Section 66 — Interpretation. Successor to s.28, s.32, s.35, s.35DDA, s.36, s.40, s.41, s.42, s.43, s.43A, s.43B, s.43D, s.44BB, s.44DA of the 1961 Act.
Section 66 is in Chapter IV — Computation of Total Income, which runs from section 13 to section 95.
The section is the dictionary for Part D of Chapter IV. It contains forty numbered definitions and no operative rule of its own; each clause either assigns a meaning for the whole Part or, where the clause says so, only for a named section.
Several clauses are targeted rather than general. Clause (1) defines "agreement" for section 26(2)(h) to include any arrangement, understanding or action in concert, whether or not formal, in writing, or intended to be legally enforceable, and clause (29) defines "service" for the same provision with an inclusive list running from accounting and banking to boarding and lodging. Clause (10) defines "long-term finance" for section 32(e) as a loan or advance repayable with interest over not less than five years. Clause (13) defines "moneys payable" for the tangible asset in section 33(12)(a)(i). Clause (15) defines "paid" as, except for section 37, actually paid or incurred according to the method of accounting on which business profits are computed.
A second group borrows meanings from elsewhere — "commission or brokerage" from section 402(7), "fees for technical services" from section 9(7)(b), "professional services" from section 402(28), "royalty" from section 9(6)(b), "permanent establishment" from section 173(c), "Keyman insurance policy" from Schedule II (Note 1), "University" from section 70(2) (Table: Sl. No. 7), and a range of company-law and securities-law terms, including, as substituted by Act No. 4 of 2026 with effect from 1 April 2026, "commodities transaction tax" and "commodity derivative" from Chapter VII of the Finance Act, 2013.
A third group defines terms outright. Clause (17) says "plant" includes ships, vehicles, books, scientific apparatus and surgical equipment used for the business or profession, but does not include tea bushes, livestock, buildings, or furniture and fittings. Clause (26) defines a "rural branch" by a population of not more than ten thousand according to the last preceding census whose figures were published before the first day of the tax year. Clause (27) defines "scientific research" and extends expenditure on it to all expenditure for its prosecution or the provision of facilities for it, while excluding expenditure on acquiring rights in or arising out of it. Clause (31) defines "speculative transaction" as a contract for purchase or sale of any commodity, including stocks and shares, settled otherwise than by actual delivery, and excludes four kinds of contract: a specified derivative transaction under clause (33), hedging in raw materials or merchandise, hedging in stocks and shares by a dealer or investor, and jobbing or arbitrage by a member of a forward market or stock exchange. Clause (33) sets the execution and documentation conditions for a specified derivative transaction, clause (32) defines "Specified Banking or Online Mode", and clause (34) defines "State Government undertaking" through five limbs including shareholding above 50% and control over the majority of directors or over management or policy decisions. Clauses (18) and (37) define "predecessor entity" and "successor entity" across amalgamation, demerger, succession of a firm by a company under section 70(1)(zd), and conversion into a limited liability partnership under section 70(1)(ze).
Part D computes business and professional income, and the outcome turns on words that would otherwise be argued case by case — whether a contract was speculative, a branch rural, an asset plant, a payment made in a banking mode. Collecting these in one place means a term carries the same meaning across the Part, and the clause-specific definitions mark where a different sense was intended for one provision only.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Minimum repayment period for a loan or advance to be "long-term finance" | Not less than five years | The terms on which moneys are loaned or advanced must provide for repayment along with interest over that period; the definition operates for the purposes of section 32(e) | Clause (10) |
| Population ceiling for a branch to be a "rural branch" | Not more than ten thousand | According to the last preceding census, of which the relevant figures have been published before the first day of the tax year | Clause (26) |
| Shareholding test for a State Government undertaking | More than 50% of the paid-up equity share capital | Held by the State Government, or by a corporation or company described in clause (34)(a) or (b), whether singly or taken together | Clause (34)(b) and (c) |
Read each clause for its stated scope before applying it: clauses (1) and (29) operate only for section 26(2)(h), clause (10) only for section 32(e), clause (13) only for section 33(12)(a)(i), and clause (15) defines "paid" for the Part except section 37. The definition of "plant" is inclusive on one side and exhaustive on the other — it pulls in books, vehicles and surgical equipment, but the exclusion of buildings and of furniture and fittings is absolute. Clause (31) is where most disputes land: a contract settled otherwise than by delivery is speculative unless it falls in one of the four exceptions, and the derivative exception works only if every clause (33) condition is met, including execution electronically on a recognised stock exchange through a registered intermediary and a time stamped contract note carrying the unique client identity number and the Permanent Account Number.
A dealer in shares enters into index derivative contracts on a recognised stock exchange through a registered broker, settled without delivery, each supported by a time stamped contract note carrying his client identity number and Permanent Account Number. Those trades are not speculative, because clause (31)(a) excludes a specified derivative transaction and the clause (33) conditions are met. The same dealer's off-exchange cash-settled contracts, with no such contract note, remain speculative under clause (31), and the loss from them is quarantined accordingly.
A taxpayer rarely sees this section named in a notice; it surfaces inside the reasoning of an assessment order or appellate order that turns on what a word in Part D means — most often whether a transaction was speculative, whether an item is plant, or whether a payment was made in the Specified Banking or Online Mode.
"plant" includes ships, vehicles, books, scientific apparatus and surgical equipment used for the business or profession but does not include tea bushes or livestock or buildings or furniture and fittings
"paid" means, except for section 37, actually paid or incurred according to the method of accounting upon the basis of which the profits or gains are computed under the head "Profits and gains of business or profession"
See the full 1961 to 2025 concordance.
All of them are in the Rules 2026 index.
See every circular and notification on this section, or the circulars index.
See every circular and notification on this section, or the notifications index.
