Notification No. 2007 — An exemption granted under section 104 of the Income-tax Act, 1961

What this is

Notification No. 2007 was published on 6 June 1967. Its subject is An exemption granted under section 104 of the Income-tax Act, 1961.

This grants an exemption or a relief under a provision that allows one. Read the conditions attached: an exemption notification is construed strictly, and a condition missed is the exemption lost.

What it does

The Central Government, in exercise of the powers conferred by sub-section (3) of section 104 of the Income-tax Act, 1961, and being of opinion that it is necessary and expedient in the public interest so to do, exempts every Indian company, not being an investment company as defined in clause (ii) of section 109 of that Act, from the operation of section 104 in respect of the previous year relevant to the assessment year commencing on 1 April 1967 and any subsequent assessment year. The exemption is subject to two conditions: that the company is engaged in a business of exporting goods or merchandise out of India, or in a business involving the performance of constructional operations or the rendering of any service outside India; and that, in respect of that previous year, the sale proceeds from such export, or the gross receipts from such constructional operations or services rendered outside India, are fifty per cent or more of the aggregate sale proceeds or gross receipts of the relevant previous year credited to the company's profit and loss account.

Why it was issued

The Central Government is of opinion that it is necessary and expedient in the public interest to grant the exemption.

Who it reaches

Indian companies exporting goods or merchandise out of India
Indian companies performing constructional operations or rendering services outside India
investment companies as defined in clause (ii) of section 109, who are excluded
Assessing Officers considering an order under section 104 for failure to distribute dividends

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.104	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.

In exercise of the powers conferred by sub-section (3) of section 104 of the Income-tax Act, 1961 (43 of 1961), the Central Government being of opinion that it is necessary and expedient in the public interest so to do, hereby exempts every Indian company [not being an investment company as defined in clause (ii) of section 109 of that Act] from the operation of the said section 104 in respect of the previous year relevant to the assessment year commencing on the 1st day of April, 1967, and any subsequent assessment year :

Provided that ---

(1) the company is engaged in any business of exporting goods or merchandise out of India or in any business which involves the performance of any constructional operations or rendering of any service outside India ; and

(2) in respect of the said previous year, the amount of the sale proceeds derived by the company from the export of goods or merchandise out of India or gross receipts derived by it from the constructional operations or services rendered outside India, as the case may be, is fifty per cent. or more of the aggregate amount of the sale proceeds or, as the case may be, the gross receipts of the relevant previous year credited to the profit and loss account of the company

From when

the assessment year commencing on 1 April 1967 and subsequent assessment years.

What to watch

The exemption runs from the previous year relevant to the assessment year commencing on 1 April 1967 and continues for subsequent assessment years, so it is not confined to a single year.
Both provisos must be satisfied, and the fifty per cent test is applied year by year against the aggregate sale proceeds or gross receipts credited to the profit and loss account of that previous year.
An investment company as defined in clause (ii) of section 109 is outside the exemption altogether, whatever its export or overseas receipts.

Where you meet it

In proceedings under section 104 against a company for not distributing the statutory percentage of its distributable income.

An example

Ours, not the Board’s: a worked case built from the rule the instrument sets, to show how it falls out.

A company whose profit and loss account for the previous year credits total sale proceeds of Rs. 1 crore, of which Rs. 55 lakh come from exports out of India, meets the fifty per cent test and is outside section 104 for that year. If in the next year its export proceeds fall to Rs. 40 lakh out of the same total, the test fails for that year and the exemption is not available for it.

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. 347 — 727. Book publishing company - Whether qualifies to be treated as company engaged in manufacture or processing of goods 7 July 1982
Notification No. 3210 — An exemption granted under section 104 of the Income-tax Act, 1961 8 August 1969
Circular No. 24 — 728. Whether production of motion pictures amounts to manufacture or processing of goods within the meaning of section 1 23 July 1969
Notification No. 2817 — An exemption granted under section 104 of the Income-tax Act, 1961 14 August 1964

← Notification No. 2249 · Notification No. 1951 →

What a notification is. A notification is made under a power the Act itself gives, and within that power it is law — unlike a circular, which only binds the department. Its reach is the reach of the enabling provision and no wider, and the date it carries decides from when it works.

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