THE COMPANIES (PROFITS) SURTAX ACT, 1964 

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ARRANGEMENT OF SECTIONS 

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SECTIONS 

   1.  Short title and extent.  

   2.   Definitions.  

   3.   Tax authorities.  

   4.   Charge of tax.  

   5.   Return of chargeable profits. 

   6.  Assessment.  

   7.   Provisional assessment.  

7A. Advance payment of surtax. 

7B. Interest payable by Government. 

7C. Interest payable by assessee. 

7D. Interest payable by assessee in case of under estimate, etc. 

   8.  Profits escaping assessment.  

   9.  Penalties.  

9A. False estimate of, or failure to pay, advance surtax. 

10.  Opportunity of being heard.  

11.  Appeals to the Commissioner (Appeals).  

11A. Transfer of certain pending appeals.  

12.  Appeals to Appellate Tribunal.  

   13.  Rectification of mistakes.  

   14.  Other amendments. 

   15.  Surtax deductible in computing distributable income under Income-tax Act. 

   16.  Revision of orders prejudicial to revenue. 

   17.  Revision of orders by Chief Commissioner or Commissioner. 

   18.  Application of provisions of Income-tax Act.  

   19.  Income-tax papers to be available for the purposes of this Act.  

   20.  Failure to deliver returns, etc. 

   21.  False statements.  

   22.  Abetment of false returns, etc. 

   23. Institution of proceedings and composition of offences.  

   24.  Power to make exemption, etc., in relation to certain Union territories. 

   24A. Agreement with foreign countries. 

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SECTIONS 

 24AA. Power to make exemption, etc., in relation to participation in the business of prospecting 

for, extraction, etc., of mineral oils.   

     25.  Power to make rules.  

     26. Saving.  

THE FIRST SCHEDULE.  

THE SECOND SCHEDULE. 

THE THIRD SCHEDULE.  

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THE COMPANIES (PROFITS) SURTAX ACT, 1964 

ACT NO. 7 OF 1964 

[2nd May, 1964.] 

An Act to impose a special tax on the profits of certain companies. 

BE it enacted by Parliament in the Fifteenth Year of the Republic of India as follows:― 

1. Short title and extent.―(1) This Act may be called the Companies (Profits) Surtax Act, 1964. 

(2) It extends to the whole of India. 

2.  Definitions.― In this Act, unless the context otherwise requires,― 
1[(1) “advance surtax” means the Surtax payable under section 7A;] 
 2[(1A)] “assessee” means a person by whom surtax or any other sum of money is payable under 
this Act and includes every person in respect of whom any proceeding under this Act has been taken 
for the assessment of his chargeable profits or of the amount of refund due to him or of the chargeable 
profits of any other person in respect of which he is assessable or of the amount of refund due to such 
other person; 

(2) “assessment” includes re-assessment; 

(3) “assessment year” means the period of twelve months commencing on the 1st day of April, 

every year; 

(4)  “Board”  means  the  Central  Board  of  Direct  Taxes  constituted  under  the  Central  Boards  of 

Revenue Act, 1963 (54 of 1963); 

(5)  “chargeable  profits”  means  the  total  income  of  an  assessee  computed  under  the 
Income-tax Act, 1961 (43 of 1961) for any previous year or years, as the case may be, and adjusted in 
accordance with the provisions of the First Schedule; 

(6) “Income-tax Act” means the Income-tax Act, 1961 (43 of 1961); 

(7) “prescribed” means prescribed by rules made under this Act; 
1[(7A) “regular assessment” means as assessment made under section 6;] 
(8)  “statutory  deduction”  means  an  amount  equal  to  3[fifteen  per  cent.]  of  the  capital  of  the 
company as computed in accordance with the provisions of the Second Schedule, or an amount of two 
hundred thousand rupees, whichever is greater: 

Provided  that  where  the  previous  year  is  longer  or  shorter  than  a  period  of  twelve  months,  the 
aforesaid amount of 3[fifteen per cent.] or, as the case may be, of two hundred thousand rupees shall 
be increased or decreased proportionately: 

Provided  further  that  where  a  company  has  different  previous  years  in  respect  of  its  income, 
profits  and  gains,  the  aforesaid  increase  or  decrease,  as  the  case  may  be,  shall  be  calculated  with 
reference to the length of the previous year of the longest duration; and 

(9) all other words and expressions used herein but not defined and defined in the Income-tax Act 

shall have the meanings respectively assigned to them in that Act. 

1. Ins. by Act 16 of 1981, s. 35 (w.e.f. 1-4-1981). 
2. Clause (1) re-numbered as clause (1A) thereof by s. 35, ibid. (w.e.f. 1-4-1981). 
3. Subs. by Act 66 of 1976, s. 29, for “ten per cent.” (w.e.f. 1-4-1977) . 

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 1[3. Tax authorities.―(1) The income-tax authorities specified in section 116 of the Income-tax Act 
shall be the authorities for the purposes of this Act and every such authority shall exercise the powers and 
perform the functions of a tax authority under this Act in respect of any company, and for this purpose his 
jurisdiction under this Act shall be the same as  he has under the Income-tax Act by virtue of orders or 
directions  issued  under  section  120  of  that  Act  (including  orders  or  directions  assigning  concurrent 
jurisdiction) or under any other provision of that Act. 

(2)  The  Board  may,  from  time  to  time,  issue  such  orders,  instructions  and  directions  to  other  tax 
authorities as it may deem fit for the proper administration of this Act, and such authorities and all other 
persons  employed  in  the  execution  of  this  Act  shall  observe  and  follow  such  orders,  instructions  and 
directions of the Board: 

Provided that no such orders, instructions or directions shall be issued― 

(a) so as to require any tax authority to make a particular assessment or to dispose of a particular 

case in a particular manner; or 

(b)  so  as  to  interfere  with  the  discretion  of  the  Commissioner  (Appeals)  in  the  exercise  of  his 

appellate functions.] 

4. Charge of tax.―Subject to the provisions contained in this Act, there shall be charged on every 
company for every assessment year commencing on and from the first day of April, 1964, 2[but before the 
first day of April, 1988] a tax (in this Act referred to as the surtax) in respect of so much of its chargeable 
profits of the previous year or previous years, as the case may be, as exceed the statutory deduction, at the 
rate or rates specified in the Third Schedule. 

5.  Return  of  chargeable  profits.―  (1)  In  the  case  of  every  company  whose  chargeable  profits 
assessable  under  this  Act  exceeded  during  the  previous  year  the  amount  of  statutory  deduction,  its 
principal officer, or where in the case of a non-resident company any person has been treated as its agent 
under section 163 of the Income-tax Act, such person, shall furnish a return of the chargeable profits of 
the company during the previous year in the prescribed form and verified in the prescribed manner and 
setting  forth  such  other  particulars  as  may  be  prescribed,  before  the  30th  day  of  September  of  the 
assessment year:  

Provided that on an application made in this behalf, the  3[Assessing Officer] may, in his discretion, 

extend the date for the furnishing of the return.  

(2)  In  the  case  of  any  company  which  in  the  3[Assessing    Officer]  opinion is  assessable  under  this 
Act, the 3[Assessing  Officer]  may, before the end of the relevant assessment year, serve a notice upon its 
principal officer, or where in the case of a non-resident company any person has been treated as its agent 
under section 163 of the Income-tax Act, upon such person, requiring him to furnish within thirty days 
from  the  date  of  service  of  the  notice  a  return  of  the  chargeable  profits  of  the  company  during  the 
previous year in the prescribed form and verified in the prescribed manner and setting forth such other 
particulars as may be prescribed: 

 Provided that on an application made in this behalf, the  3[Assessing Officer] may, in his discretion, 

extend the date for the furnishing of the return.  

(3)  Any  assessee  who  has  not  furnished  a  return  during  the  time  allowed  under  sub-section  (1)  or  
sub-section  (2),  or  having  furnished  a  return)  under  sub-section  (1)  or  sub-section  (2)  discovers  any 
omission or wrong statement therein, may furnish a return or a revised return, as the case may be, at any 
time before the assessment is made. 

6.  Assessment.―  (1)  For  the  purposes  of  making  an  assessment  under  this  Act,  the  3[Assessing 
Officer]  may serve on any, person who has furnished a return under sub-section (1) of section 5 or upon 
whom a notice has been served under sub-section (2) of section 5 (whether a return has been furnished or 
not)  a  notice  requiring  him  on  a  date  therein  to  be  specified,  to  produce  or  cause  to  be  produced  such 

1. Subs. by Act 4 of 1988, s. 188, for s. 3 (w.e.f. 1-4-1988). 
2. Ins. by Act 23 of 1986, s. 47 (w.e.f. 1-4-1988). 
3. Subs. by Act 4 of 1988, s. 187, for “Income-tax Officer” (w.e.f.1-4-1988). 

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accounts or documents or evidence as the  1[Assessing Officer] may require for the purposes of this Act 
and  may  from  time  to  time  serve  further  notices  requiring  the  production  of  such  further  accounts  or 
documents or other evidence as he may require.  

(2) The  1[Assessing Officer], after considering such accounts, documents or evidence, if any, as he 
has  obtained  under  sub-section  (1)  and  after  taking  into  account  any  relevant  material  which  he  has 
gathered, shall, by an order in writing, assess the chargeable profits and the amount of the surtax payable 
on the basis of such assessment. 

7. Provisional assessment.― (1) The 1[Assessing Officer], before proceeding to make an assessment 
under section 6 (in this section referred to as the regular assessment) may, at any time after the expiry of 
the period allowed under sub-section (1) or sub-section (2) of section 5 for the furnishing of the return and 
whether the  return  has  or has  not  been furnished, proceed  to  make  in  a  summary  manner  a provisional 
assessment of the chargeable profits and the amount of the surtax payable thereon.  

(2)  Before  making  such  provisional  assessment,  the  1[Assessing  Officer]    shall  give  notice  in  the 
prescribed form to the person on whom the provisional assessment is to be made of his intension to do so, 
and  shall  with  the  notice  forward  a  statement  of  the  amount  of  the  proposed  assessment,  and  the  said 
person  shall  be  entitled  to  deliver  to  the  1[Assessing  Officer]  at  any  time  within  fourteen  days  of  the 
service of the said notice a statement of his objections, if any, to the amount of the proposed assessment. 

 (3)  On  expiry  of  the  said  fourteen  days  from  the  date  of  service  of  the  notice  referred  to  in  
sub-section (2), or earlier, if the assessee agrees to the proposed provisional assessment, the  1[Assessing 
Officer]  may,  after  taking  into  account  the  objections,  if  any,  made  under  sub-section  (2),  make  a 
provisional assessment, and shall furnish a copy of the order of the assessment to the assessee:  

Provided that assent to the amount of the provisional assessment, or failure to make objection to it, 

shall in no way prejudice the assessee in relation to the regular assessment.  

(4) There shall be no right of appeal against a provisional assessment made under this section. 

(5) After a regular assessment has been made, any amount paid or deemed to have been paid towards 
the provisional assessment made under this section shall be deemed to have been paid towards the regular 
assessment; and where the amount paid or deemed to have been paid towards the provisional assessment 
exceeds the amount payable under the regular assessment, the excess shall be refunded to the assessee. 

 2[7A. Advance payment of surtax.― (1) In this section,―  

(a)  “chargeable  amount”,  in  relation  to  any  previous  year,  means  so  much  of  the  chargeable 

profits of the previous year as exceed the statutory deduction;  

(b) “current chargeable amount”, in relation to the advance surtax payable by a company during 
any financial year, means the chargeable amount of the company of the period which would be the 
previous year for the assessment year immediately following that financial year.  

(2) Surtax shall be payable, in accordance with the provisions of this section, in advance during the 
financial year in respect of the chargeable amount of the period which would be the previous year for the 
immediately following assessment year. 

 (3) The amount of advance surtax payable by an assessee in the financial year shall be computed as 

follows:―  

(a) the chargeable amount of the latest previous year in respect of which the assessee has been 

assessed by way of regular assessment shall first be ascertained; 

 (b) in a case where the chargeable amount of the latest previous year [being a year later than the 
previous year referred to in clause (a)] on the basis of which a provisional assessment has been made 
under  section  7  exceeds  the  chargeable  amount  referred  to  in  clause  (a),  the  chargeable  amount 

1. Subs. by Act 4 of 1988, s.187, for “Income-tax Officer” (w.e.f.1-4-1988). 
2.  Ins. by Act 16 of 1981, s. 36 (w.e.f.1-4-1981). 

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referred  to  in  clause  (a)  shall  be  substituted  by  the  chargeable  amount  on  the  basis  of  which  such 
provisional assessment has been made;  

(c)  surtax  shall be calculated  on  the  chargeable  amount referred  to  in  clause (a)  or,  as  the  case 

may be, in clause (b), at the rates specified in the Third Schedule.  

(4) Subject to the provisions of this section, advance surtax shall be payable in three equal instalments 

on the following dates during the financial year, namely:― 

(a) the 15th day of June, the 15th day of September and the 15th day of December, in the case of 
an assessee whose chargeable amount to the extent of 75 per cent. thereof or more is derived from a 
source  or  sources  for  which  the  previous  year  (relevant  to  the  assessment  year  next  following  the 
financial year aforesaid) ends on or before the 31st day of December; 

 (b) the 15th day of September, the 15th day of December and the 15th day of March, in any other 

case:  

Provided  that  where,  in  respect  of  any  class  of  assessees,  the  Board  has,  in  exercise  of  the  powers 
conferred by the proviso to sub-section (1) of section 211 of the Income-tax Act, authorised the payment 
of the last instalment of advance tax on the 15th day of March during the financial year instead of on the 
15th day of December, the last instalment of advance surtax in the case of such assessees shall also be 
payable on the 15th day of March during the financial year.  

(5) Every company shall, in each financial year, on or before the date on which the first instalment, or 
where it has not previously been assessed by way of regular assessment under this Act, on or before the 
date on which the last instalment, of advance surtax is due in its case under sub-section (4), if it is likely 
to have any current chargeable amount, send to the 1[Assessing Officer],― 

(a)  where  it  has  been  previously  assessed  by  way  of  regular  assessment  under  this  Act,  a 

statement of advance surtax payable by it computed in the manner laid down in sub-section (3), or  

(b)  where  it  has  not  previously  been  assessed  by  way  of  regular  assessment  under  this  Act,  an 

estimate of— 

(i) the current chargeable amount, and  

(ii)  the  advance  surtax  payable  by  it  on  the  amount  specified  in  (i)  above  calculated  in 

the,manner laid down in sub-section (3),  

and shall pay such amount of advance surtax,― 

(I)  in a  case falling  under clause (a), as accords  with  the statement in  equal  instalments  on the 

dates applicable in its case under sub-section (4); and  

(II) in a case falling under clause (b), as accords with the estimate in equal instalments on such of 
the dates applicable in its case as have not expired, or in one sum if only the last of such dates has not 
expired. 

 (6)  Where  a  company  which  is  required  to  send  a  statement  under  clause  (a)  of  sub-section  (5) 
estimates on or before the date on which the first instalment of advance surtax is due in its case under  
sub-section (4) that, by reason of its current chargeable amount being likely to be less than the chargeable 
amount  on  which  advance  surtax  is  payable  by  it  under  sub-section  (5)  or  for  any  other  reason,  the 

1. Subs. by Act 4 of 1988, s.187, for “Income-tax Officer” (w.e.f.1-4-1988). 

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amount of advance surtax computed in the manner laid down in sub-section (3) on the current chargeable 
amount would be less than the amount of advance surtax payable by it under sub-section (5), it may send 
to the 1[Assessing Officer], in lieu of such statement, an estimate of― 

 (i) the current chargeable amount, and  

(ii) the advance surtax payable by it on the current chargeable amount calculated  in the manner 

laid down in sub-section (3),  

and shall pay such amount of advance surtax as accords with its estimate in equal instalments on the dates 
applicable in its case under sub-section (4). 

 (7) Where a company which has sent a statement under clause (a) of sub-section (5) estimates on or 
before  the  date  on  which  the  last  instalment  of  advance  surtax  is  due  in  its  case  that,  by  reason  of  its 
current chargeable amount being likely to be less than the chargeable amount on which advance surtax is 
payable by it under sub-section (5) or for any other reason, the amount of advance surtax computed in the 
manner laid down in sub-section (3) on the current chargeable amount would be less than the amount of 
advance surtax payable by it under sub-section (5), it may, at its option, send to the  1[Assessing Officer] 
an estimate of— 

 (i) the current chargeable amount, and  

(ii) the advance surtax payable by it on the current chargeable amount calculated  in the manner 

laid down in sub-section (3),  

and shall pay such amount of advance surtax as accords with its estimate in equal instalments on such of 
the dates applicable in its case under sub-section (4) as have not expired, or in one sum if only the last of 
such dates has not expired. 

 (8)  In  the  case  of  any  company  which  is  liable  to  pay  advance  surtax  under  sub-section  (5)  or               

sub-section  (6)  or,  as  the  case  may  be,  sub-section  (7),  if,  by  reason  of  the  current  chargeable  amount 
being likely to be greater than the chargeable amount on which the advance surtax so payable by it has 
been computed or for any other reason, the amount of advance surtax computed in the manner laid down 
in sub-section (3) on the current chargeable amount (which shall be estimated by the company) exceeds 
the amount of advance surtax so payable by it by more than twenty per cent. of the latter amount, it shall, 
on  or  before  the  date  on  which  the  last  instalment  of  advance  surtax  is  payable  by  it,  send  to  the 
1[Assessing Officer] an estimate of― 

(i) the current chargeable amount, and  

(ii) the advance surtax payable by it on the current chargeable amount calculated  in the manner 

laid down in sub-section (3),  

and shall pay such amount of advance surtax as accords with its estimate on such of the dates applicable 
in its case under sub-section (4) as have not expired, by instalments which may be revised according to 
sub-section (9):  

Provided  that  where  in  respect  of  any  company  the  Commissioner  has,  in  exercise  of  the  powers 

conferred  by  the  first  proviso  to  sub-section  (4)  of  section  209A,  or  the  first  proviso  to                             
sub-section  (3A)  of  section  212,  of  the  Income-tax  Act,  extended  the  date  for  furnishing  the  estimate 
referred to in the said sub-section (4) or, as the case may be, the said sub-section (3A) and the company 
has paid the advance surtax which it is liable to pay under sub-section (5) or sub-section (6) or, as the case 
may be, sub-section (7) on or before the date on which the last instalment of advance surtax is due in its 
case,  the  company  shall  pay,  on  or  before  the  date  as  so  extended,  the  amount  by  which  the  advance 
surtax already paid by It falls short of the advance surtax payable in accordance with its estimate.  

1. Subs. by Act 4 of 1988, s.187, for “Income-tax Officer” (w.e.f. 1-4-1988). 

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(9) The company may send a revised estimate of the advance surtax payable by it on or before any 
one  of  the  dates  specified  in  sub-section  (4)  and  adjust  any  excess  or  deficiency  in  respect  of  any 
instalment already paid in a subsequent instalment or in subsequent instalments. 

 (10) Every statement or estimate under this section shall be sent in the prescribed form and verified 

in the prescribed manner. 

7B.  Interest  payable  by  Government.―The  Central  Government  shall  pay  simple  interest  at 
1[fifteen per cent.] per annum on the amount by which the aggregate sum of any installments of advance 
tax paid during any financial year in which they are payable under section 7A exceeds the amount of the 
tax determined on regular assessment, from the 1st day of April next following the said financial year to 
the date of the regular assessment for the assessment year immediately following the said financial year. 

7C. Interest payable by assessee.―(1) Where, in any financial year, a company has paid advance 
surtax  under  section  7A  on  the  basis  of  its  own  estimate  (including  revised  estimate),  and  the  advance 
surtax so paid is less than eighty-three and one-third per cent. of the assessed surtax, simple interest at the 
rate of 1[fifteen per cent.] per annum from the 1st day of April next following the said financial year up to 
the  date  of  the  regular  assessment  shall  be  payable  by  the  company  upon  the  amount  by  which  the 
advance surtax so paid falls short of the assessed surtax. 

(2) Where, on making the regular assessment, the 2[Assessing Officer] finds― 

(a) that any such company as is referred to in clause (a) of sub-section (5) of section 7A has not 
sent  the  statement  referred  to  in  that  clause  or  the  estimate  in  lieu  of  such  statement  referred  to  in  
sub-section (6) of that section; or 

(b) that any such company as is referred to in clause (b) of sub-section (5) of section 7A has not 

sent the estimate referred to in that clause. 

simple interest at the rate of  1[fifteen per cent.] per annum from the 1st day of April next following the 
financial  year  in  which  the  advance  surtax  was  payable  in  accordance  with  the  said  sub-section  (5)  or  
sub-section (6) up to the date of the regular assessment shall be payable by the company upon the amount 
equal to the assessed surtax. 

(3) Where, on making the regular assessment, the 2[Assessing Officer] finds that any company which 
is required to send an estimate under sub-section (8) of section 7A has not sent the estimate referred to 
therein,  simple  interest  at  the  rate  of  1[fifteen  per  cent.]  per  annum  from  the  1st  day  of  April  next 
following  the  financial  year  in  which  the  advance  surtax  was  payable  in  accordance  with  the  said  
sub-section (8) up to the date of the regular assessment shall be payable by the company upon the amount 
by which the advance surtax paid by it falls short of the assessed surtax. 

(4) Notwithstanding anything contained in the foregoing sub-sections, where provisional assessment 

is made under section 7― 

(i) interest shall be calculated in accordance with the provisions of sub-section (1) or sub-section 
(2) or, as the case may be, sub-section (3) up to the date on which the surtax provisionally assessed is 
paid; and 

(ii)  thereafter  interest  shall  be  calculated  at  the  rate  of  1[fifteen  per  cent.]  per  annum  on  the 

amount by which the surtax provisionally assessed falls short of the assessed surtax. 
(5) In such cases and under such circumstances as may be prescribed, the  2[Assessing Officer] may 

reduce or waive the interest payable by the company under this section. 

(6)  Where,  as  a  result  of  an  order  under  section  11,  or  section  12,  or  section  13,  or  section  17,  or 
section 18 read with section 260 or section 262 of the Income-tax Act, the amount on which interest was 
payable  under  this  section  has  been  reduced,  the  interest  shall  be  reduced  accordingly  and  the  excess 
interest paid, if any, shall be refunded. 

1. Subs. by Act 67 of 1984, s.77, for “twelve per cent.” (w.e.f. 1-10-1984). 
2. Subs. by Act 4 of 1988, s.187, for “Income-tax Officer” (w.e.f. 1-4-1988). 

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(7) In this section and section 9A, “assessed surtax” means the surtax determined on the basis of the 

regular assessment without making any deduction therefrom. 

7D.  Interest  payable  by  assessee  in  case  of  underestimate,  etc.―Where,  on  making  the  regular 
assessment,  the  1[Assessing  Officer]  finds  that  any  company  has  under  section  7A  underestimated  the 
advance  surtax  payable  by  it  and  thereby  reduced  the  amount  payable  in  either  of  the  first  two 
instalments, he may direct that the company shall pay simple interest at 2[fifteen per cent.] per annum for 
the period during which the payment was deficient, on the difference between the amount paid in each 
such  instalment  and  the  amount  which  should  have  been  paid,  having  regard  to  the  aggregate  advance 
surtax actually paid during the year.  

Explanation.―For the purposes of this section, any instalment due before the expiry of six months 
from the commencement of the previous year in respect of which it is to be paid shall be deemed to have 
become due fifteen days after the expiry of the said six months.]  

8. Profits escaping assessment.―If―  

(a) the 1[Assessing Officer] has reason to believe that by reason of the omission or failure on the 
part of the assessee to make a return under section 5 for any assessment year or to disclose fully and 
truly  all  material  facts  necessary  for  his  assessment  for  any  assessment  year,  chargeable  profits  for 
that year have escaped assessment or have been under-assessed or assessed at too low a rate or have 
been made the subject of excessive relief under this Act, or  

(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the 
part  of  the  assessee,  the  1[Assessing  Officer]  has  in  consequence  of  information  in  his  possession 
reason to believe that chargeable profits assessable for any assessment year have escaped assessment 
or have been under-assessed or assessed at too low a rate or have been the subject of excessive relief 
under this Act,  

he  may,  in  cases  falling  under clause (a)  at  any  time,  and in  cases  falling  under  clause  (b) at any  time 
within four years of the end of that assessment year, serve on the assessee a notice containing all or any of 
the  requirements  which  may  be  included  in  a  notice  under  section  5,  and  may  proceed  to  assess  or  re-
assess the amount chargeable to surtax, and the provisions of this Act shall, so far as may be, apply as if 
the notice were a notice issued under that section. 

9. Penalties.―If the 1[Assessing Officer], in the course of any proceedings under this Act, is satisfied 
that any person has, without reasonable cause, failed to furnish the return required under section 5, or to 
produce or cause to be produced the accounts, documents or other evidence required by the  1[Assessing 
Officer] under sub-section (1) of section 6, or has concealed the particulars of the chargeable profits or 
has furnished inaccurate particulars of such profits, he may direct that such person shall pay, by way of 
penalty, in addition to the amount of surtax payable, a sum not exceeding―  

(a)  where  the  person  has  failed  to  furnish  the  return  required  under  section  5,  the  amount  of 

3[surtax chargeable under the Provisions of this Act];  

(b) in any other case, the amount of surtax which would have been avoided if the return made had 

been accepted as correct:  

Provided that the 1[Assessing Officer] shall not impose any penalty under this section without the 

previous authority of the 4[Deputy Commissioner]. 

1. Subs. by Act 4 of 1988, s.187, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Subs. by Act 67 of 1984, s. 77, for “twelve per cent.” (w.e.f. 1-10-1984). 
3. Subs. by Act 26 of 1974, s. 20, for “surtax payable” (retrospectively). 
4. Subs. by Act 4 of 1988, s. 187, for “Inspecting Assistant Commissioner” (w.e.f. 1-4-1988). 

9 

 
                                                           
1[9A.  False  estimate  of,  or  failure  to  pay,  advance  surtax.―  (1)  If  2[Assessing  Officer],  in  the 
course of any proceedings in connection with the regular assessment for any assessment year, is satisfied 
that any assessee―  

(a) has furnished under clause (a) of sub-section (5) of section 7A a statement of advance surtax 

payable by him which he knew or had reason to believe to be untrue, or 

(b) has without reasonable cause failed to furnish a statement of the advance surtax payable by 

him in accordance with the provisions of clause (a) of sub-section (5) of section 7A, 

he may direct that such assessee shall, in addition to the amount of surtax, if any, payable by him, pay by 
way of penalty a sum― 

(i)  which,  in  the case  referred to  in  clause (a),  shall not be less than ten per cent. but shall not 
exceed one and a half times the amount by which the surtax actually paid during the financial year 
immediately preceding the assessment year under the provisions of section 7A falls short of— 

(1) eighty-three and one-third per-cent. of the assessed surtax, or  

(2) the amount which would have been payable by way of advance surtax if the assessee had 
furnished  a  correct  and  complete  statement  in  accordance  with  the  provisions  of  clause  (a)  of  
sub-section (5) of section 7A,  

whichever is less;  

(ii) which, in the case referred to in clause (b), shall not be less than ten per cent. but shall not 

exceed one and a half times of eighty-three and one-third per cent. of the assessed surtax.  
(2)  If  the  2[Assessing  Officer],  in  the  course  of  any  proceedings  in  connection  with  the  regular 

assessment for any assessment year, is satisfied that any assessee― 

(a)  has  furnished  under  clause  (b)  of  sub-section  (5)  or  sub-section  (6)  or  sub-section  (7)  or  
sub-section (9) of section 7A, an estimate of the advance surtax payable by him which he knew or had 
reason to believe to be untrue, or  

(b) has furnished under sub-section (8) of section 7A, an estimate of the advance surtax payable 

by him which he knew or had reason to believe to be untrue, or  

(c) has without reasonable cause failed to furnish an estimate of the advance surtax payable by 

him in accordance with the provisions of clause (b) of sub-section (5) of section 7A, or  

(d) has without reasonable cause failed to furnish an estimate of advance surtax payable by him in 

accordance with the provisions of sub-section (8) of section 7A,  

he may direct that such assessee shall, in addition to the amount of surtax, if any, payable by him, pay by 
way of penalty a sum― 

(i)  which,  in  the case  referred to  in  clause (a),  shall not be less than ten per cent. but shall not 
exceed one and a half times the amount by which the surtax actually paid during the financial year 
immediately preceding the assessment year under the provisions of section 7A falls short of― 

(1) eighty-three and one-third per cent. of the assessed surtax, or 

(2) where a statement under clause (a) of sub-section (5) of section 7A was furnished by the 

assessee, the amount payable under such statement,  

whichever is less;  

(ii) which, in the case referred to in clause (b), shall not be less than ten per cent. but shall not 
exceed one and a half times the amount by which the surtax actually paid during the financial year 

1. Ins. by Act 16 of 1981, s. 37 (w.e.f. 1-4-1981). 
2. Subs. by Act 4 of 1988, s. 187, for “Income-tax Officer” (w.e.f. 1-4-1988). 

10 

 
                                                           
immediately  preceding  the  assessment  year  under  the  provisions  of  section  7A  falls  short  of  
eighty-three and one-third per cent. of the assessed surtax;  

(iii) which, in the case referred to in clause (c), shall not be less than ten per cent. but shall not 

exceed one and a half times of eighty-three and one-third per cent. of the assessed surtax; and  

(iv) which, in the case referred to in clause (d), shall not be less than ten per cent. but shall not 
exceed one and a half times the amount of surtax payable in accordance with a statement under clause 
(a)  or  an  estimate  under  clause  (b)  of  sub-section  (5)  of  section  7A  or  an  estimate  in  lieu  of  a 
statement under sub-section (6) of that section falls short of eighty-three and one-third per cent. of the 
assessed surtax.  
Explanation.―Where  the  1[Chief  Commissioner  or  Commissioner]  has,  in  exercise  of  the  powers 
conferred by the first proviso to sub-section (4) of section 209A, or the first proviso to sub-section (3A) of 
section 212, of the Income-tax Act, extended the date for furnishing the estimate referred to in the said 
sub-section (4) or, as the case may be, the said sub-section (3A ) and the date so extended falls beyond the 
financial year immediately preceding the assessment year, then, the amount of surtax paid by the assessee 
on or before the date so extended shall, for the purposes of clause (ii) of sub-section (2) also be regarded 
as surtax actually paid during that financial year.]  

10.Opportunity  of  being  heard.―  No  order  imposing  a  penalty  under  section  9  2[or  section  9A] 

shall be made unless the assessee has been given a reasonable opportunity of being heard. 

11. Appeals to the 3[Commissioner (Appeals)].― (1) Any person objecting to the amount of surtax 
for which he is liable as assessed by the 4[Assessing Officer] or denying his liability to be assessed under 
this  Act,  or  objecting  to  any  penalty  or  fine  imposed  by  the  4[Assessing  Officer],  5[or  objecting  to  the 
interest levied by the 4[Assessing Officer] under section 7D] or to the amount allowed by the 4[Assessing 
Officer]  by  way  of  any  relief  under  any  provisions  of  this  Act,  or  to  any  refusal  by  the  4[Assessing 
Officer]  to  grant  relief  or  to  an  order  of  rectification or  amendment  having  the  effect  of  enhancing  the 
assessment or reducing the refund, or to an order refusing to allow the claim made by the assessee for a 
rectification  under  section  13  or  amendment  under  section  14  may  appeal  to  the  3[Commissioner 
(Appeals)]. 

(2) Every appeal shall be in the prescribed form and shall be verified in the prescribed manner. 

(3) An appeal shall be presented within thirty days of the following date, that is to say― 

 (a) where the appeal relates to assessment or penalty or fine, the date of service of the notice of 

demand relating to the assessment or penalty or fine, or 

 (b) in any other case, the date on which the intimation of the order sought to be appealed against 

is served:  
Provided  that  the  3[Commissioners  (Appeals)]  may  admit  an  appeal  after  the  expiration  of  the  said 

period if he is satisfied that the appellant had sufficient cause for not presenting it within that period.  

(4) The 3[Commissioner (Appeals)] shall hear and determine the appeal and, subject to the provisions 
of  this  Act,  pass  such  orders  as  he  thinks  fit  and  such  orders  may  include  an  order  enhancing  the 
assessment or penalty:  

Provided  that  an  order  enhancing  the  assessment  or  penalty  shall  not  be  made  unless  the  person 

affected thereby has been given a reasonable opportunity of showing cause against such enhancement.  

(5)  The  procedure  to  be  adopted  in  the  hearing  and  determination  of  the  appeals  shall,  with  any 

necessary modification, be in accordance with the procedure applicable in relation to income-tax.  

1. Subs. by Act 4 of 1988, s. 187, for “Commissioner” (w.e.f. 1-4-1988). 
2. Ins. by Act 16 of 1981, s. 38 (w.e.f. 1-4-1981). 
3. Subs. by Act 29 of 1977, s. 39 and the Fifth Sch., for “Appellate Assistant Commissioner” (w.e.f. 10-7-1978). 
4. Subs. by Act 4 of 1988, s. 187, for “Income-tax Officer” (w.e.f. 1-4-1988). 
5. Ins. by Act 16 of 1981, s. 39 (w.e.f. 1-4-1981). 

11 

 
                                                           
 1[11A.  Transfer  of  certain  pending  appeals.―  Every  appeal  under  this  Act  which  is  pending 
immediately  before  the  appointed  day  before  an  Appellate  Assistant  commissioner  or  a  Commissioner 
and  any  matter  arising  out  of  or  connected  with  such  appeal  and  which  is  so  pending  shall  stand 
transferred  on  that  day  to  the  Commissioner  (Appeals)  and  the  Commissioner  (Appeals)  may  proceed 
with such appeal or matter from, the stage at which it was on that day:  

Provided that the appellant may demand that before proceeding further with the appeal or matter the 

previous proceeding or any part thereof be reopened or that he be re-heard.  

Explanation.―In  this  section,  “appointed  day”  means  the  date  appointed  under  section  39  of  the 

Finance (No. 2) Act, 1977.] 

12. Appeals to Appellate Tribunal.― (1) Any assessee aggrieved by an order passed by a  2[Chief 
Commissioner  or  Commissioner]  under  section  16,  or  an  order  passed  by  3[Commissioner  (Appeals)] 
under any provision of this Act, may appeal to the Appellate Tribunal against such order. 

(2)  The  2[Chief  Commissioner  or  Commissioner]  may,  if  he  objects  to  any  order  passed  by  the 
3[Commissioner (Appeals)] under any provision of this Act, direct the 4[Assessing officer] to appeal to the 
Appellate Tribunal against the order. 

(3) Every appeal under sub-section (1) or sub-section (2) shall be filed within sixty days of the date 
on  which  the  order  sought  to  be  appealed  against  is  communicated  to  the  assessee  or  to  the  2[Chief 
Commissioner or Commissioner], as the case may be. 

(4) The  4[Assessing Officer] or the assessee, as the case may be, on receipt of notice that an appeal 
against  the  order  of  the  3[Commissioner  (Appeals)]  has  been  preferred  under  sub-section  (1)  or  
sub-section (2) by the other party may, notwithstanding that he may not have appealed against such order 
or any part thereof, within thirty days of the receipt of the notice, file a memorandum of cross-objections, 
verified  in  the  prescribed  manner,  against  any  part  of  the  order  of  the  3[Commissioner  (Appeals)]  and 
such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within 
the time specified in sub-section (3). 

(5)  The  Appellate  Tribunal  may  admit  an  appeal  or  permit  the  filing  of  a  memorandum  of  cross-
objections after the expiry of the relevant period referred to in sub-section (3) or sub-section (4), if it is 
satisfied that there was sufficient cause for not presenting it within that period. 

(6) An appeal to the Appellate Tribunal shall be in the prescribed form and shall be verified in the 
prescribed  manner  and  shall,  except  in  the  case  of  an  appeal  referred  to  in  sub-section  (2)  or  a 
memorandum  of  cross-objections  referred  to  in  sub-section  (4),  be  accompanied  by  5[a  fee  of  6[two 
hundred rupees]]. 

(7)  Subject  to  the  provisions  of  this  Act,  in  hearing  and  making  an  order  on  any  appeal  under  this 
section,  the  Appellate  Tribunal  shall  exercise  the  same  powers  and  follow  the  same  procedure  as  it 
exercises and follows in hearing and making an order on any appeal under the Income-tax Act. 

13. Rectification of mistakes.― (1) With a view to rectifying any mistake apparent from the record, 
the  2[Chief  Commissioner  or  Commissioner],  the  4[Assessing  Officer],  the  3[Commissioner  (Appeals)] 
and the  Appellate Tribunal  may,  of  his,  or  its,  own motion  or  on  an application  by  the  assessee  in  this 
behalf, amend any order passed by him or it in any proceeding under this Act 7[within four years from the 
end of the financial year in which such order was passed]. 

(2)  An  amendment  which  has  the  effect  of  enhancing  the  assessment  or  reducing  a  refund  or 
otherwise increasing the liability of the assessee shall not be made under this section unless the authority 

1. Ins. by Act 29 of 1977, s. 39 and the Fifth Sch. (w.e.f. 10-7-1978). 
2. Subs. by Act 4 of 1988, s. 187, for “Commissioner” (w.e.f. 1-4-1988). 
3. Subs. by Act 29 of 1977, s. 39 and the Fifth Sch. for “Appellate Assistant Commissioner” (w.e.f. 10-7-1978). 
4. Subs. By Act 4 of 1988, s. 187, for “Income-tax Officer” (w.e.f. 1-4-1988). 
5. Subs. by Act 42 of 1970, s. 72, for “a fee of one hundred rupees” (w.e.f. 1-4-1971). 
6. Subs. by Act 16 of 1981, s. 40, for certain words (w.e.f. 1-6-1981). 
7. Subs. By Act 67 of 1984, s. 78, for “within four years of the date on which such order was passed” (w.e.f. 1-10-1984). 

12 

 
                                                           
concerned  has  given  notice  to  the  assessee  of  its  intention  so  to  do  and  has  allowed  the  assessee  a 
reasonable opportunity of being heard. 

(3)  Where  an  amendment  is  made  under  this  section,  the  order  shall  be  passed  in  writing  by  the 

authority concerned. 

(4) Subject to the other provisions of this Act, where any such amendment has the effect of reducing 

the assessment, the 1[Assessing Officer] shall make any refund which may be due to such assessee. 

(5)  Where  any  such  amendment  has  the  effect  of  enhancing  the  assessment  or  reducing  the  refund 
already made, the  1[Assessing Officer] shall serve on the assessee a notice of demand in the prescribed 
form specifying the sum payable. 

14. Other amendments.― Where as a result of any order made under 2[sections 154, 155, 250, 254, 
260,  262,  263  or  264]  of  the  Income-tax  Act,  it  is  necessary  to  recompute  the  chargeable  profits 
determined  in  ay  assessment  under  this  Act,  the  1[Assessing  Officer]  may  proceed  to  recompute  the 
chargeable profits, and determine the surtax payable or refundable on the basis of such recomputation and 
make the necessary amendment and the provisions of section 13 shall, so far as may be, apply thereto, the 
period  of  four  years  specified  in  sub-section  (1)  of  that  section  being  reckoned  3[from  the  end  of  the 
financial year in which the order under the aforesaid sections of the Income-tax Act was passed]. 

15.  Surtax  deductible 

in  computing  distributable 

income  under  Income-tax  Act.― 
Notwithstanding anything contained in clause (i) of section 109 of the Income-tax Act, in computing the 
distributable income of a company for the purpose of Chapter XID of that Act, the surtax payable by the 
company for any assessment year shall be deductible from the total income of the company assessable for 
that assessment year. 

16. Revision of orders prejudicial to revenue.―(1) The   4[Chief Commissioner or Commissioner] 
may call for and examine the record of any proceeding under this Act, and if he considers that any order 
passed therein by the 1[Assessing Officer] is erroneous in so far as it is prejudicial to the interests of the 
revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be 
made  such  inquiry  as  he  deems  necessary,  pass  such  order  thereon  as  the  circumstances  of  the  case 
justify,  including  an  order  enhancing  or  modifying  the  assessment,  or  cancelling  the  assessment  and 
directing a fresh assessment. 

5[Explanation.―For  the  removal  of  doubts,  it  is  hereby  declared  that,  for  the  purposes  of  this  
sub-section,  an  order  passed  by  the 1[Assessing  Officer]  shall  include  an  order  passed  by  the 6[Deputy 
Commissioner]  in exercise  of  the  powers  or in  performance  of  the functions  of an 1[Assessing  Officer] 
conferred  on,  or  assigned  to,  him  under  clause  (a)  of  sub-section  (1)  of  section  125  or  under  
sub-section (1) of section 125A of the Income-tax Act as applied by section 18 of this Act.] 

 7[(2) No order shall be made under sub-section (1) after the expiry of two years from the end of the 

financial year in which the order sought to be revised was passed.] 

(3)Notwithstanding anything contained in sub-section (2), an order in revision under this section may 
be passed at any time in the case of an order which has been passed in consequence of, or to give effect 
to,  any  finding  or  direction  contained  in  an  order  of  the  Appellate  Tribunal,  the  High  Court  or  the 
Supreme Court. 

1. Subs. by Act 4 of 1988, s. 187, for “Income-tax Officer” (w.e.f. 1-4-1988). 
2. Subs. by Act 42 of 1970, s. 73, for “section 154 or section 155” (w.e.f. 1-4-1971). 
3. Subs. by  Act  67 of  1984,  s. 79,  for  “from  the  date of  the  order  passed under  the  aforesaid  sections of  the  Income-tax  Act” 
(w.e.f. 1-10-1984). 
4. Subs. by Act 4 of 1988, s. 187, for “Commissioner” (w.e.f. 1-4-1988). 
5. Ins. by Act 67 of 1984, s. 80 (w.e.f. 1-10-1984). 
6. Subs. by Act 4 of 1988, s. 187, for “Inspecting Assistant Commissioner” (w.e.f. 1-4-1988). 
7. Subs. by Act 67 of 1984, s. 80, for sub-section (2) (w.e.f. 1-10-1984). 

13 

 
                                                           
Explanation.―In  computing  the  period  of  limitation  for  the  purpose  of  sub-section  (2),  any  period 
during which any proceeding under this section is stayed by an order or injunction of any  court shall be 
excluded. 

17.  Revision  of  orders  by  1[Chief  Commissioner  or  Commissioner].―  (1)  The  1[Chief 
Commissioner or Commissioner] may, either of his own motion or on an application by the assessee for 
revision,  call  for  the  record  of  any  proceeding  under  this  Act  which  has  been  taken  by  an  2[Assessing 
Officer]  3*  *  *    subordinate  to  him  and  may  make  such  inquiry  or  cause  such  inquiry  to  be  made  and 
subject to the provisions of this Act, may pass such order thereon, not being an order prejudicial to the 
assessee, as he thinks fit. 

(2) The 1[Chief Commissioner or Commissioner] shall not of his own motion revise any order under 

this section if the order has been made more than one year previously. 

(3) In the case of an application for revision under this section by the assessee, the application shall be 
made within one year from the date on which the order in question was communicated to him or the date 
on which he otherwise came to know of it, whichever is earlier: 

Provided  that  the  1[Chief  Commissioner  or  Commissioner]  may,  if  he  is  satisfied  that  the  assessee 
was prevented by sufficient cause from  making the application within that period, admit an application 
made after the expiry of that period. 

(4) The  1[Chief Commissioner or Commissioner] shall not revise any order under this section in the 

following cases― 

4[(a) where an appeal against the order lies to the Commissioner (Appeals) but has not been made 
and the time within which such appeal may be made has not expired, or the assessee has not waived 
his right of appeal; or 

(b) where the order has been made the subject of an appeal to the Commissioner (Appeals).] 

(5) Every application by an assessee for revision under this section shall be accompanied by a fee of 

twenty-five rupees. 

Explanation  1.―  An  order  by  the  1[Chief  Commissioner  or  Commissioner]  declining  to  interfere 

shall, for the purposes of this section, be deemed not to be an order prejudicial to the assessee. 

5*    

*  

*  

* 

 * 

18.  Application  of  provisions  of  Income-tax  Act.―  The  provisions  of  the  following  sections and 
Schedules  of the  Income-tax  Act  and the  Income-tax  (Certificate  Proceedings) Rules, 1962, as in force 
from  time  to  time,  shall  apply  with  such  modifications,  if  any,  as  may  be  prescribed,  as  if  the  said 
provisions and the rules referred to surtax instead of to Income-tax  6***:― 

 7[2(44)],  8[  9[116, 117, 118, 119, 120, 129], 131, 132, 132A, 10[132B],133 to 136 (both inclusive)], 
138, 140, 156, 160, 161, 162, 163, 166, 167, 170,173, 175, 176, 178, 179, 11[218 to 229] (both inclusive), 
231,  232,  233,  237  to  242  (both  inclusive)  244,  245,  254  to  262  (both  inclusive)  265,  266,  268,  269, 
281, 10[281B], 282, 284, 8[287, 288, 288A, 288B, 289 to 293 (both inclusive),] the Second Schedule and 
the Third Schedule: 

1. Subs. by Act 4 of 1988, s. 187, for “Commissioner” (w.e.f 1-4-1988). 
2. Subs. by s. 187, ibid., for “Income-tax Officer” (w.e.f. 1-4-1988). 
3. The words “or Appellate Assistant Commissioner” omitted by Act 29 of 1977, s. 39 and the Fifth Sch. (w.e.f. 10-7-1978). 
4. Subs. by s. 39 and the Fifth Sch., ibid., for clauses (a), (b) and (c) (w.e.f. 10-7-1978). 
5. Explanation 2 omitted by s. 39 and the Fifth Sch. (w.e.f. 10-7-1978). 
6. The words “and super-tax” omitted by Act 10 of 1965, s. 74 (w.e.f. 1-4-1965). 
7. Subs. by Act 4 of 1988, s. 189, for “2(43B) and 44” (w.e.f. 1-4-1989). 
8. Subs. by Act 20 of 1967, s. 36, for “131 to 136 (both inclusive)” (w.e.f. 1-4-1967). 
9. Subs. by Act 4 of 1988, s. 189, for “118, 125, 125A, 129, 130, 130A” (w.e.f. 1-4-1988). 
10. Ins. by Act 41 of 1975, s. 124 (w.e.f. 1-10-1975). 
11. Subs. by Act 16 of 1981, s. 41, for “220 to 229” (w.e.f. 1-4-1981). 

14 

 
 
 
 
 
 
 
 
                                                           
Provided that references in the said provisions and the rules to the  “assessee” shall be construed as 

references to an assessee as defined in this Act. 

19.  Income-tax  papers  to  be  available  for  the  purposes  of  this  Act.―  (1)  Notwithstanding 
anything contained in the Income-tax Act, all information contained in any statement or return made or 
furnished under the provisions of that Act or obtained or collected for the purposes of that Act may be 
used for the purposes of this Act. 

(2) All information contained in any statement or return made or furnished under the provisions of 
this  Act  or  obtained  or  collected  for  the  purposes  of  this  Act  may  be  used  for  the  purposes  of  the  
Income-tax Act. 

20. Failure to deliver returns, etc.― If any person fails without reasonable cause to furnish in due 
time any return under sub-section (2) of section 5, or to produce, or cause to be produced, any accounts or 
documents required to be produced under section 6, he shall be punishable with fine which may extend to 
five hundred rupees, and with a further fine which may extend to ten rupees for every day during which 
the default continues. 

21.  False  statement.―  If  a  person  makes  in  any  return  furnished  under  section  5,  any  statement 
which is false, and which he either knows or believes to be false, or does not believe to be true, he shall 
be punishable with simple imprisonment which may extend to six months, or with fine which may extend 
to one thousand rupees, or with both.  

22. Abetment of false returns, etc.― If a person makes or induces in any manner another person to 
make  and  deliver  any  account,  statement  or  declaration  relating  to  chargeable  profits  liable  to  surtax 
which is false and which he either knows to be false or does not believe to be true, he shall be punishable 
with  simple  imprisonment  which  may  extend  to  six  months,  or  with  fine  which  may  extend  to  one 
thousand rupees, or with both. 

23. Institution of proceedings and composition of offences―(1) A person shall not be proceeded 
against  for  an  offence  under  section  20  or  section  21  or  section  22  or  under  the  Indian  Penal  Code  
(45 of 1860) except at the instance of the 1[Chief Commissioner or Commissioner.] 

(2)  The  1[Chief  Commissioner  or  Commissioner]  may,  either  before  or  after  the  institution  of 

proceedings, compound any offence punishable under section 20 or section 21 or section 22. 

24.  Power  to  make  exemption,  etc.,  in  relation  to  certain  Union  territories.―If  the  Central 
Government  considers  it  necessary  or  expedient  so  to  do  for  avoiding  any  hardship  or  anomaly  or 
removing any difficulty that may arise as a result of the application of this Act to the Union territories of 
Dadra and Nagar Haveli, Goa, Daman and Diu and Pondicherry, the Central Government may, by general 
or special order, make an exemption, reduction in rate or other modification in respect of surtax in favour 
of any class of assessees or in regard to the whole or any part of the chargeable  profits of any class of 
assessees. 

2[24A. Agreeement with foreign countries.― The Central Government may enter into an agreement 

with the Government of any country outside India― 

(a) for the granting of relief in respect of chargeable profits on which have been paid both surtax 

under this Act and tax of a similar character or income-tax on such profits in that country, or 

(b) for the avoidance of double taxation of chargeable profits under this Act and under any law 

relating to the taxation of income or profits in force in that country, or 

(c) for exchange of information for the prevention of evasion or avoidance of surtax chargeable 
under  this  Act  or  the  tax  chargeable  under  the  corresponding  law  in  force  in  that  country  or 
investigation of cases of such evasion or avoidance, or 

1. Subs. by Act 4 of 1988, s. 187, for “Commissioner” (w.e.f. 1-4-1988). 
2. Subs. by Act 16 of 1972, s. 57, for section 24A (w.e.f. 1-4-1972). 

15 

 
                                                           
(d)  for  recovery  of  tax  under  this  Act  and  under  any  law  relating  to  the  taxation  of  income  or 

profits in force in that country, 

and  may,  by  notification  in  the  Official  Gazette,  make  such  provision  as  may  be  necessary  for 
implementing the agreement.] 

 1[24AA.  Power  to  make  exemption,  etc.,  in  relation  to  participation  in  the  business  of 
prospecting for  extraction,  etc., of mineral  oils.―(1)  If  the  Central  Government is  satisfied  that it  is 
necessary or expedient so to do in the public interest, it may, by notification in the Official Gazette, make 
an exemption, reduction in rate or other modification in respect of surtax in favour of any class of foreign 
companies specified in sub-section (2) or in regard to the whole or any part of the chargeable profits of 
such class of companies. 

Explanation.―For  the  purposes  of  this  sub-section,  “foreign  company”  shall  have  the  meaning 

assigned to it in clause (4) of section 80B of the Income-tax Act. 

(2)The foreign companies referred to in sub-section (1) are the following, namely:― 

(a)  foreign  companies  with  whom  the  Central  Government  has  entered  into  agreement  for  the 
association or participation of that Government or any person authorised by that Government in any 
business consisting of the prospecting for or extraction or production of mineral oils; and 

(b)  foreign  companies  providing  any  services  or  facilities  or  supplying  any  ship,  aircraft, 
machinery or plant (whether by way of sale or hire) in connection with any business consisting of the 
prospecting  for  or  extraction  or  production  of  mineral  oils  carried  on  by  that  Government  or  any 
person specified by that Government in this behalf by notification in the official Gazette. 

(3) Every notification issued under this section shall be laid before each House of Parliament. 

Explanation.―For the purpose of this section, “mineral oil” includes petroleum and natural gas.] 

25. Power to make rules.―(1) The Board may, subject to the control of the Central Government, by 

notification in the official Gazette, make rules for carrying out the purposes of this Act. 

(2)  In  particular,  and  without  prejudice  to  the  generality  of  the  foregoing  power,  such  rules  may 

provide for all or any of the following matters, namely:― 

(a) the form in which returns under section 5 may be furnished and the manner in which they may 

be verified. 

(b) the form in which notice for making provisional assessment shall be given; 

(c)  the  form  in  which  appeals  under  section  11  or  section  12  may  be  filed  and  the  manner  in 

which they shall be verified; 

 2[(cc) the circumstances in which, the conditions subject to which and the manner in which, the 
3[Commissioner (Appeals)] may permit an appellant to produce evidence which he did not produce or 
which he was not allowed to produce before the 4[Assessing Officer]]; 

(d) the procedure to be followed on applications for rectification of mistakes and applications for 

refunds; 

5[(dd) the procedure to be followed in calculating interest payable by assessees or interest payable 
by  the  Government  to  assessees  under  this  Act  including  the  rounding  off  of  the  period  for  which 
such  interest  is  to  be  calculated  in  cases  where  such  period  includes  a  fraction  of  a  month,  and 
specifying the circumstances in which and the extent to which petty amounts of interest payable by 
assessees may be ignored;] 

1. Ins. by Act 16 of 1981, s. 42 (w.e.f. 1-4-1981). 
2. Ins. by Act 16 of 1972, s. 58 (w.e.f. 1-4-1972). 
3. Subs. by Act 29 of 1977, s. 39 and Fifth Sch., for “Appellate Assistant Commissioner” (w.e.f. 1-4-1977). 
4. Subs. by Act 4 of 1988, s. 187, for “Income-tax Officer” (w.e.f. 1-4-1988). 
5. Ins. by Act 42 of 1970, s. 74 (w.e.f. 1-4-1971). 

16 

 
                                                           
(e) any other matter by this Act is to be, or may be, prescribed. 

1[(2A) The power to make rules conferred by this section shall include the power to give retrospective 
effect, from a date not earlier than the date of commencement of this Act, to the rules or any of them and, 
unless the contrary is permitted (whether expressly or by necessary implication), no retrospective effect 
shall be given to any rule so as to prejudicially affect the interests of assessees.] 

(3) The Central Government shall cause every rule made under this section to be laid as soon as may 
be after it is made before each House of Parliament while it is in session for a total period of thirty days, 
which may be comprised in one session 2[or in two or more successive sessions], and if, before the expiry 
of  the  session  3[immediately  following  the  session  or  the  successive  sessions  aforesaid],  both  Houses 
agree in making any modification in the rule or both Houses agree that the rule should not be made, that 
rule  shall  thereafter  have  effect  only  in  such  modified  form  or  be  of  no  effect,  as  the  case  may  be;  so 
however, that any such modification or annulment shall be without prejudice to the validity of anything 
previously done under that rule. 

26. Saving.― Nothing contained in this Act shall apply to any company which has no share capital. 

_________ 

THE FIRST SCHEDULE 

[See Section 2(5)] 

RULES FOR COMPUTING THE CHARGEABLE PROFITS 

In computing the chargeable profits of a previous year, the total income computed for that year under 

the Income-tax Act shall be adjusted as follows:― 

1.  Income,  profits  and  gains  and  other  sums  falling  within  the  following  clauses  shall  be  excluded 

from such total income, namely:― 

(i) any income chargeable under the Income-tax Act under the head “Capital gains”; 

(ii)  any  compensation  or  other  payment  as  is  referred  to  in  clause  (ii)  of  section  28  of  the  

Income-tax Act; 

(iii) profits and gains of any business of life insurance; 

* 

(iv) any income referred to in sub-section (2) of section 41 of the Income-tax Act; 
4*   
(vi) income chargeable under the Income-tax Act under the head “Interest on securities” derived 
from any security of the Central Government issued or declared to be income-tax free or from any 
security  of  a  State  Government  issued  income-tax  free,  the  income-tax  whereon  is  payable  by  the 
State Government; 

 *  

  * 

*; 

5[(vii)  an  amount  equal  to  fifty  per  cent.  of  the  sum  with  reference  to  which  a  deduction  is 

allowable to the company under the provisions of section 80G of the Income-tax Act;] 

(viii)  income  by  way  of  dividends  from  an  Indian  company  or  a  company  which  has  made  the 

prescribed arrangements for the declaration and payment of dividends within India; 

(ix)  income  by  way  of  royalties  received  from  Government  or  a  local  authority  or  any  Indian 

concern; 

(x) in the case of a non-resident company which has not made the prescribed arrangements for the 
declaration  and  payment  of  dividends  within  India,  its  income  by  way  of  any  interest  or  fees  for 
rendering technical services received from Government or a local authority or any Indian concern; 

1. Ins. by Act 26 of 1974, s. 21 (w.e.f. 18-8-1974). 
2. Subs. by Act 41 of 1975, s. 125, for “or in two successive sessions” (w.e.f. 1-4-1976). 
3. Subs. by s. 125, ibid., for “in which it is so laid or the session immediately following” (w.e.f. 1-4-1976). 
4. Clause (v) omitted by Act 20 of 1967, s. 36 (w.e.f. 1-4-1968). 
5. Subs. by s. 36, ibid., for clause (vii) (w.e.f. 1-4-1968). 

17 

 
 
 
 
 
 
 
 
                                                           
(xi) in the case of a banking company― 

(a)  any  sum  which  during  the  previous  year  is  transferred  by  it  to  a  reserve  fund  under 
sub-section (1) of section 17 of the Banking Regulation Act, 1949 (10 of 1949) or is deposited by 
it with the Reserve Bank of India under sub-clause (ii) of clause (b) of sub-section (2) of section 
11  of  that  Act,  not  exceeding  the  amount  required  under  the  aforesaid  provisions  to  be  so 
transferred or deposited, as the case may be, or 

(b)  any  sum  transferred  by  it  during  the  previous  year  to  any  reserves  in  India  including 
reserves not shown as such in its published balance-sheet in so far as the sums transferred to such 
reserves are attributable to income chargeable to tax under the Income-tax Act and have not been 
allowed as a deduction in computing its total income under that Act and in so far as the aggregate 
of  such  sums  does  not  exceed  the  highest  of  the  aggregate  of such sums,  if  any,  so  transferred 
during any one of the three years prior to the previous year,  

whichever is higher; 

(xii)  the  amount  of  any  deduction  from  the  income-tax  1*  *  *  chargeable  on  the  total  income 
allowed under the annual Finance Act in connection with export of any goods or merchandise out of 
India or the sale by a manufacturer of any articles to any person who exports them out of India. 
 2[Explanation.―Notwithstanding  anything  contained  in  any  clause  of  this  rule,  the  amount  of  any 
income or profits and gains which is required to be excluded from the total income under that clause shall 
be only the amount of such income or profits and gains as computed in accordance with the provisions of 
the  Income-tax  Act  (except  Chapter  VIA  thereof),  and  in  a  case  where any  deduction is required  to  be 
allowed in respect of any such income or profits and gains under the said Chapter VIA, the amount of 
such income or profits and gains computed as aforesaid as reduced by the amount of such deduction.] 

2. The balance of the total income arrived at after making the exclusions mentioned in rule 1 shall be 

reduced by― 

(i) the amount of income-tax 1*** payable by the company in respect of its total income under the 
provisions of the Income-tax Act after making allowance for any relief, rebate or deduction in respect 
of income-tax 1*** to which the company may be entitled under the provisions of the said Act or the 
annual Finance Act, and after excluding from such amount― 

(a) the amount of income-tax 1***  if any, payable by the company in respect of any income 
referred to in clause (i) or clause (ii) or clause (iii) or clause (viii) of rule,1 included in the total 
income; 

3[(b) the amount of income-tax, if any, payable by the company under the provisions of the 

annual Finance Act with reference to the relevant amount of distributions of dividends by it. 

Explanation.―In  this  sub-clause,  the  expression  “the  relevant  amount  of  distributions  of 

dividends” has the meaning assigned to it in the Finance Act of the relevant year;] 

4[(c)  the  amount  of  income-tax,  if  any,  payable  by  the  company  under  section  104  of  the 

Income-tax Act. 

Explanation.― In relation to the assessment year commencing on the 1st day of April, 1964, 
the reference in this sub-clause to “income-tax” shall be construed as a reference to “super-tax”;] 
(ii)  in the  case  of a  company  which  has  been  charged  to  tax in  a  country  outside  India  on  any 
portion of its income, profits and gains included in its total income as computed under the Income-tax 
Act,  the  tax  actually  paid  in  respect  of  such  income,  profits  and  gains  in  the  said  country  in 
accordance with the laws in force in that country after allowance of every relief due under the said 
laws: 

1. The words “and super-tax” omitted by Act 10 of 1965, s. 74 (w.e.f. 1-4-1965). 
2. Ins. by Act 16 of 1981, s. 43 (w.e.f. 1-4-1981). 
3. Subs. by Act 13 of 1966, s. 43, for sub-clause (b) (w.e.f. 1-4-1966). 
4. Ins. by s. 43, ibid. (retrospectively). 

18 

 
                                                           
Provided that the aforesaid reduction shall not be allowed unless the assessee produces evidence of 

the fact of the payment of the aforesaid tax in that country. 

3. The net amount of income calculated in accordance with rule 2 shall be increased 1[by the amount 
of  any  expenditure] incurred  on  account  of commission,  entertainment and advertisement, to  the  extent 
such  expenditure,  in  the  opinion  of  the 2[Assessing  Officer]  is  excessive  having  regard  to  the 
circumstances of the case: 

Provided  that  the  previous  authority  of  the 3[Deputy  Commissioner]  is  obtained  for  holding  such 

expenditure to be excessive. 

THE SECOND SCHEDULE 

[See Section 2 (8)] 

RULES FOR COMPUTING THE CAPITAL OF A COMPANY FOR THE PURPOSES OF SURTAX 

1.  Subject to the  other  provisions  contained  in this  Schedule,  the  capital  of a  company  shall be the 

aggregate of the amounts, as on the first day of the previous year relevant to the assessment year, of― 

(i) its paid-up share capital; 

(ii) its reserves, if any created under the proviso (b) to clause (vib) of sub-section (2) of section 10 
of the Indian Income-tax Act, 1922 (11 of 1922) or under  4[sub-section (4) of section 32A, or sub-
section (3) of section 34], of the Income-tax Act, 1961 (43 of 1961); 

(iii) its other reserves as reduced by the amounts credited to such reserves as have been allowed 
as a deduction in computing the income of the company for the purposes of the Indian  Income-tax 
Act, 1922 (11 of 1922) or the Income-tax Act, 1961 (43 of 1961); 

5* 

  * 

  * 

* 

* 

6[lA. Where a company has not made any credit in any account in its books as on the first day of the 
previous  year  relevant  to  the  assessment  year  which  is  of  the  nature  of  item  (8)  or  item  (9)  under  the 
heading “CURRENT LIABILITIES AND PROVISIONS” in the column relating to  “LIABILITIES” in 
the “FORM OF BALANCE-SHEET”, given in part I of Schedule VI to the Companies Act, 1956 (1 of 
1956), or where the 2[Assessing Officer] is of opinion that the amount credited in such account falls short 
of the amount which should have reasonably been credited by it, the amount of its capital as computed 
under rule 1 shall be reduced by the amount which has not been so credited or, as the case may be, the 
amount of such shortfall. 

Explanation.― For the purposes of this rule, the amount of credit which should have reasonably been 
made by a company in relation to any account of the nature of item (9) aforesaid, means the amount of 
dividend declared or paid by the company, on or after the first day of the previous year relevant to the 
assessment year, for the previous year immediately preceding the first mentioned previous year.] 

2. Where a company owns any assets the income from which in accordance with clause (iii) or clause 
(vi)  or  clause  (viii)  of  rule  1  of  the  First  Schedule  is  required  to  be  excluded  from  its  total  income  in 
computing its chargeable profits, the amount of its capital as computed under rule 1 of this Schedule shall 
be diminished by the cost to it of the said assets as on the first day of the previous year relevant to the 
assessment year in so far as such cost exceeds the aggregate of― 

1. Subs. by Act 66 of 1976, s. 29, for “(ii) any expenditure” (w.e.f. 1-4-1977). 
2. Subs. by Act 4 of 1988, s. 187, for “Income-tax Officer” (w.e.f. 1-4-1988). 
3. Subs. by s. 187, ibid., for “Inspecting Assistant Commissioner” (w.e.f. 1-4-1988). 
4. Subs. by Act 66 of 1976, s. 29, for “sub-section (3) of section 34” (w.e.f. 1-4-1977). 
5. Sub-clauses (iv) and (v) omitted by s. 29, ibid. (w.e.f. 1-4-1977). 
6. Ins. by s. 29, ibid. (w.e.f. 1-4-1975). 

19 

 
 
 
 
 
 
 
 
                                                           
(i) any moneys borrowed 1*** and remaining outstanding as on the first day of the said previous 

year; and 

(ii) the amount of any fund, any surplus and any such reserve as is not to be taken into account in 

computing the capital under rule 1. 

Explanation 1.― A paid-up share capital or reserve brought into existence by creating or increasing 
(by revaluation or otherwise) any book asset is not capital for computing the capital of a company for the 
purposes of this Act. 

Explanation 2.―Any premium received in cash by the company on the issue of its shares standing to 

the credit of the share premium account shall be regarded as forming part of its paid-up share capital. 

Explanation 3.―Where a company has different previous years in respect of its income, profits and 
gains, the computation of capital under rules 1, 2 and 3 shall be made with reference to the previous year 
which commenced first. 

3.  Where  after  the  first  day  of  the  previous  year  relevant  to  the  assessment  year  the  capital  of  a 
company as computed in accordance with the foregoing rules of this Schedule is increased by any amount 
during that previous year on account of increase of paid-up share capital 2[or is reduced by any amount on 
account of reduction of paid-up share capital,]  or repayment of any such moneys, such capital shall be 
increased or reduced, as the case may be, by a sum which bears to that amount the same proportion as the 
number of days of the previous year during which the increase or the reduction remained effective bears 
to the total number of days in that previous year. 

4. Where a part of the income, profits and gains of a company is not includible in its total income as 
computed under the Income-tax Act, its capital shall be the sum ascertained in accordance with rules 1, 2 
and  3,  diminished  by  an  amount  which  bears  to  that  sum  the  same  proportion  as  the  amount  of  the 
aforesaid income, profits and gains bears to the total amount of its income, profits and gains. 

 3[THE THIRD SCHEDULE 

(See Section 4) 

RATES OF SURTAX 

Surtax shall be charged on the amount (hereinafter referred to as the chargeable amount) by which the 

chargeable profits exceed the amount of the statutory deduction at the following rates, namely:― 

(i)  on  so  much  of  the  chargeable  amount  as  does  not  exceed  five 
per cent. of the amount of capital as computed in accordance with the 
Second Schedule 

              25 per cent. 

(ii) on the balance, if any, of the chargeable amount 

           4[40 per cent.] 

5[Provided that where in the case of an Indian company or a company which has made the prescribed 

arrangements for the declaration and payment of dividends within India― 

(i) which is such a company as is referred to in section 108 of the Income-tax Act, and 

1. The words, brackets  and figures “other than the debentures referred to in clause (iv) or moneys referred to in clause (iv) of  

rule 1” omitted by Act 66 of 1976, s. 29 (w.e.f. 1-4-1977). 

2. Subs. by s. 29, ibid., for certain words, brackets and figures (w.e.f. 1-4-1977). 
3. Subs. by Act 32 of 1971, s. 38, for “The Third Schedule” (w.e.f. 1-4-1972). 
4. Subs. by Act 20 of 1974, s. 15, for “30 per cent.” (w.e.f. 1-4-1975). 
5. Ins. by s. 15, ibid. (w.e.f. 1-4-1975). 

20 

 
 
 
 
                                                           
(ii)  whose  paid-up  share  capital  (subscribed  and  paid  for  in  cash)  as  on  the  last  day  of  the 
previous year, is not less than twenty-five per cent. of the amount of the capital as computed under 
the Second Schedule to this Act, 

the aggregate of― 

(a)  the  amount  of  income-tax-payable  by  the  company  in  respect  of  its  total  income  of  the 
previous  year  under  the  provisions  of  the  Income-tax  Act  after  making  allowance  for  any  relief, 
rebate or deduction in respect of income-tax to which the company is entitled under the provisions of 
the said Act or the annual Finance Act; and 

(b) the amount of surtax computed in accordance with the foregoing provisions of this Schedule, 

exceeds the amount calculated at seventy per cent. of the total income of the company, the amount of such 
excess shall be deducted from the amount of surtax referred to in clause (b) above and the balance shall 
be the amount of the surtax payable by the company.] 

21 

 
 
 
 
 
 
 
 
