AL-AMEEN COLLEGE OF LAW

RE
TAXATION
MODEL ANSWER

O
1. Define tax. State the different types of tax levied in India.

AL
Introduction:

A tax may be defined as a "pecuniary burden laid upon individuals or property

G
owners to support the government or a payment exacted by legislative authority.

AN
A tax "is not a voluntary payment or donation, but an enforced contribution, exacted
pursuant to legislative authority" and is "any contribution imposed by government
whether under the name of toll, tribute, tallage, gabel, impost, duty, custom, excise,
subsidy, aid, supply, or other name.

,B
Types of taxation:

W
Personal income tax is often collected on a pay-as-you-earn basis, with small

LA
corrections made soon after the end of the tax year. These corrections take one of two
forms: payments to the government, for taxpayers who have not paid enough during the
tax year; and tax refunds from the government for those who have overpaid. Income tax
systems will often have deductions available that lessen the total tax liability by reducing
OF
total taxable income. They may allow losses from one type of income to be counted
against another. For example, a loss on the stock market may be deducted against taxes
paid on wages. Other tax systems may isolate the loss, such that business losses can only
GE

be deducted against business tax by carrying forward the loss to later tax years.

The following are the different types of tax :

LE

Income tax
L

Income tax is levied on the income of the assessee. There are 5 heads of income
CO

under Income tax Act, 1961. They are as follows;

Salary
Income from house property
Profits and gains from business or profession
N

Income from other sources

EE

Capital gains.

Capital gains tax

AM

Most jurisdictions imposing an income tax treat capital gains as part of income
subject to tax. Capital gain is generally gain on sale of capital assets, i.e., those assets not
held for sale in the ordinary course of business. Capital assets include personal assets in
-
AL

many jurisdictions. Some jurisdictions provide preferential rates of tax or only partial
 taxation for capital gains. Some jurisdictions impose different rates or levels of capital

RE
gains taxation based on the length of time the asset was held.

Corporate tax

O
Corporate tax refers to income, capital, net worth, or other taxes imposed on

AL
corporations. Rates of tax and the taxable base for corporations may differ from those for
individuals or other taxable persons.

G
Social security contributions

AN
Many countries provide publicly funded retirement or health care systems. In
connection with these systems, the country typically requires employers and/or
employees to make compulsory payments. These payments are often computed by

,B
reference to wages or earnings from self employment. Tax rates are generally fixed, but a
different rate may be imposed on employers than on employees. Some systems provide

W
an upper limit on earnings subject to the tax. A few systems provide that the tax is
payable only on wages above a particular amount. Such upper or lower limits may apply

LA
for retirement but not health care components of the tax.

Taxes on payroll or workforce

OF
Unemployment and similar taxes are often imposed on employers based on total
payroll. These taxes may be imposed at both the country and sub-country levels.
GE

Taxes on property

Recurrent [property taxes] may be imposed on immovable property (real

LE

property) and some classes of movable property. In addition, recurrent taxes may be
imposed on net wealth of individuals or corporations. Many jurisdictions impose estate
tax, gift tax or other inheritance taxes on property at death or gift transfer. Some
L

jurisdictions impose taxes on financial or capital transactions.

CO

Property tax

A property tax (or millage tax) is an ad valorem tax levy on the value of property
N

that the owner of the property is required to pay to a government in which the property is
EE

situated. Multiple jurisdictions may tax the same property. There are three general
varieties of property: land, improvements to land (immovable man-made things, e.g.
buildings) and personal property (movable things). Real estate or realty is the
AM

combination of land and improvements to land.

Property taxes are usually charged on a recurrent basis (e.g., yearly). A common
-

type of property tax is an annual charge on the ownership of real estate, where the tax
AL

base is the estimated value of the property.

 Inheritance tax

RE
Inheritance tax, estate tax, and death tax or duty is the names given to various
taxes which arise on the death of an individual. In United States tax law, there is a

O
distinction between an estate tax and an inheritance tax: the former taxes the personal
representatives of the deceased, while the latter taxes the beneficiaries of the estate.

AL
However, this distinction does not apply in other jurisdictions; for example, if using this
terminology UK inheritance tax would be an estate tax.

G
Expatriation tax

AN
An Expatriation Tax is a tax on individuals who renounce their citizenship or
residence. The tax is often imposed based on a deemed disposition of all the individual's
property.

,B
Transfer tax

W
Historically, in many countries, a contract needed to have a stamp affixed to make

LA
it valid. The charge for the stamp was either a fixed amount or a percentage of the value
of the transaction. In most countries the stamp has been abolished but stamp duty
remains. Stamp duty is levied in the UK on the purchase of shares and securities, the
issue of bearer instruments, and certain partnership transactions. Its modern derivatives,
OF
stamp duty reserve tax and stamp duty land tax, are respectively charged on transactions
involving securities and land. Stamp duty has the effect of discouraging speculative
purchases of assets by decreasing liquidity. In the United States transfer tax is often
GE

charged by the state or local government and (in the case of real property transfers) can
be tied to the recording of the deed or other transfer documents.
LE

Wealth (net worth) tax

Some countries' governments will require declaration of the tax payers' balance
L

sheet (assets and liabilities), and from that exact a tax on net worth (assets minus
CO

liabilities), as a percentage of the net worth, or a percentage of the net worth exceeding a
certain level. The tax may be levied on "natural" or legal "persons". An example is
France's ISF.
N

Taxes on goods and services

EE

Value added tax (Goods and Services Tax)

AM

A value added tax (VAT), also known as Goods and Services Tax (G.S.T), Single
Business Tax, or Turnover Tax in some countries, applies the equivalent of a sales tax to
every operation that creates value. To give an example, sheet steel is imported by a
machine manufacturer. That manufacturer will pay the VAT on the purchase price,
-
AL

remitting that amount to the government. The manufacturer will then transform the steel
into a machine, selling the machine for a higher price to a wholesale distributor. The
 manufacturer will collect the VAT on the higher price, but will remit to the government

RE
only the excess related to the "value added" (the price over the cost of the sheet steel).
The wholesale distributor will then continue the process, charging the retail distributor
the VAT on the entire price to the retailer, but remitting only the amount related to the

O
distribution mark-up to the government. The last VAT amount is paid by the eventual
retail customer who cannot recover any of the previously paid VAT. For a VAT and sales

AL
tax of identical rates, the total tax paid is the same, but it is paid at differing points in the
process.

G
VAT is usually administrated by requiring the company to complete a VAT

AN
return, giving details of VAT it has been charged (referred to as input tax) and VAT it has
charged to others (referred to as output tax). The difference between output tax and input
tax is payable to the Local Tax Authority. If input tax is greater than output tax the
company can claim back money from the Local Tax Authority.

,B
W
Sales taxes

LA
Sales taxes are levied when a commodity is sold to its final consumer. Retail
organizations contend that such taxes discourage retail sales. The question of whether
they are generally progressive or regressive is a subject of much current debate. People
with higher incomes spend a lower proportion of them, so a flat-rate sales tax will tend to
OF
be regressive. It is therefore common to exempt food, utilities and other necessities from
sales taxes, since poor people spend a higher proportion of their incomes on these
commodities, so such exemptions make the tax more progressive. This is the classic "You
GE

pay for what you spend" tax, as only those who spend money on non-exempt (i.e. luxury)
items pay the tax.
LE

A small number of U.S. states rely entirely on sales taxes for state revenue, as
those states do not levy a state income tax. Such states tend to have a moderate to large
amount of tourism or inter-state travel that occurs within their borders, allowing the state
L

to benefit from taxes from people the state would otherwise not tax. In this way, the state
CO

is able to reduce the tax burden on its citizens. The U.S. states that do not levy a state
income tax are Alaska, Tennessee, Florida, Nevada, South Dakota, Texas, Washington
state, and Wyoming. Additionally, New Hampshire and Tennessee levy state income
taxes only on dividends and interest income. Of the above states, only Alaska and New
N

Hampshire do not levy a state sales tax. Additional information can be obtained at the
EE

Federation of Tax Administrators website.

In the United States, there is a growing movement for the replacement of all
AM

federal payroll and income taxes (both corporate and personal) with a national retail sales
tax and monthly tax rebate to households of citizens and legal resident aliens. The tax
proposal is named FairTax. In Canada, the federal sales tax is called the Goods and
Services tax (GST) and now stands at 5%. The provinces of British Columbia,
-
AL

Saskatchewan, Manitoba, and Prince Edward Island also have a provincial sales tax
[PST]. The provinces of Nova Scotia, New Brunswick, Newfoundland & Labrador, and
 Ontario have harmonized their provincial sales taxes with the GST—Harmonized Sales

RE
Tax [HST], and thus is a full VAT. The province of Quebec collects the Quebec Sales
Tax [QST] which is based on the GST with certain differences. Most businesses can
claim back the GST, HST and QST they pay, and so effectively it is the final consumer

O
who pays the tax.

AL
Excises

Unlike an ad valorem, an excise is not a function of the value of the product being

G
taxed. Excise taxes are based on the quantity, not the value, of product purchased. For

AN
example, in the United States, the Federal government imposes an excise tax of 18.4
cents per U.S. gallon (4.86¢/L) of gasoline, while state governments levy an additional 8
to 28 cents per U.S. gallon. Excises on particular commodities are frequently
hypothecated. For example, a fuel excise (use tax) is often used to pay for public

,B
transportation, especially roads and bridges and for the protection of the environment. A
special form of hypothecation arises where an excise is used to compensate a party to a

W
transaction for alleged uncontrollable abuse; for example, a blank media tax is a tax on
recordable media such as CD-Rs, whose proceeds are typically allocated to copyright

LA
holders. Critics charge that such taxes blindly tax those who make legitimate and
illegitimate usages of the products; for instance, a person or corporation using CD-R's for
data archival should not have to subsidize the producers of popular music.
OF
Excises (or exemptions from them) are also used to modify consumption patterns
(social engineering). For example, a high excise is used to discourage alcohol
consumption, relative to other goods. This may be combined with hypothecation if the
GE

proceeds are then used to pay for the costs of treating illness caused by alcohol abuse.
Similar taxes may exist on tobacco, pornography, etc., and they may be collectively
referred to as "sin taxes". A carbon tax is a tax on the consumption of carbon-based non-
LE

renewable fuels, such as petrol, diesel-fuel, jet fuels, and natural gas. The object is to
reduce the release of carbon into the atmosphere. In the United Kingdom, vehicle excise
duty is an annual tax on vehicle ownership.
L
CO

Tariff

An import or export tariff (also called customs duty or impost) is a charge for the
movement of goods through a political border. Tariffs discourage trade, and they may be
N

used by governments to protect domestic industries. A proportion of tariff revenues is

EE

often hypothecated to pay government to maintain a navy or border police. The classic
ways of cheating a tariff are smuggling or declaring a false value of goods. Tax, tariff and
trade rules in modern times are usually set together because of their common impact on
AM

industrial policy, investment policy, and agricultural policy. A trade bloc is a group of
allied countries agreeing to minimize or eliminate tariffs against trade with each other,
and possibly to impose protective tariffs on imports from outside the bloc. A customs
union has a common external tariff, and the participating countries share the revenues
-
AL

from tariffs on goods entering the customs union.

 Other taxes

RE
License fees

O
Poll tax

AL
Bank tax

Financial transaction taxes including currency transaction taxes

G
AN
Ad valorem tax

Consumption tax

,B
Consumption tax

W
Environmental tax

Fees and effective taxes

Conclusion:
LA
OF
Many jurisdictions tax the income of individuals and business entities, including
corporations. Generally the tax is imposed on net profits from business, net gains, and
other income. Computation of income subject to tax may be determined under accounting
GE

principles used in the jurisdiction, which may be modified or replaced by tax law
principles in the jurisdiction. The incidence of taxation varies by system, and some
systems may be viewed as progressive or regressive. Rates of tax may vary or be constant
LE

(flat) by income level. Many systems allow individuals certain personal allowances and
other non business reductions to taxable income.
L

2. Explain the various Income Tax Authorities under the Income tax Act, 1961.
CO

Income tax authorities

According to section 116 of the Income Tax Act, there shall be the following types of
N

income tax authorities for the purposes of this Act . they are as follows ;
EE

(a) The Central Board of Direct Taxes constituted under the Central Board of Revenue
Act, 1963.
AM

(b) Directors-General of Income-tax or Chief Commissioners of Income-tax.

-

(c) Directors of Income-tax or Commissioners of Income-tax or Commissioner of

AL

Income-tax (Appeals).
 (d) Additional Directors of Income-tax, or Additional Commissioners of Income-tax or

RE
Additional Commissioners of Income-tax (Appeals).

(e) Deputy Directors of Income-tax or Deputy Commissioners of Income-tax or Deputy

O
Commissioners of Income-tax (Appeals).

AL
(f) Assistant Directors of Income-tax or Assistant Commissioners of Income-tax.

(g) Income-tax Officers.

G
AN
(h) Tax Recovery Officers.

(i) Inspector of Income-tax.

,B
The authorities acting under the Income-tax Act have to act judicially and one of
the requirements of judicial action is to give a fair hearing to the person before deciding

W
against him. The taxing authorities exercise quasi-judicial powers and in doing so they
must act in a fair and not a partisan manner.

Power of Income Tax Authorities LA

For all purposes of the Income-tax Act, the IT authorities are vested with the
OF
various powers which are vested in a Court of Law under the Code of Civil Procedure
while trying a suit in respect of any case. More particularly, the provisions of the Code of
Civil procedure and the powers granted to the tax authorities under the code would be in
GE

respect of:

1. Discovery and inspection

LE

2. enforcing the attendance, including any officer of a bank and examining him on oath
3. compelling the production of books of account and the documents
4. collection certain information [section 133B-inserted by the finance act, 1986]
L

5. Issuing commissions and summons

CO

It shall be duty of every person who has been allotted permanent account number
to quote such number in all his returns or correspondence with income tax authorities, in
all challans for the payment of any sum, in all documents prescribed by the board in the
N

interest of revenue.
EE

113. Power to call for information.

AM

The Deputy Commissioner of Taxes, the Inspecting Joint Commissioner, the

Commissioner or any other officer authorised in this behalf by the Commissioner or the
Board may, for the purposes of this Ordinance, by notice in writing, require—
-
AL

(a) Any firm, to furnish him with a statement of the names and addresses of the partners
and their respective shares;
 (b) Any Hindu undivided family, to furnish him with a statement of the names and

RE
Addresses of the manager and the members of the family;

(c) Any person, whom he has reason to believe to be a trustee, guardian or agent to

O
furnish him with a statement of the names and addresses of the persons for or of whom he
is trustee, guardian or agent;

AL
(d) any assessee to furnish him with a statement of the names and address of all persons
to whom he has paid in any income year any rent, interest, commission, royalty or

G
brokerage, or any annuity, not being an annuity classifiable under the head "Salaries",

AN
amounting to more than three thousand taka, together with particulars of all such
payment;

(e) any dealer, broker or agent, or any person concerned in the management of a Stock

,B
Exchange, to furnish a statement of the names and addresses of all person to whom he or
the Exchange has paid any sum in connection with the transfer of capital assets, or on

W
whose behalf or from whom he or the Exchange has received any such sum, together with
the particulars of all such payments and receipts; or

LA
(f) any person, including a banking company, to furnish information in relation to such
points or matters, or to furnish such statements or accounts giving such particulars, as
may be specified in the notice: Provided that no such notice on a banking company shall
OF
be issued by the Deputy Commissioner of Taxes or the Inspector, without the approval of
the Commissioner, and by any other officer, without the approval of the Board.
GE

114. Power to Inspect registers of companies.—

The Deputy Commissioner of Taxes, the Joint Commissioner of Taxes or any

LE

person authorised in writing in this behalf by either of them, may

Inspect and, if necessary, take copies, or cause copies to be taken, of any register of the
members, Debenture-holders or mortgagees of any company or any entry in such register.
L
CO

115. Power of survey.—

(1) For the purpose of survey of liability of any person to tax under this Ordinance, an
income tax authority may, notwithstanding anything contained in other provisions of
N

this Ordinance but subject to such directions or instructions as the Board may issue in
EE

this behalf, enter any place of premises within the limits of its jurisdiction and—

(a) Inspect any accounts or documents and check or verify any article or thing;
AM

(b) Make an inventory of any cash, stock or other valuable articles or things checked or
verified by it;
(c) Place marks of identification on or stamp the books of accounts or other documents
-

Inspected by it and make or cause to be made extracts or copies there from;

AL

(d) Record the statement of any person which may be useful for, or relevant to, any
Proceeding under this Ordinance; and
 (e) Make such enquiries as may be necessary.

RE
(2) Subject to the provisions of section 117, any income-tax authority exercising powers
under
sub-section (1), shall not remove or cause to be removed from any place or premises

O
wherein he has entered, any books of accounts or other documents, or any cash, stock or
other valuable article or thing.

AL
(3) Every proprietor, employee or other person who may be attending in any manner to,
or helping in, the carrying on of any business or profession, or every person who may be
Residing in the place or premises in respect of which an income tax authority may be

G
Exercising power under sub-section (1), shall in aid of the exercise of such power,--

AN
(a) Afford the authority necessary facilities for inspection of books of accounts or other
Documents, or for checking or verifying the cash, stock or other valuable article or
Thing found in such place or premises; and
(b) Furnish such information as the authority may require in respect of any matter which

,B
may be useful for, or relevant to, any proceeding under this Ordinance.

W
116. Additional powers of enquiry and production of documents.—

LA
(1) The Directors-General of Inspection, the Commissioner and the Inspecting Joint
Commissioner may, without prejudice to other powers which they may have under other
provisions of this Ordinance, make any enquiry which they consider necessary as
respects any person liable, or believed by them to be liable, to assessment under this
OF
Ordinance, or require any such person to produce, or cause to be produced, any accounts
or documents which they may consider necessary.
GE

(2) For the purposes of sub section (1), the Directors-General of Inspection, the
Commissioner and the Inspecting Joint Commissioner shall have the same powers as the
Deputy Commissioner of Taxes has under this Ordinance for the purposes of making
LE

enquiry or requiring the production of accounts or documents including the powers under
section 117(2).
L

(3) The Commissioner, the Inspecting Joint Commissioner, the Deputy Commissioner of
CO

Taxes or an Inspector, if he is so authorised in writing, may, for the purpose of making

any enquiry which he considers necessary, enter the premises in which a person liable or
believed by him to be liable to assessment, carries on his business or profession, and may
call for and inspect any such person's accounts or any documents in his possession, and
N

may stamp any accounts or documents so inspected, and may retain such accounts or
EE

documents for so long as may be necessary for examination thereof or for the purposes of
a prosecution: Provided that the Deputy Commissioner of Taxes or an Inspector shall not
make any enquiries from any scheduled bank regarding any client of such bank except
AM

with the prior approval of the Commissioner.

117. Power of search and seizure.—

-
AL

(1) Where the Directors-General of Inspection or the Commissioner, or such other officer
empowered in this behalf by the Board, has, on account of information in his possession,
 reason to believe that

RE
(a) any person, to whom a summons or notice under this ordinance has been or might be
issued to produce, or cause to be produced, any books of accounts or other documents,
has failed to, or is not likely to, produce or cause to be produced such books of

O
accounts or other documents, or
(b) any person is in possession of any money, bullion, jewellery or other valuable article

AL
or thing which represents, wholly or partly, income or property which is required to be
disclosed under this Ordinance but has not been so disclosed, he may authorize any
officer subordinate to him, being not below the rank of the Deputy Commissioner of

G
Taxes, to exercise the powers under sub-section (2).

AN
(2) An officer authorised under sub-section (1) (hereinafter referred to as the authorised
officer) may, notwithstanding anything contained in any other law for the time being in
force,--

,B
(a) enter and search any building, place, vessel, vehicle or aircraft where he has reason to
suspect that any books of accounts, documents, money, bullion, jewellery or other

W
valuable article or thing referred to in sub-section (1) are or have been kept ;
(b) break-open the lock of any door, box, locker, safe, almirah or other receptacle for the

LA
purpose of the said entry, and search, if keys thereof are not available;
(c) search any person who has got out of, or is about to get into, or is in, the building,
place, vessel, vehicle or aircraft, if he has reason to suspect that such person has
secreted about his person any such books of accounts, documents, money, bullion,
OF
jewellery or other valuable article or thing;
(d) seize any such books of accounts, documents, money, bullion, jewellery or other
valuable article or thing found as a result of such search;
GE

(e) place marks of identification on or stamp any books of accounts or other document or
make or cause to be made extracts or copies there from; and
(f) make a note or an inventory of any such money, bullion, jewellery or other valuable
LE

article or thing.

(3) The authorised officer may requisition the services of any police officer or other
L

officer of the Government to assist him for all or any of the purposes specified in sub-
CO

section (2); and it shall be the duty of every such officer to comply with such requisition.

(4) The authorised officer may, where it is not practicable to seize any such books of
accounts, documents, money, bullion, jewellery or other valuable article or thing, by
N

order in writing, require the owner or the person who is in immediate possession or
EE

control thereof not to remove, part with or otherwise deal with it without obtaining his
previous permission; and the authorised officer may take such steps as may be necessary
for ensuring compliance with the order.
AM

(5) The authorised officer may, during the course of the search or seizure, examine on
oath any person who is found to be in possession or control of any books of accounts,
documents, money, bullion, jewellery or other valuable article or thing and any statement
-
AL

made by such person during the examination may thereafter be used in evidence in any
proceeding under this Ordinance, or the Income-tax Act, 1922 (XI of 1922).
 RE
(6) Where any books of accounts, documents, money, bullion, jewellery or other valuable
article or thing is found in the possession or control of any person in the course of a
search, it may be presumed that--

O
(a) the books of accounts, documents, money, bullion, jewellery, article or thing belongs

AL
to such person;
(b) the contents of the books of accounts and documents are true ; and
(c) the signature on, or the handwriting in, any such books or documents is the signature

G
or handwriting of the person whose signature or handwriting it purports to be.

AN
(7) The person from whose custody any books of accounts or other documents are seized
under sub-section (2) may make copies thereof, or take extracts there from, in the
presence of the authorised officer or any other person designated by him, at such place

,B
and time as the authorised officer may appoint in this behalf.

W
(8) The books of accounts or other documents seized under sub-section (2) shall not be
retained by the authorised officer for a period exceeding one hundred and eighty days

LA
from the date of the seizure unless for reasons recorded in writing, approval of the
Commissioner has been obtained for such retention: Provided that the Commissioner
shall not approve such retention for a period exceeding thirty days after all the
proceedings under this Ordinance in respect of the years for which the books of accounts
OF
or other documents, as are relevant, have been completed.

(9) If any person, legally entitled to the books of accounts or other documents seized
GE

under subsection (2) objects to the approval given by the Commissioner under sub-
section (8), he may make an application, stating therein the reasons for his objection, to
the Board for the return of the books of accounts or other documents; and the Board may,
LE

after giving the applicant an opportunity of being heard, pass such orders thereon as it
may think fit.
L

(10) Subject to the provisions of this Ordinance and the rules, if any, made in this behalf
CO

by the Board, the provisions of the Code of Criminal Procedure, 1898 (Act V of 1898),
relating to search and seizure shall apply, so far as may be, to search and seizure under
sub-section (2).
Explanation.-- For the purposes of this section, the word "proceeding" means any
N

proceeding in respect of any year under this Ordinance which may be pending on the date
EE

on which a search is authorised under this section or which may have been completed on
or before such date and also includes all proceedings under this Ordinance which may be
commenced after such date in respect of any year.
AM

118. Retention of seized assets.—

(1) Where any money, bullion, jewellery or other valuable article or thing (hereinafter
-
AL

referred to as assets) is seized under section 117, the authorised officer shall, unless he
 himself is the Deputy Commissioner of Taxes, forward a report thereof, together with all

RE
relevant papers, to the Deputy Commissioner of Taxes.

(2) Where he has seized any asset under section 117 or, as the case may be, he has

O
received a report under sub-section (1), the Deputy Commissioner of Taxes shall, after
giving the person concerned a reasonable opportunity of being heard and making such

AL
enquiry as the Directors-General of Inspection or the Commissioner may direct, within
ninety days of the seizure of the assets, and with the previous approval of the
Commissioner,--

G
(a) estimate the undisclosed income (including income from the undisclosed property), in

AN
a summary manner to the best of his judgment on the basis of such materials as are
available with him;
(b) calculate the amount of tax payable under this Ordinance on the income so estimated;
and

,B
(c) specify the amount that will be required to satisfy any existing liability under this
Ordinance, the Income tax Act, 1922 (XI of 1922), the Gift-tax Act, 1963 (XIV of

W
1963), and the Wealth-tax Act, 1963 (XV of 1963), in respect of which such person is
in default or is deemed to be in default: Provided that if, after taking into account the

LA
materials available with him, the Deputy Commissioner of Taxes is of the view that it is
not possible to ascertain to which particular income year or years such income or any part
thereof relates, he may calculate the tax on such income or part, as the case may be, as if
such income or part were the total income chargeable to tax at the rates in force in the
OF
financial year in which the assets were seized.
Explanation.-- In computing the period of ninety days for the purposes of subsection
(2), any period during which any proceeding under this section is stayed by an order or
GE

injunction of any Court shall be excluded.

(3) After completing the proceedings under sub-section (2), the Deputy Commissioner of
LE

Taxes shall, with the approval of the Commissioner, make an order requiring the person
concerned to pay the aggregate of the amounts referred to in sub-section (2) (b) and (c)
and shall, if such person pays, or makes satisfactory arrangement for the payment of,
L

such amounts or any part thereof, release the assets seized under section 117 or such part
CO

thereof as he may deem fit in he circumstances of the case.

(4) Where the person concerned fails to pay, or to make satisfactory arrangements for the
payment of, any amount required to be paid in pursuance of the order under sub-section
N

(3) or any part thereof, he shall be deemed to be an assessee in default in respect of the
EE

amount or part, and the Deputy Commissioner of Taxes may retain in his custody the
assets seized under section 117 on any part thereof as are in his opinion sufficient for the
realization of the said amount or, as the case may be, of such part thereof as has not been
AM

paid.
(5) If the Deputy Commissioner of Taxes is satisfied that the assets seized under section
117 or any part thereof were held by a person for or on behalf of any other person, he
may proceed under this section against such other person, and all the provisions of this
-
AL

section shall apply accordingly.

 (6) If any person objects, for any reason, to an order made under sub-section (3), he may,

RE
within thirty day of the date of such order, make an application, stating therein the
reasons for his objection, to the Commissioner for appropriate relief in the matter; and the
Commissioner may, after giving the applicant an opportunity of being heard, pass such

O
orders thereon as he may think fit.

AL
119. Application of retained assets.—

(1) Where the assets retained under sub-section (4) of section 118 consist solely of

G
money, or partly of money and partly of other assets,--

AN
(a) the Deputy Commissioner of Taxes shall first apply such money towards payment of
the amount in respect of which the person concerned is deemed to be an assessee in
default under that sub-section; and thereupon such person shall be discharged of his
liability to the extent of the money so applied; and

,B
(b) where, after application of the money under clause (a), any part of the amount
referred to therein remains unpaid, the Deputy Commissioner of Taxes may recover the

W
amount remaining unpaid, by sale of such of the assets as do not consist of money in the
manner movable property may be sold by a Tax Recovery Officer for the recovery of

LA
tax; and for this purposes he shall have all the powers of a Tax Recovery Officer under
this Ordinance.

(2) Nothing contained in sub-section (1) shall preclude the recovery of the amount
OF
referred to in section 118 (4) by any other mode provided in this Ordinance for the
recovery of any liability of an assessee in default.
(3) Any assets or proceeds thereof which remain after the discharge of the liability in
GE

respect of the amount referred to in section 118 (4) shall forthwith be made over or paid
to the persons from whose custody the assets were seized.
LE

120. Power of Inspecting Joint Commissioner to revise orders of Deputy

Commissioner of Taxes.—
L

(1) The Inspecting Joint Commissioner may call for from the Deputy Commissioner of
CO

Taxes and examine the record of any proceeding under this Ordinance, and , if he
considers that any order passed therein by the Deputy Commissioner of Taxes 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
N

inquiry as he thinks necessary, pass such order thereon as in his view the circumstances
EE

of the case would justify, including an order enhancing or modifying the assessment or
cancelling the assessment and directing a fresh assessment to be made.
AM

(2) No order shall be made under sub-section (1) after the expiry of four years from the
date of the order sought to be revised.
-
AL
 121. Revisional power of Commissioner.—

RE
(1) The Commissioner may, either of his own motion or on an application made by the
assessee, call for the record of any proceeding under this Ordinance in which an order has

O
been passed by any authority subordinate to him and may make such enquiry or cause
such enquiry to be made and, subject to the provisions of this Ordinance, may pass such

AL
order thereon, not being an order prejudicial to the assessee, as he thinks fit.

(2) The application for revision of an order under this Ordinance passed by any authority

G
subordinate to the Commissioner shall be made within ninety days of the date on which

AN
such order is communicated to the assessee or within such further period as the
Commissioner may consider fit to allow on being satisfied that the assessee was
prevented by sufficient cause from making the application within the said ninety days.

,B
(3) The Commissioner shall not exercise his power under sub-section(1) in respect of any
order--

W
(a) where an appeal against the order lies to the Appellate Joint Commissioner or to the
Commissioner (Appeals) or to the Appellate Tribunal and the time within which such

LA
appeal may be made has not expired or the assessee has not waived his right of appeal;
(b) where the order is pending on an appeal before the Appellate Joint Commissioner or it
has been made the subject of an appeal to the Commissioner (Appeals) or to the
Appellate Tribunal; or
OF
(c) where a period of more than one year has elapsed from the date of the order in the
case of action by the Commissioner on his own motion, unless the Commissioner is
satisfied that there is sufficient causes to be recorded in writing, for exercising his
GE

power under sub-section (1).

(4) No application under sub-section (1) shall be entertained unless--

LE

(a) it is accompanied by a fee of two hundred taka ; and

(b) the undisputed portion of the tax has been paid.
Explanation.--The "undisputed portion of the tax" means--
L

(i) where the application is against an order of a Deputy Commissioner of Taxes,

CO

the tax payable under section 74; and

(ii) where the application is against an order of an Appellate Joint Commissioner,
the undisputed portion of the tax as determined on the basis of that order.
N

(5) For the purposes of this section, an order by the Commissioner declining to interfere
EE

shall not be construed as an order prejudicial to the assessee.

(6) Notwithstanding anything contained in this Ordinance, an application for revision

AM

made under sub-section (1) shall be deemed to have been allowed if the Commissioner
fails to make an order thereon within a period of one year from the end of the year in
which the application was made.
Explanation. For the purposes of this section, the Appellate Joint Commissioner of
-
AL

Taxes shall be deemed to be an authority subordinate to the Commissioner to whom the

 Deputy Commissioner of Taxes, whose order was the subject-matter of the appeal order

RE
under revision, is subordinate.

122. Power to take evidence on oath, etc.—

O
(1) The Deputy Commissioner of Taxes, the Joint Commissioner of Taxes, the
Commissioner,

AL
the Commissioner (Appeals) and the Appellate Tribunal shall, for the purposes of this
Ordinance, have the same powers as are vested in a Court under the Code of Civil
Procedure,

G
1908 (Act V of 1908), when trying a suit in respect of the following matters, namely:-

AN
(a) discovery and inspection;
(b) enforcing the attendance of any person and examining him on oath or affirmation;
(c) compelling the production of accounts or documents (including accounts or
documents relating to any period prior or subsequent to the income year); and

,B
(d) issuing commissions for the examination of witness.

W
(2) The Deputy Commissioner of Taxes shall not exercise his powers under this section
for the purpose of enforcing the attendance of an employee of a scheduled bank as a

LA
witness or compelling the production of books of account of such a bank except with the
prior approval of the Commissioner.

(3) Any authority mentioned in sub-section (1) may impound and retain in its custody for
OF
such period as it considers fit, any books of accounts or other documents produced before
it in any proceeding under this Ordinance.
GE

(4) Any proceeding under this Ordinance, before any authority mentioned in sub-section
(1), shall be deemed to be a judicial proceeding within the meaning of section 193 and
228, and for the purposes of section 196, of the Penal Code (Act XLV of 1860).
L LE

3. Explain the laws relating to the Classification of goods under the central excise
CO

laws.

Introduction:
N

Central Excise Law is a combination of Central Excise Act, 1944; Central Excise Tariff
EE

Act, (CETA) 1985 ; Central Excise Rules, 2002 ;CENVAT credit Rules, 2004.

Excise duty is paid by people to the manufacturer who pays it to the government;
AM

therefore it is an indirect tax.

As per Section 3 of the central excise Act, excise duty is levied if,
There is a good
-
AL

Goods must be moveable

Goods must be marketable
 Goods are mentioned in the central excise tariff act

RE
Goods are manufactured in India.

Classification of Goods:-

O
Excise duty is on excisable goods manufactured or produced in India. Excise duty is paid

AL
by the Manufacturer.

Two steps shall be followed to impose excise duty on them.

G
AN
(1) Classify the goods to find out rate of excise duty.
(2) Valuation of goods

In this answer we are discussing about the various methods used in classification of the

,B
goods.

W
CETA classifies all the goods under 96 Chapters by giving specific code to them.

LA
Harmonised commodity description and coding system (HS) was developed by the world
customs organisation (WCO) its an international nomenclature standard adopted by 140
countries uniformity and classification in international trade.
OF
Harmonised system provides commodity or product codes and description upto 4 digit
(Heading) and 6 digits (Sub Heading) levels only and members of WCO can extend
members.
GE

India has develoved 8 digit classification indigenious products and to moniter the trade
volumes.
LE

Goods classified using 4 digits system called as headings.

L

2 digits sub classification called Sub-heading.

CO

2 digits sub sub classification called Tariff item.

Rate of duty is indicated against each tariff item and not against heading/subheading.
N

Coding of dashes
EE

Silgle dash (-) at beginning _ Group

Two Dashes (--) at beginning _ Sub Group
AM

Triple dashes (---) after Sub group Sub-Sub Class

Quadruple dashes(----) after Sub-group

Ex:- Mens wear

-
AL
 A Coding of Dashes Ready made garments

RE
AA - Men’s wear
AA-1 -- Suits
AB - Ladies wear

O
AB-! -- Salwar
AC - other

AL
Classification of Goods:

G
AN
a) Heading
b) Section Notes
c) Chapter notes.

,B
As per the following factors;

a. Incomplete or unassembled goods

W
b. Unassembled finished goods.
c. Mixture or combinations.
d.
e.
Classification as per essential charater.
Classification of composite machines. LA
CCE v/s Shree Baidyanath Ayurved Bhawan (2009) 12 SCC 419.
OF

Held : Whether lal dant manjan (red tooth powder) is ayurvedic medicament.Lal dant
manjan is a toiletry? cosmetic and not Ayurvedic medicine.
GE

Whether lal dant manjan is a toiletry or cosmetic medicine was the question for
determination.
LE

CTT v/s Parikh Gramodyog Samsthan (2010) 256 ELT 673 (SC).

Whether voltage stabilizer is electrical goods or electronic goods is not electronic goods.
L
CO

Held : Voltage stabilizer is Electronic goods is not electrical goods.

Following is broad grouping of goods in CETA :

N

a) Animal products (Section I)

EE

b) Vegetable products (Section II)

c) Animal or vegetable fats (Section III)
d) Prepared food stuffs, beverages (Section IV)
AM

e) Mineral Products (Section V)

f) Chemical products, fertilizers, soap etc (Section VI)
g) Plastics and rubber and their Articles (Section VII)
-
AL

h) Leather and articles (Section VIII)

i) Wood, cork, straw and their articles (Section IX)., etc.
 Trade parlance Theory:

RE
Trade parlance theory emerged out of case of Grenfell v/s IRC (1876), where Justice
Pollok held that a word in a statute should be interpreted in its popular sense in which

O
people understand it.
According to this theory, a product is also classified on the basis of its end use, if

AL
classification is related to the function of the goods.

Conclusion :

G
AN
Therefore the excisable goods are classified base on these patterns and are then taxed.

d) Explain the provisions relating to the valuation of goods under the Customs

,B
Act 1962

Introduction :

W
The Customs Act, was enacted in the year 1962. The Act came into force on 13th
December, 1962.
LA
The main object of the Act is to “An Act to consolidate and amend the law relating to
OF
customs”.

Customs Act levies Customs duty on the import of goods into India and export of goods
outside India.
GE

The importer or the exporters have to pay required amount of customs duty to the
customs department.
LE

Levy of customs duty

L

The ‘charging section’ of the Customs Act, 1962 is section 12 which provides for
CO

levy of duty on imports as well as on exports at the rates which are prescribed under the
Customs Tariff Act, 1975 read along with the relevant exemption notification. The
taxable event to attract customs duty is import into or export from India. The export
N

duties are applicable to a handful of commodities. In the case of Apar India Ltd., the
Hon’ble Supreme Court has held that rate of duty will be the rate prevailing on the date
EE

of filing of bill of entry under section 46 or granting permission for entry inwards
whichever is later."
AM

Types of duties:

a. Basic duty
-

b. Additional customs duty

AL

c. Additional duty of customs in lieu of sales tax

d. Antidumping/safeguard duty
 e. Education Cess.

RE
Valuation of goods

O
The quantification of customs duty payable essentially requires the calculation of
the ‘value’ for customs purpose. As per the provisions, customs duty is payable as a

AL
percentage of ‘value’ often called ‘Assessable Value’ or ‘Customs Value’. The value may
either be (a) ‘Value’ as defined in section 14(1) of Customs Act, or (b) ‘Tariff Value’
prescribed under section 14(2) of Customs Act.

G
AN
Tariff value

Tariff value is the value that is fixed by Central Government for any class of
imported goods or exported goods. Government takes into consideration trends of value

,B
of such or like goods while fixing tariff value. Once so fixed, duty is payable as
percentage of this value.

W
Customs value

LA
Customs value as calculated as per section 14(1) is the ‘value’ normally used for
calculating customs duty payable. As per section 14(1) ‘value’ for the purpose of customs
duty is the
OF

a) Price at which such or like goods are ordinarily sold or offered for sale and the
b) Price is for delivery at the time and place of importation and such
GE

c) Price is in course of international trade, where neither seller nor buyer has interest
in the business of the other or one of them has no interest in the business of the
other and the,
LE

d) Price is the sole consideration for sale or offer for sale.

The price mentioned above has to be computed for customs duty purpose at the
L

rate of exchange, as on date of submission of bill of entry, as fixed by the Central

CO

Government. As per the provisions contained in section 14(1A) of the Act, the ‘price’
referred to above, in case of imported goods has to be determined in accordance of the
Customs Valuation Rules, 1988. Subject to three conditions laid down in section 14(1) of
Customs Act, 1962, of time, place and special circumstances, price of imported goods is
N

to be determined in terms of provisions contained in section 14(1A) and in accordance

EE

with the provisions contained in Valuation (Determination of Price of Imported Goods)

Rules, 1988. The ‘Special Circumstances’ have been statutorily provided in Rule 4(2) and
in the absence of these exceptions it is mandatory for customs authorities to accept the
AM

price actually paid or payable for the goods in a particular transaction. Valuation Rule
4(2) deals with the extraordinary or special circumstances under which the transaction
value of the goods cannot be accepted. They are as follows:
-
AL

(a) The sale is not in the ordinary course of trade under fully competitive conditions.
 (b) The sale involves any abnormal discount or reduction from the ordinary competitive

RE
price.

(c) The sale involves special discount limited to exclusive agents.

O
(d) Non-existence of objective and quantifiable data with regard to the adjustments

AL
required to be made, under the provisions of rule 9, to the transaction value.

(e) Restrictions of a non-statutory nature or non-commercial nature on the disposition or

G
use of the goods after import, which substantially affect the value of the goods.

AN
(f) Sale or price being subject to some condition or consideration for which a value
cannot be determined.

,B
(g) There exists an additional consideration, direct or indirect.

W
The CEGAT laid down in the Hydro Krimp case that comparable goods should be
of same quality and specification and from same manufacturer and country of production.

LA
They should be roughly in the same quantity. The imports should belong to the same
commercial world.

Rule 7 of the Valuation Rules allows the value to be determined on the basis of
OF
deductive method in cases where there are no contemporaneous imports. Here also the
decision of the CEGAT is relevant. The deductive value is based on the unit price at
which the imported goods or identical goods or similar imported goods are sold in the
GE

greatest aggregate quantity to unrelated persons in India. The following deductions are
available:
LE

(i) the commission usually paid or agreed to be paid or the additions usually made for
profits and general expenses in connection with sales in India of imported goods of the
same class or kind.
L
CO

(ii) usual costs of transport and insurance and associated costs incurred within India.

(iii) the customs duties and other taxes payable in India by reason of importation or sale
of goods. Alternatively, transaction/assessable value may be determined under rule 7A. It
N

consists of the following:

EE

(a) the cost or value of material and fabrication or other processing employed in
producing the imported goods;
AM

(b) an amount for profit and general expenses equal to that usually reflected in sales of
goods of the same class or kind as the goods being valued which are made by producers
-

in the country of exportation for export to India;

AL

(c) the cost or value of all other relevant expenses.

 In a case, where the value cannot be determined by any of the aforesaid rules, then resort

RE
will be made to Rule 8, Residual Method, under which the value shall be determined
using reasonable means consistent with the principles and the general provisions of the
rule.

O
Rate of duty and valuation and time of levy/incidence

AL
The rate of duty and tariff valuation shall be as applicable on

G
(a) In the case of goods directly cleared for home consumption the date of the

AN
presentation of the bill of entry.

(b) In case of goods cleared from warehouse, the date when bill of entry is presented for
home clearance of such goods from the warehouse. In case, bill of entry is submitted

,B
prior to arrival of the vessel or the aircraft, the date would be the later of the date of
submission of the bill of entry and the grant of entry inward to the vessel.

W
Advance rulings

LA
The provisions relating to advance rulings are covered in Chapter VB of the Act.
Advance rulings can be sought by a residents and/ or non-residents in case of joint
ventures in India, and by wholly owned subsidiaries of foreign companies proposing to
OF
undertake business activity in India. The Advance Ruling can be sought on matters
regarding classification and valuation of goods, notifications having a bearing on rate of
duty and notifications issued under the Customs Tariff Act and any other duty chargeable
GE

in the manner as duty of customs, under any other law for the time being in force.

The advance ruling authority created under section 245(O) of the Income-tax Act,
LE

1961 will be considered as advance ruling authority under the Central Excise Act and the
Customs Act also.
L

5. Explain the provisions relating to “Goods of National Importance “under The

CO

Central Sales Tax Act.

Introduction:
N

Central sales tax Act was enacted in the year 1956. This act came in to force on 21st
EE

December, 1956. One of the salient features of this act is to declare certain goods as
Goods of National importance.
AM

Definition
Section 2 (c) of the Act defines Declared Goods. They are as follows;
Declared goods means goods declared under Section 14 to be of special importance in
-
AL

inter-state or commerce”.
 As per Section 14 of the Act, Certain goods to be of special importance in inter-state

RE
trade or commerce. Section 14 reads as follows ;
“It is hereby declared that the following goods are of special importance in inter-

O
State trade or commence:-

AL
[(i) Cereals, that is to say,
(i) Paddy (Oryza sativa L);

G
(ii) rice (Oryza sativa L);

AN
(ii) what (Triticum vulgar, T.Compactum, T.sphaerococcum, T.durum, T.Aestivum L.t.
dicoccum);

,B
(iv) jowar or milo (Sorghum vulgare Pers);
(v) bajra (Pennisetum typholdeum L);

W
(vi) maize (Zea mays D.);
(vii) ragi (eleusine coracona Gaertn);
(viii) kodon (paspalum scrobiulatum L.); LA
(ix) kutki (Panicum miliare L);
OF

(x) barley (Hordeum vulgare L);

[(ia)] coal, including coke in all its forms, but excluding charcoal;
GE

Provided that during the period commencing on the 23rd day of February, 1967 and
ending with the date of commencement of section 11 of the Central Sales Tax
LE

(Amendment) Act, 1972, (6) of 1972), this clause shall have effect subject to the
modification that the words “but excluding charcoal” shall be omitted;]
L

(ii) cotton, that sis to say all kinds of cotton (indigenous or imported) in its
CO

unmanufactured state, whether ginned or unginned, baled, pressed or otherwise, but not
including cotton waste;
N

(iib) cotton yarn, but not including cotton yarn waste;]

EE

[(iic) crude oil, that is to say, crude petroleum oils and crude oils obtained from
bituminous minerals (such as shale, calcareous rock, sand), whatever their composition,
AM

whether obtained from normal or condensation oil-deposits or by the destructive

distillation of bituminous minerals and whther or not subject to all or any of the following
-

processes:
AL
 (1) Decantation;

RE
(2) De-salting;
(3) Dehydration;

O
(4) Stabilisation in order to normalize the vapour pressure;

AL
(5) Elimination of very light fractions with a view to returning them to the oil-
deposits in order to improve the drainage and maintain the pressure;

G
(6) The addition of only those hydrocarbons previously recovered by physical

AN
methods during the course of the above mentioned processes;
(7) Any other minor process (including addition of pour point depressants or flow

,B
improvers) which does not change the essential character of the substance;]
(iii) hides and skins, whether in a raw or dressed state;

W
[(iv) iron and steel, that is to say:-
(i)
LA
Pig iron and cast iron including [ingot moulds, bottom plates], iron scrap, cost
iron scrap, runner scrap and iron skull scrap;
(ii) Steel semis (ingots, slabs, blooms and billets of all qualities, shapes and sizes);
OF

(iii) Skelp bars, tin bars, sheet bars, hoe-bar and sleeper bars;]
(iv) Steel bars (rounds, rods, squares, flat, octagons and hexagons, plain and ribbed or
GE

twisted, in coil form as well as straight lengths);

(v) Steel structurals (angles, joists, channels, tees, sheet pilling sections, Z-sections or
LE

any other rolled sectiosn);

(vi) Sheets, hoops, strips and skelp, both black and galvanized, hot and cold rolled
L

plain and corrugated, in all qualities, in straight lengths and in coil form, as rolled and in
CO

reverted condition:
[(iva) Pulses, that is to say:-
N

(i) Gram or gulab gram (Cicerarietinum L.);

EE

(ii) Turr or arhar (Carjanus cajan);

(iii) Moong or green gram (Phaseolus aureus);
AM

(iv) Masur or lentil (Lens escculemta Moench, Lens culinarie Medic);

(v) Urad or black gram (Phaseolus mungo);
-

(vi) Moth (Phaseolus aconitifolius Jacq);

AL

(vii) Lakh or khesari (Lathyrus sativus L.)

 (viii) Discs, rings, forgings and steel castings;

RE
(ix) Tool, alloy and special steels of any of the above categories;
(x) Steel melting scrap in all forms including steel skull, turnings and borings;

O
(xi) Steel tubes, both welded and seamless, of all diameters and lengths, including

AL
tube fittings;
(xii) Tin-plates, both hot dipped and electrolyte and tin free plates;

G
(xiii) Fish plate bars, bearing plate bars, crossing sleeper bars fish plates, bearing plates,

AN
crossing sleepers and pressed steel sleepers – heavy and light crane rails;
(xiv) Wheels, tyres, axles, and wheels sets;

,B
(xv) Wire rods and wires – rolled, drawn, galvanized, immunized, aluminized, tinned
or coated such as by copper;

W
(xvi) Defectives, rejects, cuttings, or end piece and any of the above categories;
[(v)
LA
jute, that is to say, the fibre extracted from plants belonging to the species
Corchorrus capsularies and Corchorus olitorius and the fibre known as mesta or bimli
extracted from plants of the species Hibiscus cannabinus and Hibiscus sabdariff –
OF

Varaltissima and the fibre known as Sunn or Sunn-hemp extracts from plants of the
species Crotalaria juncea whether baled or otherwise;]
GE

[(vi) Oilseeds, that is to say, -

(i) Groundnut or Peanut (Arachis hypogaea);
LE

(ii) Sesamum or Til (Sesamum orientale);

(iii) Cotton seed (Gossypium Spp);
L

(iv) Soyabean (Glyine seja);

CO

(v) Rapeseed and Mustard –

(1) Torta (Brassica campestrisvar toria);
N

(2) Rai (Brassica juncea);

EE

(3) Jamba – Taramira (Eruca Satiya);

(4) Sarson, yellow and brown (Brassica campestris var sarson);
AM

(5) Banarsi Rai or True Mustard (Brassica nigra);

(vi) Linseed (Linum usitatissimum);
-

(vii) Castor (Ricinus communis);

AL

(viii) Coconut (i.e., copra excluding tender coconuts) (cocosnucifera);

 (ix) Sunflower (Helianthus annus);’

RE
(x) Nigar seed (Guizotia abyssinica);
(xi) Neem, vepa (Azadirachta indica);

O
(xii) Mahua, illupal, Ippe (Madhuca indica M. Latifolia, Bassia, Latifolia and Madhuca

AL
longifolia syn. M.Longifolia);
(xiii) Karanja, Pongam, Honga (Pongamia pinnata syn. P.Glabra);

G
(xiv) Kusum (Schleichera oleosa, syn. S.Triyuga);

AN
(xv) Punna, Undi (Calophyllum inophyllum);
(xvi) Kokum (Carcinia indica);

,B
(xvii) Sal (Shorea rebusta);
(xviii) Tung (Alecurites fordii and A. Montana);

W
(xix) Red palm (Elaeis guinensis);
(xx) Safflower (Carthanum tinctorious);]
LA
[(vii) man-made fabrics covered under heading Nos.54.08, 54.09, 54.11, 54.12, 55.07,
55.09, 55.10, 55.11, 55.12, 58.01, 58.02, 58.03, 58.04, 58.05, [58.06,] 59.02,
OF

59.03, 59.05, 59.06, and 60.01 of the Schedule to the Central Excise Tariff Act,
1985 (5 of 1986);
GE

(viii) sugar covered under sub-beading Nos. 1701.20, 1701.31, 11701.39, and 1702.11
of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986);
LE

(ix) unmanufactured tobacco and tobacco refuse covered under sub-heading No.s
2401.00, cigars and cheroots of tobacco covered under heading No.24.02,
L

cigarettes and cigarillos of tobacco covered under sub-heading Nos.2403.11,

CO

2403.21 and other manufactured tobacco covered under sub-heading

Nos.2404.39, 2404.41, [2404.13, 2404.60] of the Schedule to the Central Excise
N

Traffic Act, 1985 (5 of 1986);

EE

(x) woven fabrics of wool covered under heading Nos. 51.06, 51.07, 58.01, 58.02,
58.03 and 58.05 of the Schedule to the Central Excise Traffic Act, 1985 (5 of
AM

1985)]”.
Goods declared as of national Importance have certain restrictions on their tax and sale.
-

Restrictions are laid down under Section 15 of the said Act. They are as follows ;
AL
 Section 15. Restrictions and conditions in regard to tax on sale or purchase of

RE
declared goods within a State – Every sales tax law of a State shall, in so
purchase of declared goods, be subject to the following restrictions and

O
conditions, namely:-

AL
(a) the tax payable under that law in respect of any sale or purchase of such goods
inside the State shall not exceed [four percent.] of the sale or purchase price thereof, and

G
such tax shall not be levied at more than one stage;

AN
(b) where a tax has been levied under that law in respect of the sale or purchase inside
the State of any declared goods and such goods are sold in the course of inter-State trade

,B
or commerce, [and tax has been paid under this Act in respect of the sale of such goods
in the course of inter-State trade or commerce, the tax levied under such law] [shall be

W
reimbursed to the person making such sale in the course of inter-State trade or

LA
commerce] in such manner and subject to such conditions as may be provided in any
law in force in that State;]
(c) where a tax has been levied under that law in respect of the sale or purchase inside
OF

the State of any paddy referred to in sub-clause (i) of clause (i) of section 14, the tax
leviable on the rice procured out of such paddy shall be reduced by the amount of tax
GE

levied on such paddy;

[(ca) where a tax on sale or purchase of paddy referred to in sub-clause (i) of clause (i)
LE

of section 14 is leviable under the law and the rice procured out of such paddy is
exported out of India, then, for the purposes of sub-section (3) of section 5, the paddy
L

and rice shall be treated as a single commodity;]

CO

(d) each of the pulses referred to in clause (via) of section 14, whether whole or
separated, and whether with or without husk, shall be treated as a single commodity for
N

the purposes of levy of tax under that law.]

EE

Conclusion:
AM

Therefore these are some of the provisions which deal with the declared goods
and their inter- state sale.
-

The appropriate authority shall, after making such inquiry or calling for such
AL

information as it may deem fit, notify to the liquidator within three months from the date
 on which he receives notice of the appointment of the liquidator the amount which, in the

RE
opinion of the appropriate authority would be sufficient to provide for any tax which is
then, or is likely thereafter to become, payable by the company.

O
The liquidator shall not part with any of the assets of the company or the

AL
properties in his hands until he has been notified by the appropriate authority under sub-
section (2) and on being so notified, shall set aside an amount equal to the amount

G
notified and, until he so sets aside such amount, shall not part with any of the assets of the

AN
company or the properties in his hands;
Provided that nothing contained in this sub-section shall debar the liquidator from

,B
parting with such assets or properties in compliance with any order of a court or for the
purpose of the payment of the tax payable by the company under this Act or for making

W
any payment to secured creditors whose debts are entitled under law to priority of

LA
payment over debts due to Government on the date of liquidation or for meeting such
costs and expenses of the winding up of the company as are in the opinion of the
appropriate authority reasonable.
OF

6. Explain the various Wealth Tax Authorities and their powers.

GE

The income-tax authorities specified in Section 116 of the Income-Tax Act shall
LE

be the Wealth-tax authorities for the purpose of this Act and every such authority shall
exercise the powers and perform the functions of a wealth-tax authority under this Act.
L

The Central Government may appoint as many Valuation Officers as it thinks fit.
CO

Subject to the rules and orders of the Central Government regulating the conditions of
service of persons in public service and posts, a wealth tax authority may appoint as
N

many overseers, surveyors and assessors as may be necessary to assist the valuation
officers in performance of their functions.
EE

Return of Wealth
AM

Every person is required to file with the wealth tax officer a return of net wealth
in Form BA, if his net wealth or net wealth of any other person in respect of which he is
assessable under the Act on the valuation date is of such an amount as to render him
-
AL

liable to wealth tax.

 Return can be filed on or before the ‘due date’ specified under Section 139 of the

RE
Income-tax Act.
In case of any person who, in the opinion of wealth-tax officer, is assessable to

O
tax, the wealth-tax officer may, before end of the relevant assessment year, issue a notice

AL
requiring him to furnish, within 30 days from the date of service of such notice, a return
of net wealth in the prescribed form.

G
Assessment

AN
Where any tax is payable on the basis of any return furnished under section 14 or
section 15 or in response to a notice under clause (i) of sub-section (4) of section 16 or

,B
under section17, after taking into account the amount of tax, if any, already paid under
any provision of this Act, the assessee shall be liable to pay such tax, together with

W
interest payable under any provision of this Act, for any delay in furnishing the return

LA
,before furnishing and the return shall be accompanied by proof of payment of such tax
and interest.
If the Assessing Officer has reason to believe that the net wealth chargeable to tax
OF

in respect of which any person is assessable under this Act has escaped assessment for
any assessment year, serve on such person a notice requiring him to furnish within such
GE

period, not being less than thirty days, a return in the prescribed form and verified in the
prescribed manner setting forth the net wealth in respect of which such person is
LE

assessable as on valuation date and may proceed to assess or reassess such net wealth
which has escaped assessment.
L

Penalties
CO

For the failure to pay tax or interest payable on self-assessment, the assessee is
liable for penalty by deeming assessee to be in default not exceeding 100 percent of tax in
N

arrears.
EE

For failure to comply with notice under section 16(2) or (4) without reasonable
cause, penalty may be levied from Rs.1.000 to Rs.25.000 for each failure case.
AM

For the concealment of wealth, penalty may be levied from 100% to 500% of tax
sought to be avoided.
-
AL
 For the failure to answer question (i) legally bound, or (ii) sign statements legally

RE
required, or (iii) comply with summons under section 37(1) without reasonable cause,
penalty of Rs. 500 to Rs. 10.000 for each failure or default can be levied.

O
For failure to furnish in due time statement, or information required under section

AL
38 without reasonable cause, penalty of Rs.100 to Rs.200 for everyday of default may be
levied.

G
For committing default in payment of tax, penalty may be levied not exceeding

AN
100 per cent of tax in arrears.
Prosecutions

,B
If a person willfully attempts to evade tax, penalty or interest, be punishable, in
case amount sought to be evaded exceeds Rs.1, 00,000 with rigorous imprisonment for a

W
term of 6 months which may extend to 7 years and fine.

LA
If a person willfully attempts to evade payment of tax, penalty or interest under
this Act, be punishable with rigorous imprisonment for a term which shall not be less
than three months, but which may extend to three years and shall also be liable to fine.
OF

If a person willfully makes failure to furnish in due time return of wealth in terms
of section 14(1) or 14(2) or 17(1), he shall be punishable. In case where tax sought to be
GE

evaded exceeds Rs. 1, 00,000 with rigorous imprisonment for a term of 3 months, which
may extend to 3 years and fine.
LE

In any other case with 3 months rigorous imprisonment which may extend to
3years and fine. For second and subsequent offences under section 35A(1), 35B, 35D or
L

35F, he shall be punishable with 6 months rigorous imprisonment which may extend to 7
CO

years and with fine.

N

7. Define Agricultural Income. Explain its Characteristics.

EE

Definition
AM

According to section 2(1A) of Income Tax Act, 1961, ‘agricultural income’ means: -
Any rent or revenue derived from land which is situated in India and is used for
agricultural purposes, any income from derived from such land by agriculture, the
-
AL

performance by a cultivator or receiver of rent-in-kind of any process ordinarily

 employed by a cultivator or receiver of rent-in-kind to render the produce raised or

RE
received by him fit to be taken to market.
The sale by a cultivator or receiver or rent-in-kind of the produce raised or received

O
by him, in respect of which no process has been performed other than a process of the

AL
nature described in paragraph (ii) of this sub clause,
Any income derived from any building owned and occupied by the receiver of rent

G
or revenue of any such land, or occupied by the cultivator or the receiver of rent-in-kind,

AN
of any land with respect to which, or the produce of which, any process mentioned in
paragraph (ii) and (iii) of sub-clause (b) is carried on.

,B
Instance of Agricultural Income

W
The following are held as agricultural income based on judicial decisions

LA
a. Income from growing flowers and creepers in cultivated gardens.
b. Rent for agricultural land received from sub-tenants by mortgagee in possession
[Mustafa Ali Khan v. CIT, (1948) 16 ITR 330(PC)].
OF

c. The fees collected from owners of cattle normally used for agricultural purposes for
allowing them to graze on forest lands covered by jungle and grass grown
GE

spontaneously.[CIT v. R.B.Rai Shamsherjang Bahadur, (1953) 24 ITR 1 (All)]

d. When denuded parts of the forest are replaced and subsequent operations in forestry
LE

carried out, the income arising from the sale of replanted trees.[CIT v. Benoy Kumar
Sahas Roy, (1957) 32 ITR 466 (SC)]
L

e. Interest on capital received by a partner from the firm engaged in agricultural

CO

operation. [CIT v.M.I.Mahindra, (1978) 112 ITR 323 (Gauhati)]

f. Share of profits of a partner from engaged in agricultural operations (similarly, salary
N

received by him for rendering services is agricultural income as salary is only a mode
EE

of adjustment of the firm’s income). [CIT v. R.M.Chidambaram pillai, (1970) 771 TR

494 (Mad)].
AM

Non-Agricultural Income
The following are not agricultural income based on judicial decisions: -
-
AL

a) Income from fisheries.

b) Royalty income of mines.
 c) Income from butter and cheese-making.

RE
d) Income from poultry farming.
e) Dividend paid by company out of its agricultural income.

O
f) Interest received by a money-lender in the form of agricultural produce.

AL
Computation of Net Agricultural Income
For the purpose of computing tax in the case of individuals, Hindu Undivided

G
families, etc. having net agricultural income in addition to the non-agricultural income,

AN
the net agricultural income will be computed as follows: -
1. Agricultural income of the nature referred in section 2(1A)(a) will be computed

,B
on the same basis as is adopted for the computation of income chargeable under

W
the head ‘Income from other sources’ under section 56 to 59.
2. Agricultural income of the nature referred in section 2(1A)(b) will broadly be

LA
computed as if it were income chargeable to tax under the head “Profits and Gains
of Business or Profession” and provisions of section 30 to 32, 36, 37, 40, 40A,
OF
41, 43, 43A, 43B and 43C will apply accordingly.
3. Agricultural income of the nature referred in section 2(1A)© will be computed as
GE

if it were income chargeable under the head “Income from House Property” under
section 23 to 27.
LE

4. Where an assessee derives income from sale of tea grown and manufactured by
him in India, 60 per cent of the total income from such business, as computed in
L

accordance with the rule 8 of the Income-Tax Rules, will be regarded as

CO

agricultural income.
5. Loss incurred in agriculture will be allowed to be set off against gains from
agriculture. No set off will, however, be allowed in respect of an assessee’s share
N

in agricultural loss of an unregistered firm which is not assessed as registered firm

EE

or in the agricultural loss of an association of persons or a body of individuals.

AM

6. Any tax levied by a State Government on agricultural income will be allowed as

deduction.
7. The unabsorbed loss from agricultural activities during the previous seven years
-
AL

will be set off against the agricultural income of the assessment year in
chronological order as indicated in Financial Act of that particular year.
 8. Where the net result of computation of agricultural income from various sources

RE
is a loss, the loss will be disregarded and the net agricultural income of the
assessee shall be taken as nil.

O
9. The net agricultural income of the assessee will be rounded off to the nearest

AL
multiple of Rs.10.

Conclusion

G
The above mentioned things are the income from agriculture and according to that

AN
the computation of Net Agricultural income will be considered.

,B
Write any two Short Notes.

W
a. Distinguish features of “Tax” and ‘Fees’

LA
Characteristic of “Taxes”:- From the above definitions, the following elements of taxes
are visible:
1. Taxes are imposed by the government only.
2. A tax is a compulsory contribution of the tax-payer.
OF
3. In the payment of a tax, the element of sacrifice is involved.
4. Payment of a tax is the personal obligation of the tax-payer.
5. The aim of taxation is the welfare of the community as a whole.
GE

6. A tax is a legal collection.

7. An element of force is there.
LE

8. A tax is not imposed to realize the cost of benefits provided.

9. Taxes may be assessed on income or capital, but they are actually paid out of
income.
L

10. A tax may be imposed upon property or occupation or commodities, but they are
CO

actually paid by individuals.

11. Taxes do not involve quid pro quo between the tax-payer and the public authority.
12. The purpose of the tax is raising public revenue.
N

13. Tax is used for public purpose or common benefit of all.

EE

14. Tax involves appropriation of private property.

15. Taxes are paid in cash, but not in kind.
AM

Fees
Fee is another source of revenue of the State and it differs from tax. Fee is defined
by Prof. Seligman as ‘a payment to defray the cost of each recurring service undertaken
-

by the government, primarily in the public interest, but conferring a measurable special
AL

advantage on the fee-payer.

 Taylor states that fees are characterized by more or less free choice on the part of the

RE
payer as to whether or not should he pay more or less for direct benefit conferred upon
him.
In Corporation of Calcutta v. Liberty Cinema Theatre, (AIR 1965 SC 117)

O
Justice Mukerjee said that the term ‘fee’ is referred to a charge imposed by some
Governmental agency for special service rendered to individuals.

AL
There are two categories of fee, viz., fee for licence and fee for service rendered.
The former is to cover the expenses of regulation and the latter to respond the service
rendered, Quid pro quo of service is the only criterion. The money raised by fee must be

G
set apart and appropriated specifically for the performance of the service for which it has

AN
been collected and it must not be merged in the general revenue of the Government.
Distinguish features of “Tax” and ‘Fees’ are as follows:-

1. Tax is compulsory levy and is enforced by law. A fee is not always compulsory.

,B
2. The tax collections are routed to the Consolidated Fund. But the amount collected
by way of fees is not merged with the Consolidated Fund.

W
3. It is left to the discretion of the Government to use the tax for any public benefit.
But fee collections are set apart only to cover the expenses for which it is collected.
4.
LA
There is no element of quid pro quo between the tax payment and the public
authority. In the case of fee, quid pro quo is an essential element. The fee is charged
according to the magnitude of the benefits received by the citizens.
OF
5. Tax may be expropriatory in nature. Fee cannot be discriminatory.
6. The ultimate object of tax in a welfare State is to bring about social order. The
ultimate object of fee can at the most only for the regulation of social order.
GE

7. Taxes change when base of tax changes and the capacity to pay principle is
followed. Fees are uniform and the capacity to pay does not form the basis.
LE

8. The principle that no tax can be levied or collected without the authority of law,
applies only in respect of taxes. This prohibition does not apply in respect of a fee.
9. A tax is a common burden and the only return the tax-payer gets is the
L

participation in the common benefit of the State. A fee is a payment for service rendered,
CO

benefit provided or privilege conferred. If one who is liable to pay fee, receives general
benefit from the authority levying the fee, the element of service required for collecting
fee is satisfied.
N
EE

b. CAPITAL RECEIPTS AND REVENUE RECEIPTS.

AM

Generally, taxes are also levied on receipts. Receipts may be distinguished as

capital receipts and revenue receipts. Capital receipts means return from accumulated
wealth employed reproductively and revenue receipts means returns from property or
possession. The difference between capital and revenue is that capital is a fund; revenue
-

is a flow. Capital receipts are exempted from tax unless they are expressly taxable like
AL

capital gains. ( for example, Sec 45 of Income tax Act). But revenue receipts are taxable
 unless they are expressly exempted from tax. (for example, Sec 10 to 13 of Income tax

RE
Act).
Few Instances of Revenue Receipts.
1. Where the assessee has sold his land in consideration of the purchaser paying him

O
an annuity for his life, the annuity so received is revenue receipt.[CIT v. Gopal sharan
Narain Singh, (1934) 2 ITR 264 (Pat)].

AL
2. If the assessee himself has treated the payment in his account book as
compensation for consideration received or loss of earning or profits, it is revenue

G
receipt. And , if it is found that a contract is entered into in the ordinary course of
business, any compensation received for its termination would be a revenue receipt.

AN
3. Whereas godowns used for storing business goods are requisitioned by
Government and despite requisition, the assessee continue to carry on business though at

,B
a reduced scale, compensation received by the assessee for loss of earning is a revenue
receipt. [CIT v. Manna Ramji & Co., (1972) 86 ITR 29 (SC)].
4. Compensation received by the assessee-company (a dealer in land) from the

W
Government on account of requisition of land belonging to the assessee was held to be a

LA
revenue receipt. [Nawn Estates (P) Ltd. v. CIT, (1982) 10 Taxman 292 (Cal.)].
5. Statutory interest received under section 34 of the Land Acquisition Act is interest
for delayed payment of compensation and is, therefore, a revenue receipt liable to tax.
OF
[Shamalal Narula v. CIT, (1964) 53 ITR 151 (SC)]

FEW INSTANCES OF CAPITAL RECEIPT

GE

1. Consideration received by an assessee for vacating business premises taken on

rent, where the assessee’s business does not consist of leasing and surrendering
properties, is a capital receipt. [CIT v. Merchandizes (p). Ltd., (1990) 49 Taxman 68
LE

(Ker.)].
2. Compensation received by a partner from another partner for relinquishing all his
L

partnership was held to be a capital receipt. [A.K. Sharfuddin v. CIT, (1960) 39 ITR 333
CO

(Mad)].
3. Where the assessee’s insured building , plant and machinery were partly damaged
and it received compensation which was partly utilized for restoring the damaged assets
N

to working conditions, it was held that unutilized portion of the compensation was a
capital receipt. [CIT v. Sirpur Paper Mills Ltd., (1978) 112 ITR 776 (SC)].
EE

4. Receipt on account of sale of sum surplus loom hours is a capital receipt. [CIT v.
Maheswari Devi Mills Ltd., (1965) 57 ITR 36 (SC)].
AM

5. Capital sum payable in instalments is treated as capital receipt. [CIT v. Kunwar

Trivikram Narain Sing, (1965) 57 ITR 29 (SC)].
6. Compensation paid for agreeing to refrain from carrying on competitive business
-

in commodities in respect of which an agency was terminated or for loss of goodwill will
AL

prima facie be of the nature of a capital receipt. [Gillanders Arbuthnot & Co, Ltd. v. CIT,
 (1964) 53 ITR 283 (SC). Similarly, compensation for restraint on exercise of profession

RE
is a capital receipt.

O
c. Dealer

AL
As per Section 2 (d) of the Central sales tax Act, dealer means and includes;

a) A local authority a body – corporate, a company, co-operative society, or other

G
society, club, firm, Hindu undivided family or association of persons which carry on such

AN
business:
b) A factory, broker, commission agent, delcredere agent etc., who carries on the
business of buying, selling or distributing goods belonging to any principal whether

,B
disclosed or not:
c) An auctioneer:

W
d) In respect of a dealer outside the state, every person who within the state (i) buys,
sells or distribute goods, an agent (ii) handles goods or documents of title relating to
goods or
e) LA
Who collects or make payments of or guarantees such collections or payment of
sale price or
OF
f) Every local office or branch within state of such an outside state dealer.

Any government which buys sells or distribute goods directly or otherwise the
valuable consideration is deemed to be a dealer. But this will not apply to any transaction
GE

of the government in respect of sale, suppl, or distribution of (a) Surplus (b)

unserviceable (c) old stories, (d) materials (e) waste products (f) obsolete or discarded
machinery or parts of accessories thereof.
LE

Conclusion:
L

Therefore, a person can be a dealer under this Act. If he falls under any of the
CO

clauses of the definition. A dealer who gets himself registered is called as a registered
dealer.
N
EE

Solve any two problems

AM

a. Give a format determing the taxable income from salary.

Following is the procedure for the calculation of taxable income on salary:

1. Gather your salary slips along with Form 16 for the current fiscal year and add every
-
AL

emolument such as basic salary, HRA, TA, DA, DA on TA, and other reimbursements
and allowances that are mentioned in your Form 16 (Part B) and salary slips.
 2. The bonus received during the financial year must be added for the income that is

RE
being calculated.
3. The total is your gross salary, from which you will have to deduct the exempted
portion of House Rent Allowance, Transport Allowance (for which the maximum

O
exemption is Rs.19,200 per year), Medical reimbursement (for which the maximum
exemption is Rs.15,000), and all other reimbursements provided the actual bills in

AL
respect of the expenses incurred.
4. The result is your net income from salary.
Once your net income has been calculated, the following tax slabs will be applicable:

G
For individuals who are under 60 years of age:

AN
Up to Rs.2.5 lakhs Nil Nil Nil

,B
Rs.2.5 lakhs to Rs.5 5% of (Total income – Rs.2.5 2% of income 1% of income tax
lakhs lakhs) tax
Rs.5 lakhs to Rs.10 Rs.25,000 + 20% of (Total income 2% of income 1% of income tax

W
lakhs – Rs.5 lakhs) tax
Above Rs.10 lakhs Rs.1,12,500 + 30% of (Total 2% of income 1% of income tax
income – Rs.10 lakhs) tax

LA
OF

b. Give a format determing the taxable income from other sources.

GE

Any income which does not fall under any other head of income i.e. Income from
business/profession, Income from salary, capital gains and house property then it will be
called as income from other sources.
LE

Illustration:
L
CO

Compute the income from other sources of Mr. X as per the details given below for
Financial Year 2016-17:-

Interest received on debentures 15000/=

N

Interest received from taxable bonds 20000/=

EE

Interest received from Public Provident Fund 30000/=

Dividend received from mutual funds 10000/=
Interest received on Fix Deposits With Bank 12000/=
AM

Accrued Interest on Kisan Vikas Patra 8000/=

Accrued Interest on National Saving Certificates 5000/=
Interest received on Income Tax refund 4000/=
-

Gift received from a friend 60000/=

AL

Winning from Television Shows 100000/=

 Solution:

RE
Interest received on debentures 15000/=
Interest received from taxable bonds 20000/=

O
Interest received from Public Provident Fund (Exempted) 30000/= 0

AL
Dividend on Mutual Fund (Exempted) 10000/= 0
Interest received on Fix Deposits with Bank 12000/=
Accrued Interest on Kisan Vikas Patra 8000/=

G
Accrued Interest on National Saving Certificates 5000/=

AN
Interest on Income Tax Refund 4000/=
Gift received from a friend (exempted if amount is 50000/= or 60000/=
less)

,B
Winning from Television shows 100000/=
TAXABLE INCOME FROM OTHER SOURCES 224000/=

W
Clarification:- Since the gift received during the year is more than Rs.50000/= that is

LA
why it will be included in taxable income from other sourced.

-------------------------------------------------------------------------------------------------------
OF
GE
L LE
CO
N
EE
AM
-
AL