tax

Act, in sub-section (1), for the words “one and one-fourth per cent.”,

the words “one per cent.” shall be substituted. 

8. Amendment of section 201.-In section 201 of the Income-tax Act, in

sub-section (1A), for the words “fifteen per cent.”, the words “twelve

per cent.” shall be substituted

9. Amendment of section 206C.-In section 206C of the Income-tax Act,-

(a) in sub-section (1),-

(i) for the Table, the following Table shall be substituted, namely:-

“TABLE

Sl. No. Nature of goods Percentage

(1) (2) (3)

(i) Alcoholic liquor for human consumption One per cent.

(ii) Tendu leaves Five per cent.

(iii) Timber obtained under a forest lease Two and one-half

per cent.

(iv) Timber obtained by any mode other than Two and one-half

per cent.

under a forest lease

(v) Any other forest produce not being timber Two and one-half

per cent.

or tendu leaves

(vi) Scrap One per cent. : “;

(ii) for the proviso below the Table, the following proviso shall be

substituted, namely:-

“Provided that every person, being a seller shall at the time, during

the period beginning on the 1st day of June, 2003 and ending on the day

immediately preceding the date on which the Taxation Laws (Amendment)

Act, 2003 comes into force, of debiting of the amount payable by the

buyer to the account of the buyer or of receipt of such amount from the

said buyer in cash or by the issue of a cheque or draft or by any other

mode, whichever is earlier, collect from the buyer of any goods of the

nature specified in column (2) of the Table as it stood immediately

before the 1st day of June, 2003, a sum equal to the percentage,

specified in the corresponding entry in column (3) of the said Table,

of such amount as income-tax in accordance with the provisions of this

section as they stood immediately before the 1st day of June, 2003.”;

(b) after sub-section (1), the following sub-sections shall be

inserted, namely:-

“(1A) Notwithstanding anything contained in sub-section (1), no

collection of tax shall be made in the case of a buyer, who is resident

in India, if such buyer furnishes to the person responsible for

collecting tax, a declaration in writing in duplicate in the prescribed

form and verified in the prescribed manner to the effect that the goods

referred to in column (2) of the aforesaid Table are to be utilised for

the purposes of manufacturing, processing or producing articles or

things and not for trading purposes.

(1B) The person responsible for collecting tax under this section shall

deliver or cause to be delivered to the Chief Commissioner or

Commissioner one copy of the declaration referred to in sub-section

(1A) on or before the seventh day of the month next following the month

in which the declaration is furnished to him.”;

(c) in sub-section (3), for the words “seven days”, the words “the

prescribed time” shall be substituted;

(d) in sub-section (5), for the words “ten days from the date of

debit”, the words “such period as may be prescribed from the time of

debit” shall be substituted;

(e) in sub-section (7), for the words “one and one-fourth per cent.”,

the words “one per cent.” shall be substituted;

(f) in the Explanation occurring at the end, in clause (a), for subclauses

(i) and (ii), the following sub-clauses shall be substituted,

namely:-

“(i) a public sector company, the Central Government, a State

Government, and an embassy, a high commission, legation, commission,

consulate and the trade representation, of a foreign State and a club;

or

(ii) a buyer in the retail sale of such goods purchased by him for

personal consumption;”. 

10. Amendment of section 220.-In section 220 of the Income-tax Act, in

sub-section (2), for the words “one and one-fourth per cent.”, the

words “one per cent.” shall be substituted. 

11. Amendment of section 230.-In section 230 of the Income-tax Act, in

sub-section (2), after the word, brackets and figure “sub-section (1)”,

the words, brackets, figure and letter “or the first proviso to sub-

section (1A)” shall be inserted and shall be deemed to have been

inserted with effect from the 1st day of June, 2003. 

12. Amendment of section 234A.-In section 234A of the Income-tax Act,

in sub-sections (1) and (3), for the words “one and one-fourth per

cent.”, the words “one per cent.” shall be substituted. 

13. Amendment of section 234B.-In section 234B of the Income-tax Act,

in sub-sections (1) and (3), for the words “one and one-fourth per

cent.”, the words “one per cent.” shall be substituted.

14. Amendment of section 234C.-In section 234C of the Income-tax Act,

in sub-section (1),-

(i) in clause (a), in sub-clauses (i) and (ii), for the words “one and

one-fourth per cent.”, the words “one per cent.” shall be substituted;

(ii) in clause (b), in sub-clauses (i) and (ii), for the words “one and

one-fourth per cent.”, the words “one per cent.” shall be substituted. 

15. Amendment of section 234D.-In section 234D of the Income-tax Act,

in sub-section (1), for the words “two-third per cent.”, the words

“one-half per cent.” shall be substituted. 

16. Amendment of section 244A.-In section 244A of the Income-tax Act,

in sub-section (1), in clauses (a) and (b), for the words “two-third

per cent.”, the words “one-half per cent.” shall be substituted. 

17. Amendment of section 272A.-In section 272A of the Income-tax Act,

in sub-section (2), after clause (i), the following clause shall be

inserted, namely:-

“(j) to deliver or cause to be delivered in due time a copy of the

declaration referred to in sub-section (1A) of section 206C,”. 

18. Amendment of Second Schedule.-In the Second Schedule to the Incometax

Act, in rule 68A, in sub-rule (3), for the words “eight per cent.”,

the words “six per cent.” shall be substituted.

 

CHAPTER III

AMENDMENTS TO THE WEALTH-TAX ACT, 195 7

19. Amendment of section 17B.-In section 17B of the Wealth-tax Act,

1957 (27 of 1957) (hereafter in this Chapter referred to as the Wealthtax

Act), in sub-sections (1) and (3), for the words “one and onefourth

per cent.”, the words “one per cent.” shall be substituted 

20. Amendment of section 31.-In section 31 of the Wealth-tax Act, in

sub-section (2),-

(a) for the words “one and one-fourth per cent.”, the words “one per

cent.” shall be substituted;

(b) in the second proviso, for the words “one and one-fourth per

cent.”, the words “one per cent.” shall be substituted. 

21. Amendment of section 34A.-In section 34A of the Wealth-tax Act,-

(a) in sub-section (3), for the words “eight per cent.”, the words “six

per cent.” shall be substituted;

(b) in sub-section (4B), in clause (a), for the words “two-third per

cent.”, the words “one-half per cent.” shall be substituted.

 

CHAPTER IV

AMENDMENT TO THE EXPENDITURE-TAX ACT, 1987 

22. Amendment of section 14 of Act 35 of 1987.-In section 14 of the

Expenditure-tax Act, 1987 (35 of 1987), for the words “one and onefourth

per cent.”, the words “one per cent.” shall be substituted. 

23. Repeal and saving.-(1) The Taxation Laws (Amendment) Ordinance,

2003 is hereby repealed.

(2) Notwithstanding such repeal, anything done or any action taken

under the Income-tax Act, 1961 (43 of 1961), the Wealth-tax Act, 1957

(27 of 1957) and the Expenditure-tax Act, 1987 (35 of 1987), as amended

by the said Ordinance shall be deemed to have been done or taken under

the corresponding provisions of those Acts, as amended by this Act.

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