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;
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* * * * *;
(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).
7
(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
interest-tax Payable in advance.
On or before the 15th December 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.
On or before the 15th March 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).
8
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
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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.
10
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).
11
(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).
12
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).
13
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).
14
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.
15
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).
16
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).