Circular : No. 430 [F. No. 225/101/85-IT(A-II)], dated 6-9-1985
Circular No. 430 was issued by the Central Board of Direct Taxes on 6 September 1985. Its subject is Circular : No. 430 [F. No. 225/101/85-IT(A-II)], dated 6-9-1985.
Announces the abolition of the compulsory deposit scheme for income-tax payers with effect from 1 April 1985, so that no liability to make a compulsory deposit arises from financial year 1985-86 onwards. Under the Act as it stood, a deposit made or recovered in a financial year was repayable in five equal annual instalments with interest, beginning two years after the end of that year. The Compulsory Deposit Scheme (Income-tax Payers) Amendment Act, 1985 holds back withdrawals: no depositor may take out, before the end of financial year 1985-86, an amount that would otherwise have fallen due for repayment during that year, and the amount held back carries interest as if it were still a compulsory deposit, the Act continuing to apply to it. The circular then answers four questions — a bank may accept a compulsory deposit even after 31 March 1985, though whether penalty under section 10 follows is for the Income-tax Officer to decide; a person who turned 65 before 1 April 1985 may be paid out, the one-year postponement not applying to him; instalments that had already fallen due in an earlier year but were not drawn may be paid during financial year 1985-86, the postponement reaching only amounts falling due in that year; and early repayment in extreme hardship remains open under the second proviso to section 8(1), on its own conditions.
To put out the effect of the abolition and of the Amendment Act of 1985, and to answer queries raised on how the change worked in particular situations.
Circular : No. 430 [F. No. 225/101/85-IT(A-II)], dated 6-9-1985
1. The Act and the Scheme framed thereunder have been amended from time to time to provide for
liability for making compulsory deposits up to and including the financial year 1984-85. Under the Act,
the compulsory deposit made or recovered in a financial year is repayable in five equal annual
instalments commencing from the expiry of two years from the end of that financial year, together with
interest.
2. It has now been decided to abolish the scheme of making compulsory deposits under the Act with
effect from 1-4-1985. There would, therefore, be no liability to make compulsory deposit from the
financial year 1985-86 onwards. However, under an amendment made by the Compulsory Deposit
Scheme (Income-tax Payers) Amendment Act, 1985, no depositor will be entitled to withdraw before
the expiry of the financial year 1985-86, any amount relating to it otherwise becoming due for
repayment or payment during that financial year. Such amount shall carry interest for the period as if it
were a compulsory deposit and the provisions of the Act will continue to apply in relation to such
amount.
3. Some queries raised in this connection are clarified below :Can a bank accept payment of compulsory deposit after 31-3-1985? Yes. A bank can accept payment of compulsory deposit even after 31-3-1985. However, the question whether the depositor is liable to a penalty under section 10 will be decided by the Income-tax Officer. (2) Can a person attaining the age of 65 years before 1-4-1985 be paid the amount standing to his credit in the compulsory deposit account? Yes. The postponement of payment by one year provided for by the Amendment Act does not apply to such persons. (3) Can a person who was eligible to receive payment of instalments under the Scheme prior to 1-4-1985, but who had not made the withdrawal, be allowed payment of such amount during the financial year 1985-86? Yes. The postponement of payment of instalments and interest applies only in respect of amounts falling due for repayment during the financial year 1985-86 and not to amounts which became repayble during an earlier financial year. (4) In cases of extreme hardship, will earlier repayment of any deposit or any instalment thereof be permissible under the second proviso to section 8(1) during the financial year 1985-86? Yes. Such earlier repayments will, however, be subject to satisfaction of the conditions laid down in the second proviso to section 8(1). ■■
Only in old records — a compulsory deposit account of that period surfacing in a wealth or succession matter, or an unclaimed instalment traced long afterwards.
Source: the Income Tax Department’s own published text — its page for this instrument.