INCOME TAX
INSTRUCTION NO
139/CBDT, Dated: January 16, 1970
Section(s) Referred: 271(1)(c)
Statute: Income - Tax Act, 1961
Instructions on the above subject contained in Board's circular letter F.No.58/75/67-IT(Inv) dated 18-9-66 have been reconsidered by the Board in consultation with Ministry of Law.
2. Section 271(1)(c) requires imposition of penalty with reference to tax that would have been avoided if the income as returned by such person has been accepted, while section 271(2) provides that penalty imposable in the case of a registered firm will be the same as if it was an unregistered firm. The legal fiction as a registered firm being treated as an unregistered firm is limited for the purpose of calculating the tax in the case of a registered firm as if it was an unregistered one. There is no warrant for extending this fiction and taking the view that the total income of the firm should also be predetermined as if it was an unregistered firm. Since the annuity deposit it is deductible from the total income and not from the tax, the question of deducting annuity deposit for determining the tax on the total income of the registered firm does not arise u/s.271(2) for the purpose of a determining the penalty imposable in the case of a registered firm.
3. These instructions are in supersession of the earlier instructions contained in Board's circular letter dated 18-9-1969 and may be brought to the notice of all officers in your charge.