Income-tax Act : Insurance business4 Indian Bare Acts :

Income-tax Act,1961

Act No : 43

Section : Insurance business4

44. Insurance business4 Notwithstanding anything to the contrary contained in the provisions of this Act relating to the computation of income chargeable under the head "Interest on securities"', "Income from house property", "Capital gains" or "Income from other sources", or in section 199 or in sections 28 to 6[43B], the profits and gains of any business of insurance, including any such business carried on by a mutual insurance company or by a cooperative society, shall be computed in accordance with the rules contained in the First Schedule. 5 These words should have been omitted consequent on the deletion of this head of income. 6 Substituted for "43A" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1989. Earlier, "43A" was substituted for "43" by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967. ---------------------------------------------------------------------- 1.264 taken into account in arriving at the assessable profits. 1[44A. Special provision for deduction in the case of trade, professional or similar association (1) Notwithstanding anything to the contrary contained in this Act, where the amount received during a previous year by any trade, professional or similar association 2[(other than an association or institution referred to in clause (23A) of section 10)] from its members, whether by way of subscription or otherwise (not being remuneration received for rendering any specific services to such members) falls short of the expenditure incurred by such association during that previous year (not being expenditure deductible in computing the income under any other provision of this Act and not being in the nature of capital expenditure) solely for the purposes of protection or advancement of the common interests of its members, the amount so fallen short (hereinafter referred to as deficiency) shall, subject to the provisions of this section, be allowed as a deduction in computing the income of the association assessable for the relevant assessment year under the head "Profits and gains of business or profession" and if there is no income assessable under that head or the deficiency allowable exceeds such income, the whole or the balance of the deficiency, as the case may be, shall be allowed as a deduction in computing the income of the association assessable for the relevant assessment year under any other head. (2) In computing the income of the association for the relevant assessment year under sub-section (1), effect shall first be given to any other provision of this Act under which any allowance or loss in respect of any earlier assessment year is carried forward and set off against the income for the relevant assessment year. (3) The amount of deficiency to be allowed as a deduction under this section shall in no case exceed one-half of the total income of the association as computed before making any allowance under this section. (4) This section applies only to that trade, professional or similar association the income of which or any part thereof is not distributed to its members except as grants to any association or institution affiliated to it.] 3[44AA. Maintenance of accounts by certain persons carrying on profession or business' (1) Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other profession as is notified by the Board in the Official Gazette' shall keep and maintain such books ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1964, w.e.f. 1-4-1964. 2 Inserted by the Finance (No. 2) Act, 1965, w.r.e.f. 1-4-1964. 3 Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4- 1976. 1.265 of account and other documents as may enable the 1[Assessing] Officer to compute his total income in accordance with the provisions of this Act. (2) Every person carrying on business or profession [not being a profession referred to in sub-section (1)] shall,- (i) if his income from business or profession exceeds 2[forty thousand] rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession exceed or exceeds 3[five hundred thousand] rupees in any one of the three years immediately preceding the previous year; or (ii) where the business or profession is newly set up in any previous year, if his income from business or profession is likely to exceed 4[forty thousand] rupees or his total sales, turnover or gross receipts, as the case may be, in business or profession are or is likely to exceed 5[five hundred thousand] rupees, during such previous year, keep and maintain such books of account and other documents as may enable the 6[Assessing] Officer to compute his total income in accordance with the provisions of this Act. (3) The Board may, having regard to the nature of the business or profession carried on by any class of persons, prescribed, by rules, the books of account and other documents (including inventories, wherever necessary) to be kept and maintained under sub- section (1) or sub-section (2), the particulars to be contained therein and the form and the manner in which and the place at which they shall be kept and maintained.' (4) Without prejudice to the provisions of sub-section (3), the Board may prescribe, by rules, the period for which the books of account and other documents to be kept and maintained under sub- section (1) or subsection (2) shall be retained.] 1 Substituted for "Income-tax" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. 2 Substituted for "twenty-five thousand" by the Finance Act, 1992, w.e.f. 1-4-1993. 3 Substituted for "two hundred and fifty thousand", by the Finance Act, 1992, w.e.f. 1-4-1993. 4 Substituted for "twenty-five thousand", ibid. 5 Substituted for "two hundred and fifty thousand", ibid. 6 Substituted for "Income-tax" by the Direct Tax Laws (Amendment) Act, 1987, w.e.f. 1-4-1988. ----------------------------------------------------------------------- 1.266 1[44AB. Audit of accounts of certain persons carrying on business or profession 2 3Every person,- (a) carrying on business shall, if his total sales, turnover or gross receipts, as the case may be, in business exceed or exceeds forty lakh rupees in any previous year 4[* * *]; or (b) carrying on profession shall, if his gross receipts in profession exceed ten lakh rupees in any previous year 5[* * *], get his accounts of such previous year 6[* * *] audited by an accountant before the specified date and 7 [furnish by] that date the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed: 8[Provided that this section shall not apply to the person, who derives income of the nature referred to in 9[* * *] or section 44B or section 44BB or section 44BBA or section 44BBB, on and from the 1st day of April, 1985 or, as the case may be, the date on which the relevant section came into force, whichever is later: Provided further that] in a case where such person is required by or under any other law to get his accounts audited 10[* * *], it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and 11[furnishes by] that date the report of the audit as required under such other law and a further report in the form prescribed under this section. Explanation.-For the purposes of this section,- (i) "accountant" shall have the same meaning as in the Explanation below sub-section (2) of section 288; 12[(ii) "specified date", in relation to the accounts of the previous year ---------------------------------------------------------------------- 1 Inserted by the Finance Act, 1984, w.e.f. 1-4-1988, 4 The words 'or years relevant to the assessment year commencing on the first day of April, 1985, or any subsequent assessment year' omitted by the Finance Act, 1988, w.e.f. 1-4-1989. 5 Ibid. 6 The words 'or years' omitted, ibid. 7 Substituted for obtain before' by the Finance Act, 1995, w.e.f. 1-7-1995. 8 Substituted for 'Provided that, by the Finance Act, 1992, w.r.e.f. 1-4-1985. 9 The words 'section 44AC or' omitted by the Finance Act, 1995, w.e.f. 1-7-1995. 10 The words 'by an accountant' omitted by the Finance Act, 1985, w.e.f. 1-4-1985. 11 Substituted for 'obtains before' by the Finance Act, 1995, w.e.f. 1-7-199.5. 12 Substituted by the Finance Act, 1988, w.e.f. 1-4-1989. Prior to the substitution, clause (ii) read as under: "(ii) 'specified date', in relation to the accounts of the previous year or years relevant to an assessment year, means the date of the expiry of four months from the end of the previous year or, where there is more than one previous year, from the end of the previous year which expired last before -> ->. ------------------------------------------------------------------------ 1.267 relevant to an assessment year means,- (a) where the assessee is a company, the 1[30th day of November] of the assessment year; (b) in any other case, the 31st day of October of the assessment year.]] 2[44AC. Special provision for computing profits and gains from the business of trading in certain goods.-Omitted by the Finance Act, 1992, w.e.f 1-4-1993.] --------------------------------------------------------------------- -> -> the commencement of the assessment year, or the 30th day of June of the assessment year, whichever is later." 1 Substituted for "31st day of December' by the Finance Act, 1994, w.e.f. 1-4-1994. 2 Prior to the omission, section 44AC, as inserted by the Finance Act, 1988, w.e.f. 1-4-1989 and amended subsequently, read as under: ----------------------------------------------------------------------- 1.268 -> -> "44AC. Special provision for computing profits and gains from the business of trading in certain goods*.-(1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an assessee, being a person other than a public sector company (hereafter in this section referred to as the buyer), obtaining in any sale by way of auction, tender or any other mode, conducted by any other person or his agent (hereafter in this section referred to as the seller),- (a) any goods in the nature of alcoholic liquor for human consumption (other than Indian-made foreign liquor), a sum equal to forty per cent of the amount paid or payable by the buyer as the purchase price in respect of such goods shall be deemed to be the profits and gains of the buyer from the business of trading in such goods chargeable to tax under the head "Profits and gains of business or profession": [Provided that nothing contained in this clause shall apply to a buyer where the goods are not obtained by him by way of auction and where the sale price of such goods to be sold by the buyer is fixed by or under any State Act;] [Explanation.-For the purposes of this clause, "purchase price" means any amount (by whatever name called) paid or payable by the buyer to obtain the goods referred to in this clause, but shall not include the amount paid or payable by him towards the bid money in an auction, or, as the case may be, the highest accepted offer in case of tender or any other mode;] (b) the right to receive any goods of the nature specified in column (2) of the Table below, or such goods, as the case may be, a sum equal to the percentage, specified in the corresponding entry in column (3) of the said Table, of the amount paid or payable by the buyer in respect of the sale of such light or as the purchase price in respect of such goods shall be deemed to be the profits and gains of the buyer from the business of trading in such goods chargeable to tax under the head "Profits and gains of business or profession". TABLE --------------------------------------------------------------------- S. No. Nature of goods Percentage --------------------------------------------------------------------- (1) (2) (3) --------------------------------------------------------------------- (i) Timber obtained under a forest lease Thirty-five per cent (ii) Timber obtained by any mode other Fifteen per cent than under a forest lease (iii) Any other forest produce not being Thirty-five per cent timber ---------------------------------------------------------------------- (2) For the removal of doubts, it is hereby declared that the provisions of subsection (1) shall not apply to a buyer (other than a buyer who obtains any goods, from any seller which is a public sector company) in the further sale of any goods obtained under or in pursuance of the sale under sub-section (1). (3) In a case where the business carried on by the assessee does not consist exclusively of trading in goods to which this section applies and where separate accounts are not maintained or are not available, the amount of expenses attributable to such other business shall be an amount which bears to the total expenses of the business carried on by the assessee the same proportion as the turnover of such other business bears to the total turnover of the business carried on by the assessee. Explanation.-For the purposes of this section, "seller" means the Central Government, a State Government or any local authority or corporation or authority established by or under a Central, State or Provincial Act, or any company or firm For co-operative society]."