Income Tax Act

Official PDF pages 101–105

SOURCE PDF PAGE 101
(4) The provisions of sub-section (3) shall apply only in a case where the amount
of consideration or a part thereof has been received by specified banking or online
mode on or before the date of agreement for transfer of such asset.
(5) For the determination of the stamp duty value under sub-section (1), the provi -
sions of section 78(2) and (3)shall apply.
Business of prospecting for mineral oils.
54.   (1) Where the assessee undertakes specified oil exploration business, then
deduction specified in sub-sections (3) and (4) shall be allowed while computing
the income under the head “Profits and gains of business or profession”.
(2) For the purposes of this section, “specified oil exploration business” means
business consisting of prospecting for or extraction or production of mineral oils
where the following conditions are fulfilled:—
( a )   the Central Government has entered into an agreement with the assessee;
( b )   such agreement is entered for association or participation of the Central
Government or any person authorised by it; and
( c )   such agreement is laid before each House of Parliament.
(3) The deduction referred to in sub-section (1) shall be—
( a )   for the period before the beginning of commercial production, expend -
iture towards infructuous or abortive exploration incurred in respect of
any surrendered area;
( b )   for the period after the commencement of commercial production,
expenditure (whether before or after such production) in respect of drill -
ing or exploration activities or services or in respect of physical assets
used in that connection;
( c )   for the tax year of commencement of commercial production and such
succeeding tax years as specified in the agreement, towards depletion of
mineral oil in the mining area.
(4) The deductions referred to in sub-section (1) shall be—
( a )   either   in lieu   of, or in addition to, any allowance admissible under this
Act as specified in the agreement; and
( b )   computed and made in the manner specified in the agreement and the
other provisions of this Act shall be deemed to have been modified to
such extent.
(5) Where the business or any interest therein as referred to in sub-section (1) is
wholly or partly transferred as per the provisions of the agreement, the profit shall
be charged to tax or deduction shall be allowed in the following manner:—
( a )   where A is less than C, then (C–A) shall be allowed as deduction in the
tax year in which such business or interest is transferred;
( b )   where A is greater than C,—

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SOURCE PDF PAGE 102
( i )   but less than B, then (A–C) shall be the profit chargeable under the
head “Profits and gains of business or profession” for the tax year
in which such transfer takes place;
( ii )   in any other case, only (B–C) shall be the profit chargeable under
the said head for the tax year in which such transfer takes place;
and
( iii )   no deduction shall be allowed for the expenditure incurred remain -
ing unallowed in the tax year in which such transfer takes place or
any subsequent tax year,
where,—
A = proceeds of the transfer (so far as they consist of capital sums);
B = total amount of expenditure incurred in connection with the business
or to obtain interest therein;
C = amount of expenditure incurred remaining unallowed.
(6) If the business or interest therein is no longer in existence in the year of trans -
fer, the provisions of sub-section (5) shall apply as if such business is in existence
during the said year.
(7) Where the business or interest therein is sold or otherwise transferred in a scheme
of amalgamation or demerger and the amalgamated entity or the resulting entity
being an Indian company, then the provisions of sub-section (5) shall—
( a )   not apply to the amalgamating or demerged company; and
( b )   continue to apply to the amalgamated or resulting company as it would
have applied to the amalgamating or demerged company as if the transfer
had not taken place.
Insurance business.
55.   Irrespective of anything to the contrary contained in the provisions of
this Act for computing income under the head “Income from house property”,
“Capital gains” or “Income from other sources”, or in section 390(5) and (6), or
in sections 26 to 54, the profits and gains of any business of insurance, including
any such business carried on by a mutual insurance company or by a co-operative
society, shall be computed as per the provisions of Schedule XIV.
Special provision in case of interest income of specified financial institutions.
56.   (1) Irrespective of anything to the contrary contained in this Act, the
interest income in relation to bad or doubtful debts of a specified financial
institution shall be chargeable to tax under the head “Profits and gains of business
or profession” in the tax year in which such interest is—
( a )   credited to the profit and loss account; or
( b )   actually received,
whichever is earlier.

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SOURCE PDF PAGE 103
(2) For the purposes of this section,—
( a )   “specified financial institution” means—
( i )   a public financial institution; or
( ii )   a scheduled bank; or
( iii )   a co-operative bank, other than—
( A )   a primary agricultural credit society; or
( B )   a primary co-operative agricultural and rural development
bank; or
( iv )   a State Financial Corporation; or
( v )   a State Industrial Investment Corporation; or
( vi )   any such class of non-banking financial companies, as may be
notified by the Central Government;
( b )   “bad or doubtful debts” shall be such categories of debts, as may be pre -
scribed, having regard to the guidelines issued in relation to such debts
by the Reserve Bank of India.
Revenue recognition for construction and service contracts.
57.   (1)   The   profits   and   gains   arising   from   a   construction   contract   or   a
contract for providing services, shall be determined on the basis of percentage
of completion method, subject to provisions of sub-section (2), as per the income
computation and disclosure standards notified under section 276(2).
(2) For the purposes of sub-section (1), the profits and gains arising from a contract
for providing services shall be determined—
( a )   on the basis of project completion method, if the duration of such con -
tract is not more than ninety days;
( b )   on the basis of straight line method, if the contract involves indeterminate
number of acts over a specified period of time.
(3) For the purposes of percentage of completion method, project completion method
or straight line method under this section,—
( a )   the contract revenue shall include retention money;
( b )   the contract costs shall not be reduced by any incidental income in the
nature of interest, dividends or capital gains.
Special provision for computing profits and gains of business or profession
on presumptive basis in case of certain residents.
58.   (1) The provisions of sections 26 to 54, to the extent contrary to this section,
shall not apply to the manner of computation of profits and gains of the spec -
ified business or profession in sub-section (2).
(2) The profits and gains of any specified business or profession as mentioned in
column B of the Table below, carried on by an assessee specified in column C of the
said Table, having total turnover or gross receipts of business or profession during
the tax year specified in column D and computed in the manner specified in column
E thereof, shall be deemed to be the profits and gains of such business or profession
chargeable to tax under the head “Profits and gains of business or profession”.

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SOURCE PDF PAGE 104
TABLE
Sl.
No.
Specified
business or
profession
Assessee   Total turnover or, as
the case may be, gross
receipts of business or
profession during tax
year
Manner of computation
A   B   C   D   E
1.   Any business
other   than
the business
specified ag-
ainst   serial
number 2.
Eligible
assessee.
( a )   Does   not   exceed
two crore rupees;
or
( b )   does   not   exceed
three crore rupees,
where the amount
or   aggregate   of
amounts received,
in cash, does not
exceed 5% of the
total turnover or
gross receipts.
( A )   The aggregate of—
( i )   6 %   o f   t o t a l
t u r n o v e r   o r
gross   receipts
which   is   re -
ceived by spec -
ified   banking
or online mode
during the tax
year or before
the   due   date
s p e c i f i e d   i n
section   263(1)
in   respect   of
that tax year;
( ii )   8 %   o f   t o t a l
t u r n o v e r   o r
gross   receipts
as reduced by
the turnover or
gross   receipts
covered in ( i ); or
( B )   profit   claimed   to
have been actually
earned,
whichever is higher.
2.   Business of
plying,   hir -
ing or leas -
i n g   g o o d s
carriage.
An assessee,
who   owns
n o t   m o r e
t h a n   t e n
goods   car -
riages at any
time during
the tax year.
( A )   The   aggregate   of
income from goods
carriage:—
( i )   being a heavy
g o o d s   v e h i   -
cle, calculated
at   the   rate   of
`   1000 per ton
of gross vehicle
weight   or   un -
laden   weight,
as the case may
be,   for   each

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SOURCE PDF PAGE 105
Sl.
No.
Specified
business or
profession
Assessee   Total turnover or, as
the case may be, gross
receipts of business or
profession during tax
year
Manner of computation
A   B   C   D   E
vehicle, for ev -
ery   month   or
part of a month
during   which
such vehicle is
owned   by   the
assessee in the
tax year;
( ii )   being   a   vehi -
cle other than
h e a v y   g o o d s
vehicle, calcu -
lated at the rate
of   `   7,500 for
each goods car -
riage for every
month or part of
a month during
which the vehi -
cle is owned by
the assessee in
the tax year; or
( B )   profit claimed to
have been actually
earned,
whichever is higher.
3.   S p e c i f i e d
p r o f e s s i o n
as   referred
to in section
62(4).
Specified
assessee.
( a )   Does   not   exceed
fifty lakh rupees; or
( b )   does   not   exceed
seventy-five   lakh
rupees,
where the amount or
aggregate of amounts
received in cash does
not exceed 5% of the
gross receipts.
50% of the gross receipts
or profit claimed to have
been actually earned,
whichever is higher.
(3) Any assessee mentioned in column C of the Table in sub-section (2), who claims
that—