Circular No. 567 — Admissibility of deduction in respect…

What this is

Circular No. 567 was issued by the Central Board of Direct Taxes on 19 July 1990. Its subject is 584. Admissibility of deduction in respect of income from units of the Unit Trust of India.

This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.

What it does

Treats income from Unit Trust of India units as dividend from an Indian company for the extra deduction under section 80L. The second proviso to section 80L(1), as amended by Finance Act, 1988, gave a further deduction, subject to an overall ceiling of Rs. 3,000, for interest on deposits under the notified National Deposit Scheme or dividend received from an Indian company, to the extent not already allowed under section 80L(1) or its first proviso. The question was whether income on Unit Trust units counted as such dividend. The Board holds it does, by force of section 32(3) of the Unit Trust of India Act, 1963, so the further deduction under the second proviso is available on unit income referred to in section 80L(1)(v).

Why it was issued

References had been received from the public asking whether income on Unit Trust of India units was dividend received from an Indian company for the purposes of the second proviso to section 80L(1).

Who it reaches

Individual and Hindu undivided family holders of Unit Trust of India units
Assessees already exhausting the main section 80L(1) limit on other income
Assessing Officers computing the section 80L deduction
Return preparers claiming the additional Rs. 3,000 relief

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.32	s.33, s.66
s.80L	no counterpart recorded

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

584. Admissibility of deduction in respect of income from units of the Unit Trust of India
1. The second proviso to sub-section (1) of section 80L of the Income-tax Act, 1961 was amended by the Finance Act, 1988, to provide that in computing the total income, any income by way of interest on deposits under the notified National Deposit Scheme or dividend received from any Indian company, in the aggregate and to the extent such income has not been allowed as a deduction under sub-section (1) or under the first proviso to sub-section (1), shall be further allowed as a deduction, subject to overall ceiling of Rs. 3,000.
2. References have been received from the public seeking clarification as to whether the income received in respect of units of the Unit Trust of India is dividend received from an Indian company, for the purposes of the second proviso to sub-section (1) of section 80L of the Income-tax Act, 1961, or not.
3. The income received in respect of the units of the Unit Trust of India is dividend received from an Indian company by virtue of the provisions of sub-section (3) of section 32 of the Unit Trust of India Act, 1963. Accordingly, the Board have decided that the deduction under the second proviso to sub-section (1) of section 80L of the Income-tax Act, 1961 in respect of dividend received from an Indian company will also be admissible in respect of income received from units of the Unit Trust of India, referred to in clause (v) of sub-section (1) of section 80L of the Income-tax Act, 1961.
Circular : No. 567, dated 19-7-1990.

What to watch

The extra deduction has its own ceiling of Rs. 3,000 and bites only on income not already allowed under section 80L(1) or the first proviso.
The reasoning rests on section 32(3) of the Unit Trust of India Act, 1963 deeming unit income to be dividend from an Indian company, so it does not carry over to income from other mutual funds.
This is written on section 80L as it stood after Finance Act, 1988; the deduction itself and the statutory deeming it depends on have not survived in that form, as the text's own references show.
It is a deduction from total income, not an exemption, and so is of no use where there is no gross total income to set it against.

Where you meet it

In an old assessment or rectification where the section 80L deduction claimed on unit income has been restricted.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Circular No. 20/2019 — Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes Circular No. 2.0/2019 New De 19 August 2019
Circular No. 3/2017 — Circular No.- 3/2017 20 January 2017
Notification No. 123/2016/F. No. 133/33/2015-TPL (Part-I) / G.S.R. 1180(E) — ¹Hkkx IIµ[k.M 3(i)º Hkkjr dk jkti=k % vlk/kj.k 5 28 December 2016
Notification No. 103/2016 [F.No.370142/29/2016 -TPL] / SO 3399(E) — Ministry of Finance 7 November 2016
Notification No. 85 /2016 [F.No.142/13/2015-TPL] / SO 3075(E) — 2 the Gazette of INDIA : Extraordinary [Part Ii—sec. 3(ii)] 28 September 2016
Notification No. 13 /2016 [F. No.142/33/2015-TPL] / SO 650(E) — [To BE Published in the Gazette of INDIA Extraordinary, Part II, section 3, Sub-section (ii)] 3 March 2016

← Circular No. 570 · Circular No. 566 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.