Insertion of new Chapter

Section 44 of the Finance Act, 1964 deals with insertion of new Chapter. Insertion of new Chapter 44. In the Income-tax Act, after section 280, the following Chapter and sections shall be inserted, namely:— ‘CHAPTER XXIIA ANNUITY DEPOSITS Persons to whom this Chapter applies 280A.

Insertion of new Chapter

44. In the Income-tax Act, after section 280, the following Chapter and sections shall be inserted, namely:—

‘CHAPTER XXIIA

ANNUITY DEPOSITS

Persons to whom this Chapter applies

280A. The provisions of this Chapter shall apply to every person, being—

(i) an individual, who is a citizen of India,

(ii) a Hindu undivided family,

(iii) an unregistered firm,

(iv) an association of persons or a body of individuals, whether incorporated or not (other than a company or a cooperative society), and

(v) an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2 (other than a corporation established by a Central, State or Provincial Act):

Provided that such person is a resident.

Definitions

280B. In this Chapter, unless the context otherwise requires,—

(1) "adjusted total income"—

(a) in relation to the assessment year commencing on the 1st day of April, 1964, means the amount of total income computed without making any allowance under section 280o and reduced by the aggregate of the following amounts, if any, included therein, namely: —

(i) any income chargeable under the head "Salaries";

(ii) if the depositor is a, partner of an unregistered firm which is liable to make an annuity deposit for the relevant assessment year, the amount of his share in the profits and gains of the firm computed in the manner laid down in section 67;

(iii) if the depositor is a member of an association of persons or a body of individuals (other than a Hindu undivided family or a firm which is liable to make an annuity deposit for the relevant assessment year, the amount which he is entitled to receive from the association or body;

(iv) any compensation or other payment referred to in clause (ii) of section 28; and

(v) any income chargeable under the head "Capital gains";

(b) in relation to the assessment year commencing on the 1st day of April, 1965, or any subsequent assessment year, means the amount of total income computed without making any allowance under section 280O and reduced, by the aggregate of the following amounts, if any, included therein, namely: —

(i) any sum which under the provisions of subclause (vii) of clause (1) of section 17 is included in salary ;

(ii) any income chargeable under the head "Salaries" in respect of which the assessee can make an application for the grant of relief under sub-section (1) of section 89;

(iii) the amount referred to in sub-clause (a)(ii) or sub-clause (a)(iii) of this clause;

(iv) any compensation or other payment referred to in clause (ii) of section 28; and

(v) any income chargeable under the head "Capital gains";

(2) "advance deposit" means the annuity deposit required to be made in advance in accordance with the provisions of sections 280E to 280I;

(3) "advance tax" shall have the same meaning as in section 207;

(4) "annuity" means any annual instalment of principal and interest thereon payable by the Central Government under the provisions of section 280D;

(5) "annuity deposit" means a deposit of money required to be made under the provisions of this Chapter;

(6) "depositor" means a person to whom the provisions of this Chapter apply.

Requirement as to annuity deposit

280C. (1) Where any Central Act enacts that any person to whom the provisions of this Chapter apply shall make for any assessment year an annuity deposit with the Central Government at any rate or rates, such person shall make such deposit at that rate or those rates in accordance with, and subject to the provisions of, this Chapter in respect of the adjusted total income of the previous year or previous years, as the case may be.

(2) In respect of the adjusted total income in relation to which an annuity deposit is to be made under sub-section (2), such deposit shall be made in advance in accordance with the provisions of sections 280E to 280I.

Repayment

280D; Subject to the provisions of this Chapter and any scheme framed thereunder, the Central Government shall repay to the depositor the annuity deposit made or recovered in any year in ten annual equated instalments of principal and interest at such rate as may be notified by the Central Government in the Official Gazette:

Provided that nothing in this section shall prevent the payment of any annuity at such commuted value thereof as may be provided in a scheme framed under section 280W, in any case in which the authority empowered to make such payment is satisfied that genuine hardship will be caused unless such payment is made.

Computation of advance deposit

280E, The amount of advance deposit to be made by a depositor in the financial year shall be computed as follows: —

(a)(i) his total income for the latest previous year in respect of which he has been assessed by way of regular assessment shall first be ascertained;

(ii) the amount of income of the nature referred to in subclause (b)(i) or sub-clause (b)(ii) or sub-clause (b)(iii) or subclause (b) (iv) or sub-clause (b) (v) of clause (1) of section 280B, if any, included in such income shall be deducted therefrom, and on the balance annuity deposit shall be calculated at the rates in force in the financial year;

(iii) the amount of annuity deposit calculated in accordance with sub-clause (ii) shall, subject to the provisions of clauses (b) and (c), be the advance deposit to be made;

(b) in cases where an estimate of the adjusted total income is sent by the depositor under sub-section (1) or sub-section (2) or sub-section (3) of section 280H, the total income on the basis of which such adjusted total income is so estimated shall, for the purposes of calculation of advance deposit under this section, be substituted for the total income referred to in clause (a).

(c) in cases where the Income-tax Officer makes an amended order referred to in sub-section (3) of section 280F on the basis of a provisional assessment, the total income on the basis of which the relevant provisional assessment had been made shall be substituted for the total income referred to in clause (a).

Explanation.—In this section and in sections 280F and 280H, the expression "total income" means the total income computed without making any allowance under section 280O.

Order by Income-tax Officer

280F. (1) Where a depositor has been previously assessed by way of regular assessment under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), the Income-tax Officer may, on or after the 1st day of April in the financial year, by order in writing, require him to make an advance deposit computed in accordance with the provisions of section 280E.

(2) The notice of demand issued under section 156 in pursuance of such order shall specify the instalments in which the advance deposit is to be made under section 280G.

(3) If, after the making of an order by the Income-tax Officer under this section and before the 15th day of February of the finan cial year, a regular assessment or a provisional assessment under section 141 of the depositor (or of the registered firm of which he is a partner) is made in respect of a previous year later than that referred to in the order of the Income-tax Officer, the Income-tax Officer may make an amended order requiring such depositor to make in one instalment on the specified date, or in equal instalments on the specified dates, if more than one, falling after the date of the amended order, the advance deposit computed on the basis of the adjusted total income calculated with reference to the total income determined under the regular assessment or the provisional assess ment aforesaid as reduced by the deposit, if any, made in accordance with the original order.

Instalments of advance deposit

280G. Subject to the provisions of section 280H, the provisions of section 211 shall, so far as may be, apply in relation to advance deposit to be made by a depositor as they apply in relation to advance tax payable by an assessee with the modification that reference therein to section 210 shall be construed as reference to section 280F.

Estimate to deposition

280H. (1) If a depositor, who is required to make advance deposit by an order under section 280F, estimates at any time before the last instalment is due that his adjusted total income for the period which would be the previous year for the immediately following assessment year, is less than the income in respect of which he is required to make such deposit, and accordingly wishes to make a deposit of an amount less than the amount which he is so required to deposit, he may send to the Income-tax Officer—

(i) an estimate of the adjusted total income of the said previous year;

(ii) an estimate of the advance deposit to be made by him calculated in the manner laid down in section 280E;

and shall make such deposit as accords with his estimate in equal instalments on such of the dates specified in section 211 as applied to advance deposit by section 280G as have not expired or in one sum if only the last of such dates has not expired.

(2) The depositor may send a revised estimate of the advance deposit to be made by him and adjust any excess or deficiency . in respect of any instalment already paid in a subsequent instalment or in subsequent instalments.

(3) A depositor who has not previously been assessed by way of regular assessment under this Act, or under the Indian Income-tax Act, 1922 (11 of 1922), shall, before the 1st day of March in each financial year, if his total income of the period which would be the previous year for the immediately following assessment year is likely to exceed the minimum amount in relation to which annuity deposit is required to be made under the provisions of the Finance Act of that year, send to the Income-tax Officer—

(i) an estimate of the adjusted total income of the said previous year;

(ii) an estimate of the advance deposit to be made by him calculated in the manner laid down in section 280E;

and shall make such deposit as accords with his estimate, on such of the dates specified under section 211 as applied to advance deposit by section 280G as have not expired, by instalments which may be revised according to sub-section (2).

(4) Every estimate under this section shall be sent in the prescribed form and verified in the prescribed manner.

Com mission receipts

280I. Where part of the adjusted total income consists of any income of the nature of commission which is receivable periodically and is not received or adjusted by the payer in the depositor‘s account before any of the quarterly instalments of advance deposit become due, he may defer the making of advance deposit in respect of that part of his income to the date on which such income would be normally received or adjusted, and, if he does so, he shall communicate to the Income-tax Officer the date to which the making of such deposit is deferred.

Annuity deposit on the basis of self-assessment

280J. Where in respect of any assessment year, income-tax is payable on the basis of self-assessment under section 140A, the depositor shall, on or before the date on which tax under such assessment is payable, make an annuity deposit equal to the amount, if any, by which the amount of annuity deposit required to be made on the basis of income returned exceeds the amount, if any, of the annuity deposit already made by him in respect of that assessment year.

Annuity deposit on the basis of provisional or regular assessment

280K. At the time of making a provisional assessment under section 141 or a regular assessment, or as soon thereafter as may be, the Income-tax Officer shall, by order in writing, determine the amount of annuity deposit, if any, required to be made by the depositor on the basis of the income so assessed after taking into account the amount of annuity deposit, if any, already made by him in respect of that assessment year.

Special provisions for the assessment year 1964-65

280L. (1) If the total income of a depositor for the previous year relevant to the assessment year commencing on the 1st day of April, 1964 (such total income being computed without making any allowance under section 280O) exceeds fifteen thousand rupees and he does not furnish a return under section 139 before the 1st day of March, 1965 and no regular assessment under section 144 is made before the said 1st day of March, he shall send to the Income-tax Officer—

(i) an estimate of the adjusted-total income of the said previous year;

(ii) an estimate of annuity deposit to be made by him calculated in the manner laid, down in section 280E;.

and shall make such deposit as accords with his estimate on or before the 31st day of March, 1965.

(2) An estimate under this section shall be sent in. the prescribed form and verified in the prescribed manner,

Recomputation of annuity deposit and adjustment of excess or deficiency

280M. (1) Where as a result of an order of re-assessment or recomputation under section 147 or as a result of an order under section 154 or section 155 or section 186 or section 250 or section 254 or section 260 or section 262 or section 263 or section 264, the total income of a depositor is enhanced or reduced, or the status under which he is assessed is altered, or in the case of a firm, registration is granted or cancelled, the Income-tax Officer shall compute or recompute the amount of annuity deposit to be made by such depositor;

(2) Where any depositor has deposited any amount for any assessment year which is—

(a) in excess of the amount, or

(b) less than the amount,

required to be deposited under the provisions of this Chapter for that year and in the case referred to in clause (b), an additional amount has been recovered to make up the deficiency, then such excess amount or additional amount, as the case may be, may be adjusted or otherwise dealt with in such manner as may be provided in a scheme framed under section 280W.

Refund of annuity deposit made by a firm assessed under clause (b) of section 183

280N. Where any unregistered firm is assessed under clause (b) of section 183 for any assessment year, such firm shall not be liable to make an annuity deposit for that assessment year and annuity deposit made by it for that assessment year, if any, shall be adjusted or otherwise dealt with in such manner as may be provided in a scheme framed under section 280W.

Annuity deposit allowed as deduction in computing total income

280O. (1) Notwithstanding anything to the contrary contained in the provisions of this Act relating to the computation of income chargeable under any head of income, the annuity deposit required to be made under this Chapter shall, subject to the provisions of sub-section (2), be allowed as a deduction in computing the total income assessable for the assessment year in respect of which the annuity deposit is required to be made.

(2) If the adjusted total income of the depositor includes any income chargeable under the head "Salaries", the allowance under sub-section (1) shall be made in computing the income under that head, and if there is no income chargeable under that head or the annuity deposit required to be made exceeds such income, the whole or the balance of the annuity deposit required to be made shall be allowed as a deduction in computing earned income chargeable under any other head, and if there is no earned income chargeable under any other head or the whole or the balance Of the annuity deposit required to be made exceeds such earned income, the whole or balance of the annuity deposit required to be made shall be allowed as a deduction in computing any other income under any head.

Explanation.—In this sub-section, the expression "earned income" has the meaning assigned to it in the Finance Act of the relevant year.

Annuity deposit deductible in computing income under the head "Salaries for purposes of section 192

280P. Any person responsible for paying any income chargeable under the head "Salaries" to a resident shall, at the time of payment, deduct income-tax and super-tax under section 192 as if the estimated income referred to in sub-section (1) of that section had been reduced by the amount of advance deposit, if any, to be made by the assessee at the rates in force in the financial year concerned in respect of such income, whether such advance deposit has or has not been made.

Rounding off

280Q. The amount of any deposit to be made under this Chapter shall be rounded off to the nearest multiple of five rupees and where such amount contains a part of five rupees, then, if such part is two rupees and fifty naye paise or more, it shall be increased to five rupees and if such part is less than two rupees and fifty naye paise, it shall be ignored.

Penalty for failure to make deposit

280R. (2) If any person who is liable to make an annuity deposit under this Chapter fails to make such deposit within the time specified therefor, the Income-tax Officer may direct that the depositor shall pay by way of penalty an amount not exceeding one-half of the annuity deposit which he is liable to make.

(2) If the Income-tax Officer, in the course of any proceedings in connection with the regular assessment is satisfied that any depositor—

(a) has furnished under section 280H an estimate of advance deposit to be made by him which he knew or had reason to believe to be untrue, or

(b) has without reasonable cause failed to furnish an estimate of advance deposit to be made by him in accordance with the provisions of sub-section. (3) of section 280H,

he may direct that such depositor shall pay by way of penalty a sum—

(i) which, in the case referred to in clause (a), shall not exceed half the amount by which the advance deposit actually made during the financial year immediately preceding the assessment year under the provisions of sections 280E to 280I falls short of—

(1) seventy-five per cent, of the annuity deposit required to be made on the basis of income assessed by way of regular assessment (such deposit being calculated at the rates in force in the financial year immediately preceding the assessment year), or

(2) where a notice under section 280F was issued to the depositor, the deposit required to be made thereunder, which-ever is less; and

" (ii) which, in the case referred to in clause (b), shall not exceed half the amount equal to the seventy-five per cent. referred to in clause (i) (1),

(3) No order imposing a penalty under this section shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard.

Other interest and penalty provisions of the Act not to apply

280S. Notwithstanding anything to the contrary contained in this Act, the provisions of this Act, other than those contained in this Chapter or any scheme framed thereunder, relating to interest payable by the Central Government on refunds and interest payable by the assessee in default or those relating to imposition of penalty shall not apply in relation to any sum due under this Chapter.

Recovery of arrears of deposit and penalty

280T. For the removal of doubts, it is hereby declared that any arrear of annuity deposit and any penalty imposed under this Chapter shall be recoverable in the manner provided in Chapter XVII-D for the recovery of arrears of tax.

Special provisions for authors, playwrights, artists, musicians and actors

280U. Any individual, being an author, playwright, artist, musician or actor, may, in addition to the amount of annuity deposit required to be made by him in respect of any assessment year, make a further deposit of an amount not exceeding twenty-five per cent, of his adjusted total income assessable for that assessment year, and if he does so, the further deposit made by him, shall, for the purposes of this Chapter, be included in the annuity deposit required to be made by him.

Special provisions relating to, gratuity

280V. Where the total income of a depositor assessable for any assessment year includes any gratuity chargeable under the head "Salaries", he may, in addition to the amount of annuity deposit required to be made by him in respect of that assessment year, make a further deposit of an amount not exceeding fifty per cent. of the amount of such gratuity, and if he does so, the further deposit made by him, shall, for the purposes of this Chapter, be included in the annuity deposit required to be made by him.

Annuity Deposit Scheme

280W. (1) The Central Government shall, by notification in the Official Gazette, frame one or more scheme or schemes to be called Annuity Deposit Scheme or Schemes in relation to deposits under this Chapter.

(2) A scheme under sub-section (1) may provide for—

(a) the manner in which the annuity deposits shall be made;

(b) the manner in which, and intervals at which, annuities shall be paid; and the manner in which the excess or deficiency of annuity deposit may be adjusted or otherwise dealt with;

(c) the authority or authorities by or through whom such deposits may be collected or by whom annuities may be issued.;

(d) the documents to be issued to persons by whom deposits have been made as evidence of such deposits;

(e) the accounts to be maintained with respect to such deposits and annuities and the officers by whom such accounts snail be maintained;

(f) the nomination of any person to receive the annuity or any other sum due under this Chapter to any depositor in the event of his death and the cancellation or change of such nomination;

(g) the issue of duplicate of any document issued as evidence of any such deposit in the event of loss or destruction of the original and the fee on the payment of which such duplicate may be issued; and

(h) any other matter which may be necessary or proper for the effective implementation of the scheme.

(3) The Central Government may, by notification in the Official Gazette, add to, amend, vary or rescind any scheme framed under this Chapter.

(4) Any scheme framed under this Chapter shall be laid, as soon as may be, after it is framed 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 successive sessions, and, if before the expiry of the session in which it is so laid or the session immediately following, both Houses agree in making any modification in any provision of the scheme or both Houses agree that any provision in the scheme should not be made, that provision of the scheme 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 provision.

Option in certain cases

280X (1) Notwithstanding anything contained in this Chapter, any depositor may, on or before the 30th day of June of the assessment year in which he first becomes liable to make an annuity deposit, by notice in writing to the Income-tax Officer, declare (such declaration being final for that assessment year and all assessment years thereafter) that the provisions of this Chapter shall not apply to him and if he does so, the provisions of this Chapter [other than sub-section (2)] shall not apply to him for any assessment year in relation to which such option has effect :

Provided that in relation to the assessment year commencing on the 1st day of April, 1964, this sub-section shall have effect as if for the words, figures and letters "the 30th day of June", the words, figures and. letters "the 30th day of September" were substituted:

Provided further that where any such depositor satisfies the Income-tax Officer that he was prevented by sufficient cause from making such declaration within the period allowed therefor, the Income-tax Officer may, with the previous approval of the Inspecting Assistant Commissioner, allow such depositor to make the declaration at any time after the expiry of the aforesaid period.

(2) If a person has exercised the option under sub-section (1), then the amount of income-tax (but not super-tax) payable by him in respect of any assessment year in relation: to which such option has effect shall be increased by a sum equal to fifty per cent of the amount by which the amount of annuity deposit which would have been otherwise required to be made in respect of that assessment year exceeds the difference between the tax payable by him on his total income and the tax that would have been payable had his total income been reduced by the amount of annuity deposit:

Provided that if such person is more than seventy years of age on the last day of the previous year relevant to the assessment year, he shall not be liable to pay the additional income-tax under this sub-section.‘.

[Finance Act, 1964]

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Section 44, The Finance Act, 1964 (Act 5 of 1964).