THE INTEREST-TAX ACT, 1974 

__________ 

ARRANGEMENT OF SECTIONS 

________ 

SECTIONS 

1.  Short title and extent. 
2.  Definitions. 
3.  Tax authorities. 
4.  Charge of tax. 
5.  Scope of chargeable interest. 
6.  Computation of chargeable interest. 
7. 
 Return of chargeable interest. 
8.  Assessment. 
9.  Self-assessment. 
10.  Interest escaping assessment. 
10A. Time limit for completion of assessments and re-assessments. 
11.  Advance payment of interest-tax. 
12.   Interest for default in furnishing return of chargeable interest. 
12A. Interest for default in payment of interest-tax in advance. 
12B. Interest for deferment of interest-tax payable in advance. 
13.  Penalty for concealment of chargeable interest. 
14.  Opportunity of being heard. 
15.  Appeals to the Commissioner (Appeals). 
15A. [Omitted.] 
16.   Appeals to Appellate Tribunal.  
17.  Rectification of mistakes. 
18.  Interest-tax deductible in computing total income under the Income-tax Act. 
19.  Revision of order prejudicial to revenue. 
20.  Revision of orders by Commissioner. 
21.  Application of provisions of Income-tax Act. 
22.  Income-tax papers to be available for the purposes of this Act. 
23.  Failure to comply with notices. 
24.  False statements. 
25.  Wilful attempt to evade tax, etc. 
26.  Abetment of false returns, etc. 
26A. Offences by credit institutions. 
26B. Institution of proceedings and composition of offences. 
26C. Power of credit institutions to vary certain agreements. 
27.  Power to make rules. 
28.  Power to exempt. 
29.  Power to remove difficulty. 
30.  [Repealed.] 

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THE INTEREST-TAX ACT, 1974 

ACT NO. 45 OF 1974 

[23rd September, 1974.] 

An Act to impose a special tax on interest in certain cases. 

BE it enacted by Parliament in the Twenty-fifth Year of the Republic of India as follows:— 

1. Short title and extent.—(1) This Act may be called the Interest-tax Act, 1974. 

(2) It extends to the whole of India. 

2. Definitions.—In this Act, unless the context otherwise requires,— 

(1) “assessee” means a person by whom interest-tax or any other sum of money is payable under this 

Act and includes— 

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

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

(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 interest” means the total amount of interest referred to in section 5, computed in the 

manner laid down in section 6; 

1[(5A) “credit institution” means,— 

(i)  a  banking  company  to  which  the  Banking  Regulation  Act,  1949  (10  of  1949),  applies 

(including any bank or banking institution referred to in section 51 of that Act) 2***; 

(ii) a public financial institution as defined in section 4A of the Companies Act, 1956 (1 of 1956); 

(iii)  a  State  financial  corporation  established  under  section  3  or  section  3A  or  an  institution 

notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951); and 

(iv) any other financial company; 

(5B) “financial company” means a company, other than a company referred to in  sub-clause (i), (ii) 

or (iii) of clause (5A), being— 

(i) a hire-purchase finance company, that is to say, a company which carries on, as its principal 

business, hire-purchase transactions or the financing of such transactions; 

(ii) an investment company, that is to say, a company which carries on, as its principal business, 
the  acquisition  of  shares,  stock,  bonds,  debentures,  debenture  stock  or  securities  issued  by  the 
Government or a local authority, or other marketable securities of a like nature; 

(iii)  a  housing  finance  company,  that  is  to  say,  a  company  which  carries  on,  as  its  principal 
business, the business of financing of acquisition or construction of houses, including acquisition or 
development of land in connection therewith; 

1. Ins. by Act 49 of 1991, s. 91 (w.e.f. 1-10-1991). 
2.  The  words  “or  a  co-operative  society  engaged  in  carrying  on  the  business  of  banking  not  being  a  co-operative  society 

providing credit facilities to farmers or village artisans” omitted by Act 18 of 1992, s. 103 (w.e.f. 1-4-1993). 

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(iv) a loan company, that is to say, a company [not being a company referred to in  sub-clauses (i) 
to  (iii)]  which  carries  on,  as  its  principal  business,  the  business  of  providing  finance,  whether  by 
making loans or advances or otherwise; 

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

 2[(va)  a  residuary  non-banking  company  [other  than  a  financial  company  referred  to  in            

sub-clause (i), (ii), (iii), (iv) or (v)] that is to say, a company which receives any deposit under any 
scheme  or  arrangement,  by  whatever  name  called,  in  one  lumpsum  or  in  instalments  by  way  of 
contributions or subscriptions or by sale of units or certificates or other instruments or in any other 
manner; or] 

(vi) a miscellaneous finance company, that is to say, a company which carries on exclusively, or 

almost exclusively, two or more classes of business referred to in the preceding sub-clauses;] 

(6) “Income-tax Act” means the Income-tax Act, 1961(43 of 1961); 
3[(7) '“interest” means interest on loans and advances made in India and includes— 

(a)  commitment  charges  on  unutilised  portion  of  any  credit  sanctioned  for  being  availed  of  in 

India; and 

(b) discount on promissory notes and bills of exchange drawn or made in India,  

but does not include— 

(i)  interest  referred  to  in  sub-section  (1B)  of  section  42  of  the  Reserve  Bank  of  India  Act, 

1934 (2 of 1934); 

(ii) discount on treasury bills;] 

(8) “prescribed” means prescribed by rules made under this Act; 
4* 

* 

* 

* 

*; 

(10) 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. 

3. Tax authorities.—5[(1) The income-tax authorities specified in section 116 of the Income-tax Act 

shall be the interest-tax authorities for the purposes of this Act. 

(1A)  Every  such  authority  shall  exercise  the  powers  and  perform  the  functions  of  an    interest-tax 

authority under this Act in respect of any person within his jurisdiction. 

(1B) The jurisdiction of an interest-tax authority 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 the concurrent jurisdiction) or under any other provision of that Act. 

(1C)  The  interest-tax  authority  having  jurisdiction  in  relation  to  a  credit  institution  which  has  no 
income  assessable  to  income-tax  under  the  Income-tax  Act  shall  be  the  interest-tax  authority  having 
jurisdiction in respect of the area in which that institution carries on its business or has its principal place 
of business. 

(1D) Section 118 of the Income-tax Act and any notification issued thereunder shall apply in relation 
to  the  control  of  interest-tax  authorities  as  they  apply  in  relation  to  the  control  of  the  corresponding 

1. The word “or” omitted by Act 18 of 1992, s. 103 (w.e.f 1-4-1993). 
2. Ins. by s. 103, ibid. (w.e.f. 1-4-1993). 
3. Subs. by Act 49 of 1991, s. 91, for clause (7) (w.e.f. 1-10-1991). 
4. Clause (9) omitted by s. 91, ibid. (w.e.f. 1-10-1991). 
5. Subs. by s. 92, ibid., for sub-section (1) (w.e.f. 1-10-1991). 

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income-tax  authorities,  except  to  the  extent  to  which  the  Board  may,  by  notification  in  the  Official 
Gazette, otherwise direct in respect of any interest-tax authority.] 

(2) All officers and persons employed in the execution of this Act shall observe and follow the 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 Appellate Assistant Commissioner in the exercise 

of his appellate functions. 
(3) Every Income-tax Officer  1[or Assistant Commissioner 2[ or Deputy Commissioner]] employed in 
the  execution  of  this  Act shall  observe  and  follow  the  orders,  instructions  and directions issued  for  his 
guidance by the 3[Director] or by the Commissioner or by the 4[Additional Commissioner of Income-tax 
or the 5[Joint Commissioner]] within whose jurisdiction he performs his functions. 

4.  Charge  of  tax.—6[(1)]  Subject  to  the  provisions  of  this  Act,  there  shall  be  charged  on  every 
scheduled bank for every assessment year commencing on or after the 1st day of April, 1975, a tax (in 
this Act referred to as interest-tax) in respect of its chargeable interest of the previous year at the rate of 
seven per cent. of such chargeable interest: 

7[Provided  that  the  rate  at  which  interest-tax  shall  be  charged  in  respect  of  any  chargeable  interest 
accruing or arising after the 31st day of March, 1983 shall be three and a half per cent. of such chargeable 
interest.] 

8[(2) Notwithstanding anything contained in sub-section (1) but subject to the other provisions of this 
Act, there shall be charged on every credit institution for every assessment year commencing on and from 
the 1st day of April, 1992, interest-tax in respect of its chargeable interest of the previous year at the rate 
of three per cent. of such chargeable interest.] 

9[Provided  that  the  rate  at  which  interest-tax  shall  be  charged  in  respect  of  any  chargeable  interest 

accruing or arising after the 31st day of March, 1997 shall be two per cent. of such chargeable interest.] 

10[(3) Notwithstanding anything contained in sub-sections (1) and (2), no interest-tax shall be charged 

in respect of any chargeable interest accruing or arising after the 31st day of March, 2000.] 

11[5. Scope of chargeable interest.—Subject to the provisions of this Act, the chargeable interest of 
any previous year of a credit institution shall be the total amount of interest (other than interest on loans 
and advances made to other credit institutions 12[or to any co-operative society engaged in carrying on the 
business of banking]) accruing or arising to the credit institution in that previous year: 

Provided that any interest in relation to categories of bad or doubtful debts referred to in section 43D 
of the Income-tax Act shall be deemed to accrue or arise to the credit institution in the previous year in 
which it is credited by the credit institution to its profit and loss account for that year or, as the case may 
be, in which it is actually received by the credit institution, whichever is earlier.] 

6.  Computation  of  chargeable  interest.—(1)  Subject  to  the  provisions  of  sub-section  (2),  in 
computing  the  chargeable  interest  of  a  previous  year,  there  shall  be  allowed  from  the  total  amount  of 
interest (other than interest on loans and advances made to 13[credit institutions] accruing or arising to the 
assessee in the previous year, a deduction in respect of the amount of interest which is established to have 
become a bad debt during the previous year: 

1. Ins. by Act 32 of 1994, s. 56 (w.e.f. 1-6-1994). 
2.  Ins. by Act 21 of 1998, s. 77 (w.e.f. 1-4-1998). 
3. Subs. by Act 32 of 1994, s. 56, for “Director of Inspection” (w.e.f. 1-6-1994). 
4. Subs. by s. 56, ibid., for “Inspecting Assistant Commissioner” (w.e.f. 1-6-1994). 
5. Subs. by Act 21 of 1998, s. 77, for “Deputy Commissioner” (w.e.f. 1-4-1998). 
6. Section 4 renumbered as sub-section (1) thereof by Act 49 of 1991, s. 93 (w.e.f. 1-10-1991). 
7. Ins. by Act 11 of 1983, s. 43 (w.e.f. 1-4-1983). 
8. Ins. by Act 49 of 1991, s. 93 (w.e.f. 1-10-1991). 
9. Ins. by Act 26 of 1997, s. 59 (w.e.f. 1-4-1998). 
10. Ins. by Act 10 of 2000, s. 77 (w.e.f. 1-4-2001). 
11. Subs. by Act 49 of 1991, s. 94, for section 5 (w.e.f. 1-10-1991). 
12. Ins. by Act 18 of 1992, s. 104 (w.r.e.f. 1-10-91). 
13. Subs. by Act   49 of 1991, s. 95, for “scheduled banks” (w.e.f. 1-10-1991). 

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Provided that  such interest  has  been taken into  account  in  computing  the  chargeable  interest  of  the 
assessee of an earlier previous year and the amount has been written off as irrecoverable in the accounts 
of the assessee for the previous year during which it is established to have become a bad debt. 

Explanation.—For  the  removal  of  doubts,  it  is  hereby  declared  that  in  computing  the  chargeable 
interest of a previous year, no deduction, other than the deduction specified in this sub-section, shall be 
allowed from the total amount of interest accruing or arising to the assessee. 

(2) In computing the chargeable interest of a previous year, the amount of interest which accrues or 
arises to the assesse  1[before the 1st day of August, 1974 or 2[during the period commencing on the 1st 
day of April, 1985 and ending with the 30th day of September, 1991] shall not be taken into account. 

7. Return of chargeable interest.—3[(I) In the case of every credit institution, its principal officer, or 
where  in  the  case  of  a  non-resident,  credit  institution  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  interest  of  the 
credit  institution  of  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  31st  day  of  December  of  the 
assessment year. 

(2) Without prejudice to the provisions of sub-section (1), the Assessing Officer may, before the end 
of the relevant assessment year, serve a notice upon the principal officer of any credit institution, or where 
in the case of a non-resident credit institution 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  interest  of  the  credit  institution  of  the  previous  year  in  the 
prescribed form and verified in the prescribed manner and setting forth such other particulars as may be 
prescribed.] 

(3)  Any  assessee  who  has  not  furnished  a  return  within  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 4[before the expiry of one year from the end of the relevant assessment year or before the completion 
of the assessment, whichever is earlier.] 

8.  Assessment.—(1)  For  the  purposes  of  making  an  assessment  under  this  Act,  the   5[Assessing 
Officer] may serve on any person who has furnished a return under section 7 or upon whom a notice has 
been  served  under  sub-section  (2)  of  section  7  (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  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 5[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  interest  and  the  amount  of  the  interest-tax 
payable on the basis of such assessment. 

6[(3) If any person— 

(a) fails to make a return as required under sub-section (1) of section 7 and has not made a return 

or a revised return under sub-section (3) of that section, or 

(b) fails to comply with all the terms of notice under sub-section (2) of that section, 

1. Subs. by Act 19 of 1978, s. 33, for “before the 1st day of August, 1974” (1-4-1978). 
2. Subs. by Act 49 of 1991, s. 95, for “after the 31st day of March, 1985” (w.e.f. 1-10-1991). 
3. Subs. by s. 96, ibid., for sub-sections (1) and (2) (w.e.f. 1-10-1991).  
4. Subs. by s. 96, ibid., for  “before the assessment is made”  (w.e.f. 1-10-1991). 
5. Subs. by s. 97, ibid., for  “Income-tax Officer”  (w.e.f. 1-10-1991). 
6. Ins. by s. 97, ibid. (w.e.f. 1-10-1991). 

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the Assessing Officer shall, after taking into account all the relevant material which he has gathered and 
after  giving  the  assessee  an  opportunity  of  being  heard,  make  the  assessment  of  the  total  chargeable 
interest to the best of his judgment and determine the sum payable by the assessee on the basis of such 
assessment: 

Provided  that  such  opportunity  shall  be  given  by  the  Assessing  Officer  by  serving  a  notice  calling 
upon  the  assessee  to  show  cause,  on  a  date and  time  to  be  specified  in  the  notice,  why  the  assessment 
should not be completed to the best of his judgment: 

Provided further that it shall not be necessary to give such opportunity in a case where a notice under 

sub-section (1) has been issued prior to the making of an assessment under this section.] 

1[9.  Self-assessment.—(1)  Where  interest-tax  is  payable  on  the  basis  of  any  return  required  to  be 
furnished  under  section  7  or  section  10,  after  taking  into  account  the  amount  of  interest-tax,  if  any, 
already paid under any provision of this Act, the assessee shall be liable to pay such interest-tax, together 
with interest payable under any provision of this Act for any delay in furnishing the return or any default 
or  delay  in  payment  of  advance  interest-tax,  before  furnishing  the  return  and  the  return  shall  be 
accompanied by proof of payment of such interest-tax and interest. 

Explanation.—Where  the  amount  paid  by  the  assessee  under  this  sub-section  falls  short  of  the 
aggregate of the interest-tax and interest as aforesaid, the amount so paid shall first be adjusted towards 
the interest payable as aforesaid and the balance, if any, shall be adjusted towards the interest-tax payable. 

(2) After the assessment under section 8 has been made, any amount paid under sub-section (1) shall 

be deemed to have been paid towards such assessment. 

(3) If any assessee fails to pay the whole or any part of interest-tax or interest or both in accordance 
with  the  provisions  of  sub-section  (1),  he  shall,  without  prejudice  to  any  other  consequences  which  he 
may  incur,  be  deemed  to  be  an  assessee  in  default  in  respect  of  the  interest-tax  or  interest;  or  both 
remaining unpaid, and all the provisions of this Act shall apply accordingly.] 

10. Interest escaping assessment.—If— 

(a) the 2[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 7 for any assessment year or to disclose fully and 
truly all material facts necessary for his assessment for any  assessment year, chargeable interest for 
that  year  has  escaped  assessment  or  has  been  under-assessed  or  has  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  2[Assessing  Officer]  has,  in  consequence  of  information  in  his  possession, 
reason to believe that chargeable interest assessable for any assessment year has escaped assessment 
or has been under-assessed or has been made 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 assesee a notice containing all or any of 
the  requirements  which  may  be  included  in  a  notice  under  section  7,  and  may  proceed  to  assess  or            
re-assess  the  amount  chargeable  to  interest-tax,  and  the  provisions  of  this  Act  shall,  so  far  as  may  be, 
apply, as if the notice were a notice issued under that section. 

3[10A. Time limit for completion of assessments and re-assessments.—(1) No order of assessment 
shall be made under section 8 at any time after the expiry of two years from the end of the assessment 
year in which the interest was first assessable. 

(2) No order of assessment or re-assessment shall be made under section 10 after the expiry of two 

years from the end of the financial year in which the notice under that section was served. 

1. Subs. by Act 49 of 1991, s. 98, for section 9 (w.e.f. 1-10-1991). 
2. Subs. by s. 99, ibid., for “Income-Tax Officer” (w.e.f. 1-10-1991). 
3. Ins. by s.100, ibid. (w.e.f 1-10-1991). 

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(3) Notwithstanding anything contained in sub-sections (1) and (2), and order of fresh assessment in 
pursuance  of  an  order  passed  under  section  15,  section  16,  section  19  or  section  20,  setting  aside  or 
cancelling  an  assessment  may  be  made  at  any  time  before  the  expiry  of  two  years from  the  end  of  the 
financial year in which the order under section 15 of section 16 is received by the Commissioner or, as the 
case may be, the order under section 19 or section 20 is passed by the Commissioner. 

(4) The provisions of sub-sections (1) and (2) shall not apply to the assessment or re-assessment made 
in consequence of, or to give effect to, any finding or direction contained in an order under section 15 or 
section 16 or section 19 or section 20 of this Act or section 256 or section 260 of the Income-tax Act as 
applicable  to  this  Act  by  virtue  of  section  21  of  this  Act  or  in  an  order  of  any  court  in  a  proceeding 
otherwise than by way of appeal or reference under this Act and such assessment or re-assessment may, 
subject to the provisions of sub-section (3), be completed at any time. 

Explanation 1.—In computing the period of limitation for the purposes of this section— 

(i) the time taken in reopening the whole or any part of the proceeding; or 

(ii) the period during which the assessment proceeding is stayed by an order or injunction of any 

Court, 

shall be excluded. 

Explanation 2.—Where, by an order referred to in sub-section (4), any interest is excluded from the 
chargeable interest for an assessment year in respect of an assessee, then, an assessment of such interest 
for another assessment year shall, for the purposes of  section 10 and this section, be deemed to be one 
made in consequence of, or to give effect to, any finding or direction contained in the said order.] 

1[11.  Advance  payment  of  interest-tax.—(1)  Interest-tax  shall  be  payable  in  advance  during  the 
financial  year  in  respect  of  the  chargeable  interest  for  the  assessment  year  immediately  following  that 
financial year in accordance with the provision of this section. 

(2) Interest-tax shall be payable in advance in three instalments during each financial year, the due 

date of, and the amount payable in, each such instalment being as specified in the following Table: 

TABLE 

Due date of instalment 

Amount payable 

On or before the 15th September 

Not  less  than  twenty  per  cent.  of  such 

On or before the 15th December 

On or before the 15th March 

interest-tax Payable in advance. 

Not  less  than  fifty  per  cent.  of  such 
interest-tax  payable  in  advance,  as 
reduced by the amount, if any, paid in 
the earlier instalment. 

The  whole  amount  of  such  interest-tax 
payable  in  advance  as  reduced  by  the 
amount or amounts, if any, paid in the 
earlier instalment or instalments: 

Provided that any amount paid by way of interest-tax payable in advance on or before the 31st day of 
March shall also be treated as interest-tax paid in advance during the financial year ending on that day for 
all the purposes of this Act. 

12.  Interest  for  default  in  furnishing  return  of  chargeable  interest.—(1)  Where  the  return  of 
chargeable interest for any assessment year under sub-section (1) of section 7, or in response to a notice 
under sub-section (2), of that section is furnished after the due date, or is not furnished, the  assessee  shall  

1. Subs. by Act 49 of 1991, s. 101, for sections 11 to 13 (w.e.f. 1-10-1991). 

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be liable to pay simple interest at the rate of two per cent. for every month or part of a month comprised 
in the period commencing on the date immediately following the due date, and,— 

(a) where the return is furnished after the due date, ending on the date of the furnishing of the 

return; or 

(b)  where  no  return  has  been  furnished,  ending  on  the  date  of  completion  of  assessment  under             

sub-section (3) of section 8, on the amount of the interest-tax on the chargeable interest as determined 
under sub-section (2) or sub-section (3) of section 8 as reduced by the interest-tax paid in advance. 

Explanation  1.— In  this  section,  “due  date”  means  the  31st  day  of  December  of  the  relevant 

assessment  year  or,  as  the  case  may  be,  the  date  on  which  return  in  response  to  a  notice  under                      
sub-section (2) of section 7 is due to be filed. 

Explanation 2.—Where in relation an assessment year, an assessment is made for the first time under 
section 10, the assessment so made shall be regarded as assessment made under sub-section (2), or, as the 
case may be, sub-section (3) of section 8. 

Explanation 3.—For the purposes of computing the interest payable under section 9, interest-tax on 
the  chargeable  interest  declared  in the  return  shall  be  deemed  to  be  the  interest-tax  on total  chargeable 
interest determined under sub-section (2) or sub-section (3) of section 8. 

(2)  The  interest  payable  under  sub-section  (1)  shall  be  reduced  by  the  interest,  if  any,  paid  under 

section 9 towards the interest chargeable under this section. 

(3)  Where  the  return  of  chargeable  interest  for  any  assessment  year,  required  by  a  notice  under  
section 10 issued after the completion of assessment under sub-section (2) or sub-section (3) of section 8 
or section 10 is furnished after the expiry of the time allowed under such notice or is not furnished, the 
assessee  shall  be  liable  to  pay  simple  interest  at  the  rate  of  two  per  cent.  for  every  month  or  part  of  a 
month comprised in the period commencing on the date immediately following the expiry of time allowed 
as aforesaid, and,— 

(a)  where  the  return  is  furnished  after  the  expiry  of  the  time  aforesaid,  ending  on  the  date  of 

furnishing the return; or 

(b)  where  no  return  has  been  furnished,  ending  on  the  day  of  completion  of  the  re-assessment 

under section 10, 

on  the  amount  by  which  the  interest-tax  on  the  chargeable  interest  as  determined  on  the  basis  of  such           
reassessment exceeds the interest-tax on chargeable interest on the basis of earlier assessment aforesaid. 

(4) Where, as a result of an order under section 15 or section 17 of this Act or section 254 or section 
260 or section 262 of the Income-tax Act, as applicable to this Act by virtue of section 21 of this Act, the 
amount  on  which  interest  was  payable  under  sub-section  (1)  or  sub-section  (3)  has  been  increased  or 
reduced, as the case may be, the interest shall be increased or reduced accordingly, and— 

(i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee a 
notice of demand in the prescribed form specifying the sum payable and such notice of demand shall 
be deemed to be a notice under section 156 of the Income-tax Act as applicable to this Act by virtue 
of Section 21, and the provisions of this Act shall apply accordingly; 

(ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded. 

(5)  The  provisions  of  this  section  shall  apply  in  respect  of  assessments  for  the  assessment  year 

commencing on the 1st day of April, 1992 and subsequent years. 

 12A.  Interest  for  default  in  payment  of  interest-tax  in  advance.—(1)  Subject  to  the  other 
provisions  of  this  section,  where  in  any  financial  year,  an  assessee,  who  is  liable  to  pay  interest-tax  in 
advance  under  section  11 has failed  to  pay  such  tax,  or  where  the  interest-tax paid in advance by  such 
assessee is less than ninety per cent. of the assessed interest-tax, the assessee shall be liable to pay simple 
interest at the rate of two per cent. for every month or part of a month comprised in the period from the 
1st  day  of  April  next  following  such  financial  year  to  the  date  of  determination  of  chargeable  interest 
under  sub-section  (2)  or,  as  the  case  may  be,  sub-section  (3)  of  section  8  on  an  amount  equal  to  the 

8 

 
assessed interest-tax, or, as the case may be, on the amount by which the interest-tax payable in advance 
falls short of the assessed interest-tax. 

Explanation 1.—In this section “assessed interest-tax” means, — 

(a)  for  the  purpose  of  computing  the  interest  payable  under  section  9,  the  interest-tax  on  the 

chargeable interest as declared in the return referred to in that section; 

(b) in any other case, interest-tax on chargeable interest as determined under sub-section (2) or, as 

the case may be, sub-section (3) of section 8. 

Explanation  2.—Where, in  relation to  an assessment year,  an  assessment  is  made  for  the  first time 
under section 10, the assessment so made shall be regarded as assessment made under sub-section (2) or, 
as the case may be, sub-section (3) of section 8. 

(2) Where,  before  the  date  of  completion  of  assessment  under sub-section  (2)  or  sub-section  (3)  of  

section 8, interest-tax is paid by the assessee under section 9 or otherwise,— 

(i) interest shall be calculated in accordance with the foregoing provisions of this section up to the 
date on which the tax is so paid, and reduced by the interest, if any, paid under section 9 towards the 
interest chargeable under this section; 

(ii) thereafter, interest shall be calculated at the rate aforesaid on the amount by which the tax so 

paid together with interest-tax paid in advance falls short of the assessed interest-tax. 

(3) Where, as a result of an order of reassessment under section 10, the amount on which the interest 
was payable under sub-section (1) is increased, the assessee shall be liable to pay simple interest at the 
rate of two per cent. for every month or part of a month comprised in the period commencing on the day 
following the completion of the assessment under sub-section (2) or, as the case may be, sub-section (3) 
of section 8 referred to in sub-section (1) and ending on the date of reassessment under section 10, on the 
amount  by  which  the  interest-tax  on  the  basis  of  the  reassessment  exceeds  the  interest-tax  on  the 
chargeable interest determined on the basis of assessment under sub-section (2) or, as the case may be, 
sub-section (3) of section 8. 

(4) Where, as a result of an order under section 15 or section 17 of this Act or section 254 or section 
260 or section 262 of the Income-tax Act as applicable to this Act by virtue of section 21 of this Act, the 
amount  on  which  interest  was  payable  under  sub-section  (1)  or  sub-section  (3)  has  been  increased  or 
reduced, as the case may be, the interest shall be increased or reduced accordingly, and— 

(i) in a case where the interest is increased, the Assessing Officer shall serve on the assessee a 
notice of demand in the prescribed form specifying the sum payable and such notice of demand shall 
be deemed to be a notice under section 156 of the Income-tax Act as applicable to this Act by virtue 
of section 21 of this Act, and provisions of this Act shall apply accordingly; 

(ii) in a case where the interest is reduced, the excess interest paid, if any, shall be refunded. 

(5)  The  provisions  of  this  section  shall  apply  in  respect  of  assessments  for  the  assessment  year 

commencing on the 1st day of April, 1992 and subsequent assessment years. 

12B. Interest for deferment of interest-tax payable in advance.—(1) Where in any financial year, 
the assessee who is liable to pay interest-tax in advance under section 11 has failed to pay the interest-tax 
and where such tax paid by the assessee on his chargeable interest on or before the 15th day of September 
is less than twenty per cent. of the interest-tax due on the returned chargeable interest or the amount of 
such interest-tax paid on or before the 15th day of December is less than fifty per cent. of the tax due on 
the returned chargeable interest then, the assessee shall be liable to pay simple interest at the rate of one 
and one-half per cent. per month of the shortfall for a period of three months on the amount of shortfall 
from  twenty  per  cent.  or;  as  the  case  may  be,  fifty  per  cent.  of  the  interest-tax  due  on  the  returned 
chargeable interest. 

(2)  The  provisions  of  this  section  shall  apply  in  respect  of  assessments  for  the  assessment  year 

commencing on the 1st day of April, 1992 and subsequent assessment years. 

9 

 
13. Penalty for concealment of chargeable interest.—If the Assessing Officer or the Commissioner 
(Appeals) in the course of any proceeding under this Act, is satisfied that any person has concealed the 
particulars  of  chargeable  interest  or  has  furnished  inaccurate  particulars  of  such  interest,  he  may  direct 
that such person shall pay by way of penalty, in addition to any interest-tax payable by him, a sum which 
shall not be less than, but shall not exceed three times, the amount of interest-tax sought to be evaded by 
reason  of  the  concealment  of  particulars  of  his  chargeable  interest  or  the  furnishing  of  inaccurate 
particulars of such chargeable interest.] 

14. Opportunity of being heard.—No order imposing a penalty under section 12 or section 13 shall 

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

15.  Appeals  to  the  1[Commissioner  (Appeals)].—(1)  Any  person  objecting  to  the  amount  of 
interest-tax  for  which  he  is  assessed  by  the  2[Assessing  Officer]  or  denying  his  liability  to  be  assessed 
under this Act, or objecting to any penalty or fine imposed by the 2[Assessing Officer], or to the amount 
allowed by the 2[Assessing Officer] by way of any relief under any provision of this Act, or to any refusal 
by the 2[Assessing Officer] to grant relief or to an order of rectification 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 17, may appeal to the 1[Commissioner (Appeals)]. 

3[(2) Every appeal filed on or after the 1st day of October, 1998 shall be in the prescribed form and 
shall  be  verified  in  the  prescribed  manner  and shall be  accompanied  by  a  fee  of  two  hundred  and  fifty 
rupees.] 

(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 

the 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  1[Commissioner  (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 1[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. 

15A. [Appeal to the Commissioner (Appeals).] Omitted by  Finance  (No. 2) Act, 1991 (49  of 1991),    

s. 103 (w.e.f. 1-10-1991).  

16.  Appeals  to  Appellate  Tribunal.—(1)  Any  assessee  aggrieved  by  an  order  passed  by  a 
Commissioner under section 19, or an order passed by  4[a Commissioner (Appeals)] under any provision 
of this Act, may appeal to the Appellate Tribunal against such order. 

(2)  The  Commissioner  may,  if  he  objects  to  any  order  passed  by  the  1[Commissioner  (Appeals)] 
under any provision of this Act, direct the 5[Assessing Officer] to appeal to the Appellate Tribunal against 
the order. 

1. Subs. by Act 29 of 1977, s. 39 and the Fifth Schedule, for “ Appellate Assistant Commissioner” (w.e.f. 1-4-1977). 
2. Subs. by Act 49 of 1991, s. 102, for “Income-tax Officer” (w.e.f. 1-10-1991). 
3. Subs. by Act 21 of 1998, s. 78, for sub-section ( 2) (w.e.f. 1-10-1998). 
4. Subs. by Act 29 of 1977, s. 39 and the Fifth Schedule, for “an Appellate Assistant Commissioner” (w.e.f. 1-4-1977). 
5. Subs. by Act 49 of 1991, s. 104, for “Income-tax Officer” (w.e.f. 1-10-1991). 

10 

 
                                                           
 
(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 
Commissioner, as the case may be. 

(4) The  1[Assessing Officer] or the assessee, as the case may be, on receipt of notice that an appeal 

against  the  order  of  the  2[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  2[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  a  fee  of  3[one 
thousand rupees in the case of an appeal filed on or after the 1st day of October, 1998]. 

(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. 

17. Rectification of mistakes.—(1) With a view to rectifying any mistake apparent from the record, 
the  Commissioner, the  4[Assessing  Officer],  the  2[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  5[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 
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 4[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  4[Assessing Officer] shall serve on the assessee a notice of demand in the prescribed 
form specifying the sum payable. 

6[18. 

Interest-tax  deductible 

in 

computing 

total 

income  under 

the 

Income-tax                             

Act.—Notwithstanding  anything  contained  in the  Income-tax  Act,  in  computing  the  income  of  a  credit 
institution chargeable to income-tax under the head “Profits and gains of business or profession” or under 
the head “Income from other sources”, the interest-tax payable by the credit institution for any assessment 
year shall be deductible from the income, under the respective heads, of the credit institution assessable 
for that assessment year.] 

19. Revision of order prejudicial to revenue.—(1) The 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 7[Assessing Officer] is erroneous in so far as it is prejudicial to the interests of the revenue, he may, 

1. Subs. by Act 49 of 1991, s. 104,  for “Income-tax Officer” (w.e.f. 1-10-1991 
2. Subs. by Act 29 of 1977, s. 39 and the Fifth Schedule, for “Appellate Assistant Commissioner” (w.e.f. 1-4-1977). 
3. Subs. by Act 21 of 1998, s. 79, for “two hundred rupees” (w.e.f. 1-10-1998). 
4. Subs. by Act 49 of 1991, s. 105,  for “Income-tax Officer” (w.e.f. 1-10-1991). 
5. Subs. by Act 67 of 1984, s. 82, for “within four years of the date on which such order was passed” (w.e.f. 1-10-1984). 
6. Subs. by Act 49 of 1991, s. 106, for section 18 (w.e.f. 1-10-1991). 
7. Subs. by s. 107, ibid., for “Income-tax Officer” (w.e.f. 1-10-1991). 

11 

 
                                                           
after  giving  the  assessee  an  opportunity  of  being  heard  and  after  making  or  causing  to  be  made  such 
enquiry 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. 

1[Explanation.—For  the  removal  of  doubts,  it  is  hereby  declared  that,  for  the  purposes  of  this               

sub-section,— 

(a) “record” shall include and shall be deemed always to have included all records relating to any 

proceeding under this Act available at the time of examination by the Commissioner; 

(b) where any order referred to in this sub-section is the subject matter of any appeal, the power of 
the Commissioner under this sub-section shall extend to all such matters as had not been considered 
and decided in such appeal.] 
2[(2) No order shall be made under in 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  sub-section (2), an order-in revision under this section may 
be passed at anytime 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 3[the National Tax Tribunal], the 
High Court or the Supreme Court. 

Explanation.—In  computing  the  period  of  limitation  for  the  purposes  of  sub-section  (2),  4[the  time 
taken  in  giving  an  opportunity  to  the  assessee  to  be  reheard  under  the  proviso  to  section  129  of  the 
Income-tax Act, as applicable to this Act by virtue of section 21 of this Act, and] any period during which 
any proceeding under this section is stayed by an order or injunction of any court shall be excluded. 

20. Revision of orders by Commissioner.—(1) The 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  5[Assessing Officer] 6*** subordinate to him and may make such enquiry or cause 
such enquiry 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 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 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 Commissioner shall not revise any order under this section in the following cases— 

7[(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 appeals; 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. 

1. Subs. by  Act 49 of 1991,  s. 107, for the Explanation (w.e.f. 1-10-1991). 
2. Subs. by Act 67 of 1984, s. 83, for sub-section (2) (w.e.f. 1-10-1984). 
3. Ins. by Act 49 of 2005, s. 30 and the Schedule (w.e.f. 28-12-2005). 
4. Ins. by Act 49 of 1991, s. 107 (w.e.f. 1-10-1991). 
5. Subs. by s. 108, ibid., for “Income-tax Officer” (w.e.f. 1-10-1991). 
6. The words “or Appellate Assistant Commissioner” omitted by Act 29 of 1977, s. 39 and  the Fifth Schedule (w.e.f. 8-8-1977). 
7. Subs. by s. 39 and the Fifth Schedule, ibid., for clauses (a), (b) and (c) (w.e.f. 8-8-1977).  

12 

 
                                                           
1[(6) On every application by an assessee for revision under this sub-section, made on or after the 1st 
day of October, 1998, an order shall be passed within one year from the end of the financial year in which 
such application is made by the assesse for revision. 

Explanation.—In  computing  the  period  of  limitation  for  the  purposes  of  this  sub-section,  the  time 
taken  in  giving  an  opportunity  to  the  assessee  to  be  re-heard  under  the  proviso  to  section  21  and  any 
period during which any proceeding under this section is stayed by an order or injunction of any court 
shall be excluded. 

(7) Notwithstanding anything  contained in sub-section (6), an order in revision under sub-section (6) 
may be passed at any time in consequence of or to give effect to any finding or direction contained in an 
order of the 2[Appellate Tribunal, the National Tax Tribunal, the High Court or the Supreme Court].] 

Explanation.—An  order  by  the  Commissioner  declining  to  interfere  shall,  for  the  purposes  of  this 

section be deemed not to be an order prejudicial to the assessee. 

3* 

* 

* 

* 

* 

21.  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 necessary modifications as if the said provisions and the rules referred 
to interest-tax instead of to income-tax:— 

4[2(44)  5[,119],129,131,132,132A,  132B,  133  to  136  (both  inclusive),  138,140,145,  156,  160,  161, 
162, 163, 166, 167, 170, 173, 175, 176, 178, 179, 220 to 227 (both inclusive), 228A, 229, 232, 237 to 245 
(both inclusive), 254 to 262 (both inclusive), 265, 266, 268, 269, 281, 281B, 282, 284, 287, 288, 288A, 
288B, 289 to 293 (both inclusive), the Second Schedule and the Third Schedule:] 

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. 

22. 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. 

6[23. Failure to comply with notices.—If any person fails, without reasonable cause, to produce or 
cause to be produced, any accounts or documents required to be produced under section 8, he shall pay by 
way  of  penalty,  a  sum  which  shall  not  be  less  than  one  thousand  rupees,  but  which  may  extend  to           
twenty-five thousand rupees, for each such failure. 

24. False statements.—If a person makes a statement in any verification under this Act or any rule 
made  thereunder,  or  delivers  an  account  or  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 rigorous imprisonment for a 
term which shall not be less than three months but which may extend to seven years and with fine. 

25.  Wilful  attempt to  evade  tax,  etc.—If  a  person wilfully  attempts in  any  manner  whatsoever to 
evade  any  interest-tax,  penalty  or  interest  chargeable  or  imposable  under  this  Act,  he  shall,  without 
prejudice  to  any  penalty  that  may  be  imposable  on  him  under  any  other  provision  of  this  Act,  be 

1. Ins. by Act 21 of 1998, s. 80 (w.e.f. 1-10-1998). 
2. Subs. by Act 49 of 2005, s. 30 and the Schedule (w.e.f. 28-12-2005). 
3. The Explanation 2 omitted by 29 of 1977, s. 39 and the Fifth Schedule (w.e.f. 8-8-1977). 
4. Subs. by Act 49 of 1991, s. 109, for certain figures, brackets, letters and words (w.e.f. 1-10-1991). 
5. Ins. by Act 26 of 1997, s. 60 (w.e.f. 1-10-1991). 
6. Subs. by Act 49 of 1991, s. 110, for sections 23 to 26 (w.e.f 1-10-1991). 

13 

 
 
 
 
 
 
 
 
 
                                                           
 
punishable with rigorous imprisonment for a term which shall not be less than three months but which 
may extend to seven years and with fine. 

Explanation.—For the purposes of this section, a wilful attempt to evade any interest-tax, penalty or 
interest  chargeable  or  imposable  under  this  Act  or  the  payment  thereof  shall  include  a  case  where  any 
person— 

(i)  has  in  his  possession  or  control  any  books  of  account  or  other  documents  (being  books  of 
account  or  other  documents  relevant  to  any  proceeding  under  this  Act)  containing  a  false  entry  or 
statement; or 

(ii) makes or causes to be made any false entry or statement in such books of account or other 

documents; or 

(iii)  wilfully  omits  or  causes  to  be  omitted  any  relevant  entry  or  statement  in  such  books  of 

account or other documents; or 

(iv) causes any other circumstances to exist which will have the effect of enabling such person to 
evade  any  interest-tax,  penalty  or  interest  chargeable  or  imposable  under  this  Act  or  the  payment 
thereof. 

26. Abetment of false returns, etc.—If a person abets or induces in any manner another person to 
make and deliver any account or a statement or declaration relating to any chargeable interest which is 
false and  which  he  either knows  or  believes  to  be false or  does  not  believe to be  true or to commit  an 
offence under section 25, he shall be punishable with rigorous imprisonment for a term which shall not be 
less than three months but which may extend to seven years and with fine. 

26A. Offences by credit institutions.—(1) Where an offence under this Act has been committed by a 
credit  institution  every  person  who,  at  the  time  the  offence  was  committed,  was  in  charge  of,  and  was 
responsible to, the credit institution or the conduct of the business of the credit institution as well as the 
credit institution shall be deemed to be guilty of the offence and shall be liable to be proceeded against 
and punished accordingly: 

Provided  that  nothing  contained  in  this  sub-section  shall  render  any  such  person  liable  to  any 
punishment if he proves that the offence was committed without his knowledge or that he had exercised 
all due diligence to prevent the commission of such offence. 

(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been 
committed by a credit institution and it is proved that the offence has been committed with the consent or 
connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other 
officer of the credit institution, such director, manager, secretary or other officer shall also be deemed to 
be guilty of that offence and shall be liable to be proceeded against and punished accordingly. 

Explanation.—For the purposes of this section, “director”, in relation to a co-operative society, means 

any member controlling the affairs thereof. 

 26B.  Institution  of  proceedings  and  composition  of  offences.—(1)  A  person  shall  not  be 
proceeded against for any offence under section 24 or section 25 or  section 26 or for any offence under 
the  Indian  Penal  Code  (45  of  1860),  except  with  the  previous  sanction  of  the  Commissioner  or 
Commissioner (Appeals): 

Provided  that  the  Chief  Commissioner  or,  as  the  case  may  be,  Director  General  may  issue  such 
instructions  or  directions  to  the  aforesaid  interest-tax  authorities  as  he  may  deem  fit  for  institution  of 
proceedings under this sub-section. 

(2)  Any  offence  under  the  sections  referred  to  in  sub-section  (1)  may,  either  before  or  after  the 

institution of proceedings, be compounded by the Chief Commissioner or Director General. 

Explanation.—For the removal of doubts, it is hereby declared that the power of the Board to issue 
orders, instructions or directions under this Act shall include the power to issue instructions or directions 
(including  instructions  or  directions  to  obtain  the  previous  approval  of  the  Board)  to  other  interest-tax 
authorities for the proper composition of offences under this section. 

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26C.  Power  of  credit  institutions  to  vary  certain  agreements.—Notwithstanding  anything 
contained  in  any  agreement  under  which  any  term  loan  has  been  sanctioned  by  the  credit  institution 
before the 1st day of October, 1991, it shall be lawful for the credit institution to vary the agreement, so as 
to increase the rate of interest stipulated therein to the extent to which such institution is liable to pay the 
interest-tax under this Act in relation to the amount of interest on the term loan which is due to the credit 
institution. 

Explanation.—For the purposes of this section, “term loan” means a loan which is not repayable on 

demand.] 

27. 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 7 may be furnished and the manner in which they may 

be verified; 

(b)  the  form  in  which  appeals  under  section  15  or  section  16  may  be  filed  and  the  manner  in 

which they may be verified; 

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

refunds; 

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

(3)  The  power  to  make  rules  conferred  by  this  section  shall  on  the  first  occasion  of  the  exercise 
thereof include the power to give retrospective effect to the rules or any of them from a date not earlier 
than the date of commencement of this Act. 

(4) 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 or in two or more successive sessions, and if, before the expiry of 
the session 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 the 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. 

28.  Power  to  exempt.—Where  the  Central  Government  is  of  the  opinion  that  it  is  necessary  or 
expedient so to do either in the public interest or having regard to the peculiar circumstances of the case, 
it may, by notification, and subject to conditions, if any, as may be specified in the notification, exempt 
1[any  credit  institution  or  any  class  of  credit  institutions  or  any  interest  on  any  category  of  loans  or 
advances] from the levy of interest-tax: 

Provided that no such exemption shall be made except on the recommendation of the Reserve Bank 

of India. 

29. Power to remove difficulty.—2[(1)] If any difficulty arises in giving effect to the provisions of 
this Act, the Central Government may, by order, not inconsistent with the provisions of this Act, remove 
the difficulty: 

Provided  that  no  such  order  shall  be  made  after  the  expiry  of  a  period  of  two  years  from  the 

commencement of this Act. 

3[(2) If any difficulty arises in giving effect to the provisions of this Act, as amended by the Finance 
(No.2) Act, 1991(49 of 1991), the Central Government may, by order, do anything not inconsistent with 
such provisions for the purpose of removing the difficulty: 

1. Subs. by Act 49 of 1991, s.111, for “any scheduled bank or any class of scheduled banks” (w.e.f. 1-10-1991). 
2. Section 29 renumbered as sub-section (1) thereof by s. 112, ibid. (w.e.f. 1-10-1991).  
3. Ins. by s. 112, ibid. (w.e.f. 1-10-1991).  

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Provided that no such order shall be made after the expiry of two years from the 1st day of October, 

1991. 

(3) Every order made under sub-section (2) shall be laid before each House of Parliament.] 

30. [Repeal.] Rep. by Repealing and Amending Act, 1978 (38 of 1978), s. 2 and the First Schedule                   

(w.e.f. 26-11-1978). 

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