Amendment of the Income-tax Rules under section 14A of the Income-tax Act, 1961
Notification No. 208 was published on 10 August 2006. Its subject is Amendment of the Income-tax Rules under section 14A of the Income-tax Act, 1961.
This amends the Income-tax Rules. What it changes is the Rules, not the Act — and a rule can never take away what the section gives.
The Income-tax (Ninth Amendment) Rules, 2006 rewrite parts of Form No. 3CD in Appendix II, the statement of particulars annexed to the audit report under section 44AB. A new item 12A is inserted calling for particulars of a capital asset converted into stock-in-trade, namely its description, date of acquisition, cost of acquisition and the amount at which it is converted. Item 15 is recast into a lettered list of the sections under which amounts are admissible, adding sections 35DD and 35DDA to the existing list. In item 17, sub-item (h) is split so that the auditor must state whether a certificate has been obtained from the assessee that payments covered by section 40A(3) were made by account payee cheque or account payee bank draft and separately the amount inadmissible under section 40A(3) read with rule 6DD with a break-up; and new sub-items (l) and (m) require the amount inadmissible under section 14A in respect of expenditure relating to income not forming part of total income and the amount inadmissible under the proviso to section 36(1)(iii). In item 21 the reference to clauses (a), (c), (d) or (e) of section 43B is widened to clauses (a), (b), (c), (d), (e) or (f) and sub-item (ii) is omitted; item 24 gains a certificate requirement on account payee mode for loans and deposits, with an exclusion for repayments to Government, a Government company, a banking company or a corporation established by a Central, State or Provincial Act; item 25 is lettered (a) and a new sub-item (b) asks whether a change in shareholding attracts section 79; and item 27 is substituted to require a statement of compliance with Chapter XVII-B with a four-fold break-up of tax deductible and not deducted, shortfall, tax deducted late, and tax deducted but not paid to the credit of the Central Government. Items 7(b) and 8(a) are substituted, item 13(b) is widened to cover service tax and value added tax refunds, and the Annexure is renumbered as Annexure-I with consequential changes in Part B.
NOTIFICATION NO. 208/2006, DATED 10-8-2006
In exercise of the powers conferred by section 295 read with section 44AB of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:–
1. (1) These rules may be called the Income-tax (Ninth Amendment) Rules, 2006.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Income-tax Rules, 1962, in Appendix II, in Form No 3CD, –
(i) in item 7, for sub-item (b), the following sub-item shall be substituted, namely –
"(b) If there is any change in the partners or members or in their profit sharing ratio since the last date of the preceding year, the particulars of such change";
(ii) in item 8, for sub-item (a), the following sub-item shall be substituted namely:-
"(a) Nature of business or profession (if more than one business or profession is carried on during the previous year, nature of every business or profession).";
(iii) after item 12, the following item shall be inserted, namely:–
"12A Give the following particulars of the capital asset converted into stock-in-trade: -
(a) Description of capital asset,
(b) Date of acquisition;
(c) Cost of acquisition;
(d) Amount at which the asset is converted into stock-in-trade.",
(iv) in item 13, in sub-item (b), for the words "refunds of duty of customs or excise, or refunds of sales tax", the words "refund of duty of customs or excise or service tax, or refund of sales tax or value added tax" shall be substituted;
(v) in item 15 for the words, figures and letters "Amounts admissible under sections 33AB, 33ABA, 33AC, 35, 35ABB, 35AC, 35CCA, 35CCB, 35D, 35E", the words, brackets, letters and figures "Amounts admissible under sections -
(a) 33AB
(b) 33ABA
(c) 33AC (wherever applicable)
(d) 35
(e) 35ABB
(f) 35AC
(g) 35CCA
(h) 35CCB
(i) 35D
(j) 35DD
(k) 35DDA
(l) 35E"
shall be substituted;
(vi) in item 17,-
(a) for sub-item (h), the following sub-item shall be substituted, namely.-
"(h) (A) whether a certificate has been obtained from the assessee regarding payments relating to any expenditure covered under section 40A(3) that the payments were made by account payee cheques drawn on a bank or account payee bank draft, as the case may be, [Yes/No]
(B) amount inadmissible under section 40A(3), read with rule 6DD [with break-up of inadmissible amounts]";
(b) after sub-item (k), the following sub-items shall be inserted, namely:–
"(l) amount of deduction inadmissible in terms of section 14A in respect of the expenditure incurred in relation to income which does not form part of the total income,
(m) amount inadmissible under the proviso to section 36(1)(iii).";
(vii) in item 21,-
(a) in sub-item (i), for the words, brackets, letters and figures "clauses (a), (c), (d) or (e) of section 43B", the words, brackets, letters and figures "clauses (a), (b), (c), (d), (e) or (f) of section 43B" shall be substituted,
(b) sub-item (ii) shall be omitted;
(viii) in item 24, after sub-item (b), the following sub-item shall be inserted, namely:-
"(c) Whether a certificate has been obtained from the assessee regarding taking or accepting loan or deposit, or repayment of the same through an account payee cheque or an account payee bank draft. [Yes/No]
The particulars (i) to (iv) at (b) and the Certificate at (c) above need not be given in the case of a repayment of any loan or deposit taken or accepted from Government, Government company, banking company or a corporation established by a Central, State or Provincial Act",
(ix) item 25 shall be lettered as sub-item (a) thereof and after the sub-item as so lettered the following sub-item shall be inserted, namely:-
"(b) whether a change in shareholding of the company has taken place in the previous year due to which the losses incurred prior to the previous year cannot be allowed to be carried forward in terms of section 79.";
(x) for item 27, the following item shall be substituted, namely -
"27. (a) Whether the assessee has complied with the provisions of Chapter XVII-B regarding deduction of tax at source and regarding the payment thereof to the credit of the Central Government. [Yes/No]
(b) If the provisions of Chapter XVII-B have not been complied with,
please give the following details*, namely:-Amount
(i)
Tax deductible and not deducted at all
………………….
(ii)
shortfall on account of lesser deduction than required to be deducted
………………….
(iii)
tax deducted late
………………….
(iv)
tax deducted but not paid to the credit of the Central Government
………………….
"Please give the details of cases covered in (i) to (iv) above.";
(xi) (a) The Annexure shall be numbered as Annexure-I and in the Annexure as so numbered, in Part B thereof,
(i) for the words, ‘Nature of Business’, the words ‘Nature of business or profession in respect of every business or profession carried on during the previous year’ shall be substituted;
(ii) in Sl. No. 1, for the words "Paid-up share capital", the words "Paid-up share capital/capital of partner/proprietor" shall be substituted;
(iii) in Sl. No. 2, for the words "Share Application Money", the words "Share Application Money/Current Account of Partner or Proprietor, if any," shall be substituted;
(iv) in Sl. No 3, for the words "Reserves and Surplus", the words "Reserves and Surplus/Profit and Loss Account" shall be substituted;
(v) in Sl. No. 8, for the words "Gross turnover", the words "Gross turnover/gross receipts" shall be substituted,
(vi) in Sl. No 15, for the words and brackets "Net Profit (or loss) before tax", the words and brackets "Net Profit (or loss) before tax as per Profit and Loss Account" shall be substituted.after the Annexure-I as so numbered, the following Annexure shall be inserted, namely-
"Annexure - II
VALUE OF FRINGE BENEFITS IN TERMS OF SECTION 115WC READ WITH SECTION 115WB FOR THE ASSESSMENT YEAR
Sl. No.
Section under which chargeable to Fringe Benefit Tax
Nature of expenditure/payment
Amount of expenditure incurred or payment made
Deductions, if any
Total
Percentage expenditure/Payment being fringe benefits
Value of fringe benefits
(1)
(2)
(3)
(4)
(5)
(6)
(4-5)
(7)
(8)
Debited to the Profit and Loss Account
Accounted for in the balance sheet
Reimbursement
Any other head
Total
1.
115WB(1)(b)
Free or concessional ticket provided by the employer for private journeys of his employees or their family members
100%
2.
115WB(1)(c)
Any contribution by the employer to any approved Superannuation fund for employees
(see Note 1)
100%
3.
115WB(2)(A)
Entertainment
20%
4.
115WB(2)(B)
Provision of Hospitality of every kind by the employer to any person
(see Note 2)
20%
(see Note 3)
5.
115WB(2)(C)
Conference
(other than fee for participation by the employees in any conference
(see Note 4)
20%
6.
115WB(2)(D)
Sales promotion including publicity
(see Note 5)
20%
7.
115WB(2)(E)
Employees’ Welfare
(see Note 6)
20%
8.
115WB(2)(F)
Conveyance, tour and travel
(including foreign travel)
(see Note 7)
20%
(see Note 8)
9.
115WB(2)(G)
Use of hotel, boarding and lodging facilities
20%
(see Note 9)
10.
115WB(2)(H)
Repair, running
(including fuel),
maintenance of motor cars and the amount of depreciation thereon
20%
(see Note 10)
11.
115WB(2)(I)
Repair, running
(including fuel) and maintenance of aircrafts and the amount of depreciation thereon
20%
(see Note 11)
12.
115WB(2)(J)
Use of telephone (including mobile phone)
other than expenditure on leased telephone lines
20%
13
115WB(2)(K)
Maintenance of any accommodation in the nature of guest house other than accommodation used for training purposes
20%
14.
115WB(2)(L)
Festival celebrations
50%
15.
115WB(2)(M)
Use of health club and similar facilities
50%
16.
115WB(2)(N)
Use of any other club facilities
50%
17.
115WB(2)(O)
Gifts
50%
18.
115WB(2)(P)
Scholarships
50%
19.
115WB(2)(Q)
Tour and Travel (including foreign travel)
(see Note 12)
5%
20.
Total
Notes :
1. For assessment year 2007-08 and subsequent assessment years, the value of fringe benefits in respect of contribution by the employer to an approved superannuation fund shall be the amount of contribution which exceeds one lakh rupees in respect of each employee.
2 Expenditure on hospitality does not include the following:-
(i) any expenditure on, or payment for, food or beverage provided by the employer to his employees in office or factory;
(ii) any expenditure on, or payment through paid vouchers which are not transferable and usable only at eating joints or outlets.
3. In the case of an employer engaged in the business of hotel 5% shall be substituted for 20%. In addition to this, in the case of an employer engaged in the business of carriage of passengers or goods by aircraft or by ship 5% shall be substituted for 20% for assessment year 2007-08 and subsequent assessment years.
4. For the purposes of this clause, any expenditure on conveyance, tour and travel (including foreign travel), on hotel or boarding and lodging in connection with any conference shall be deemed to be expenditure incurred for the purposes of conference.
5. The following expenditure on advertisement shall not be considered as expenditure on sales promotion including publicity -
(i) the expenditure (including rental) on advertisement of any form in any print (including journals, catalogues or price lists) or electronic media or transport system,
(ii) the expenditure on the holding of, or the participation in any press conference or business convention, fair or exhibition,
(iii) the expenditure on sponsorship of any sport event or any other event organized by any Government agency or trade association or body,
(iv) the expenditure on the publication in any print or electronic media of any notice required to be published by or under any law or by an order of a court or Tribunal,
(v) the expenditure on advertisement by way of signs, art work, painting, banners, awnings, direct mail, electric spectaculars, kiosks, hoardings, bill boards or by way of such other medium of advertisement,
(vi) the expenditure by way of payment of any advertising agency for the purposes of clauses (i) to (v) above.
(vii) the expenditure on distribution of free samples of medicines or of medical equipment, to doctors (not to be considered as expenditure on sales promotion, including publicity for assessment year 2007-08 and subsequent assessment years).
(viii) the expenditure by way of payment to any person of repute for promoting the sale of goods or services of the business of the employer (not to be considered as expenditure on sales promotion, including publicity for assessment year 2007-08 and subsequent assessment years).
6. For the purposes of this clause, any expenditure incurred or payment made to fulfil any statutory obligation or mitigate occupational hazards or provide first aid facilities in the hospital or dispensary run by the employer shall not be considered as expenditure for employees’ welfare
7. For assessment year 2007-08 and subsequent assessment years, clause (F) of sub-section (2) of section 115WB refers to expense on ‘conveyance’.
8. In the case of an employer engaged in the business of construction, or in the business of manufacture or production of pharmaceuticals or computer software, 5% shall be substituted for 20%.
9. In the case of an employer engaged in the business of manufacture or production of pharmaceuticals or computer software, 5% shall be substituted for 20%. Besides, in the case of an employer engaged in the business of carriage of passengers or goods by aircraft or by ship 5% shall be substituted for assessment year 2007-08 and subsequent assessment years.
10. In the case of an employer engaged in the business of carriage of passengers or goods by motor car, 5% shall be substituted for 20%.
11. In the case of an employer engaged in the business of carriage of passengers or goods by aircraft, ‘Nil’ shall be substituted for 20%.
12. This clause is applicable for assessment year 2007-08 and subsequent assessment years".
[F.No. 142/2/2006-TPL]
Forms it touches. Form No. 3CD
the date of publication in the Official Gazette.
A reader meets this in the statement of particulars in Form No. 3CD annexed to the tax audit report under section 44AB, and in the assessment that works from it.
Forms it names. Form No. 3CD
Rules it names. Rule 6DD of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.
Source: the Income Tax Department’s own published text — its page for this instrument.
