EXPENDITURE-TAX ACT, 1987

[Act No. 35 of Year 1987]

An Act to provide for the levy of a tax on expenditure incurred in certain hotels ¹[or restaurants and for matters connected therewith or incidental thereto]

Comment: The Act seeks to levy a tax on the expenditure icnuured in specified hotels or restaurants and connected matters

Be it enacted by Parliament in the Thirty-eighth year of the Republic of India as follows: -

1. Short title, extent and commencement

(1) This Act may be called the Expenditure-tax Act, 1987.

(2) It extends to the whole of India except the State of Jammu and Kashmir.

(3) It shall come into force on such ²date as the Central Government may, by notification in the Official Gazette, appoint.

2. Definitions

In this Act unless the context otherwise requires,-

(1) "assessee" means a person responsible for collecting the expenditure-tax payable under the provisions of this Act;

(2) "assessment year" means the period of twelve months commencing on the 1st day of April every year;

(3) "Board" means the Central Board of Direct Taxes constituted under the Central Boards of Revenue Act, 1963 (54 of 1963);

(4) "chargeable expenditure" means the expenditure referred to in section 5;

(5) "expenditure-tax" or "tax" means the tax chargeable under the provisions of this Act;

(6) "hotel" includes a building or part of a building where residential accommodation is, by way of business, provided for a monetary consideration;

(7) "Income-tax Act" means the Income-tax Act, 1961 (43 of 1961);

(8) "Person responsible for collecting" means a person who is required to collect tax under this Act or is required to pay any other sum of money under this Act and includes-

(a) every person in respect of whom any proceedings under this Act have been taken, and;

(b) every person who is deemed to be an assessee-in-default under any provision of this Act;

(9) "prescribed" means prescribed by rules made under this Act;

¹[(9A) "restaurant" means any premises, not being a restaurant situated in a hotel referred to in clause (1) of section 3, in which the business of sale of food or drink to the public is carried on and such premises, at the beginning of any month, are equipped with, or have access to, facilities for air-conditioning;]

(10) "room charges" means the charges for a unit of residential accommodation in a hotel and includes the charges for-

(a) furniture, air-conditioner, refrigerator, radio, music, telephone, television, and

(b) such other services as are normally included by a hotel in room rent,

but does not include charges for food, drinks and any services other than those referred to in sub-clauses (a) and (b);

(11) all other words and expressions used herein but not defined and defined in the Income-tax Act shall have the meanings respectively assigned to them in that Act.

³[3. Application of the Act

This Act shall apply in relation to any chargeable expenditure-

(1) incurred in a hotel wherein the room charges for any unit of residential accommodation at the time of incurring of such expenditure are ⁴[two thousand rupees] or more per day per individual and where,-

(a) a composite charge is payable in respect of such unit and food, the room charges included therein shall be determined in the prescribed manner;

(b) (i) a composite charge is payable in respect of such unit, food, drinks and other services, or any of them, and the case is not covered by the provisions of sub-clause (a), or

(ii) it appears to the Assessing Officer that the charges for such unit, food, drinks or other services are so arranged that the room charges are understated and the other charges are overstated,

the Assessing Officer shall, for the purposes of this clause determine the room charges on such reasonable basis as he may deem fit; and

(2) incurred in a restaurant ⁶[before the 1st day of June, 1992].]

⁷[4. Charge of expenditure-tax

Subject to the provisions of this Act, there shall be charged on and from-

(a) the commencement of this Act, a tax at the rate of ⁸[ten] per cent of the chargeable expenditure incurred in a hotel referred to in clause (1) of section 3:

Provided that nothing in this clause shall apply in the case of a hotel referred to in ⁹[clause (a) of sub-section (7) of section 80-IB] of the Income-tax Act during the period beginning on the 1st day of April, 1991 and ending on the 31st day of March, 2001:

¹⁰[Provided further that nothing in this clause shall apply in the case of a hotel referred to in ⁹[clause (a) of sub-section (7) of section 80-IB] of the Income-tax Act, 1961 (43 of 1961) during the period beginning on the 1st day of April, 1998 and ending on the 31st day of March, 2008;]

(b) the 1st day of October, 1991, ⁶[but not after the 31st day of May, 1992] a tax at the rate of fifteen per cent of the chargeable expenditure incurred in a restaurant referred to in clause (2) of section 3.]

¹¹[5. Meaning of chargeable expenditure

For the purposes of this Act, chargeable expenditure,-

(1) in relation to a hotel referred to in clause (1) of section 3, means any expenditure incurred in, or payments made to, the hotel in connection with the provision of-

(a) any accommodation, residential or otherwise; or

(b) food or drink by the hotel, whether at the, hotel or outside, or by any other person at the hotel; or

(c) any accommodation in such hotel on hire or lease; or

(d) any other services at the hotel, either by the hotel or by any other person, by way of beauty parlour, health club, swimming pool or other services,

but does not include-

(i) any expenditure which is incurred, or the payment for which is made, in foreign exchange ⁶[before the lst day of October, 1992];

(ii) any expenditure incurred by persons within the purview of the Vienna Convention on Diplomatic Relations, 1961 or the Vienna Convention on Consular Relations, 1963;

(iii) any expenditure incurred in any shop or in any office which is not owned or managed by the person who carries on the business of a hotel;

(iv) any expenditure by way of any tax, including tax under this Act.

Explanation.-For the purposes of this clause,-

(a) expenditure incurred or any payments made in Indian currency obtained by conversion of foreign exchange into Indian currency shall in such cases and in such circumstances or, as may be prescribed¹² be deemed to five been incurred or, as the case may be, made in foreign exchange; and

(b) "foreign exchange" and "Indian currency" shall have the meanings respectively assigned to them in clauses (h) and (k) of section 2 of the Foreign Exchange Regulation Act, 1973 (46 of 1973);

(2) in relation to a restaurant referred to in clause (2) of section 3, means any expenditure incurred in, or payments made to, a restaurant in connection with the provision of food or drink by the restaurant, whether at the restaurant or outside, or by any other person in the restaurant, but does not include any expenditure referred to in sub-clauses (ii) and (iv) of clause (1).]

6. Tax authorities

¹³[(1) Every Director General of Income-tax, Chief Commissioner of Income-tax, Director of Income-tax, Commissioner of Income-tax, Commissioner of Income-tax (Appeals), ¹⁴[Additional Director of Income-tax, Additional Commissioner of Income-tax,] ¹⁵[Joint Director of Income-tax, Joint Commissioner of Income-tax,] Deputy Director of Income-tax, Deputy Commissioner of Income-tax, Assistant Director of Income-tax, Assistant Commissioner of Income-tax, Income-tax Officer, Tax Recovery Officer and Inspector of Income-tax shall have the like powers and perform the like functions under this Act as he has and performs under the Income-.tax Act, and for the exercise of his powers and the performance of his functions, his jurisdiction under this Act shall be the same as he has under the Income-tax Act.]

(2) All officers and persons employed in the execution of this Act shall observe and follow the orders, instructions and directions of the Board:

Provided that no such orders, instructions or directions shall be issued-

(a) so as to require any tax authority to make a particular assessment or to dispose of a particular case in a particular manner; or

(b) so as to interfere with the discretion of the Commissioner (Appeals) in the exercise of his appellate functions.

(3) Every ¹⁶[Assessing] Officer employed in the execution of this Act shall observe and follow the orders, instructions and directions issued for his guidance by the ¹⁷[Director General or Director or by the Chief Commissioner or Commissioner] or by the ¹⁴[Additional Commissioner of Income-tax or] ¹⁸[Joint] Commissioner within whose jurisdiction he performs his functions.

¹⁹[7. Collection and recovery of expenditure-tax

(1) Where any chargeable expenditure is incurred in a hotel referred to in clause (1) of section 3,-

(a) if such expenditure relates to any of the services, specified in sub-clauses (a) to (d) of clause (1) of section 5, provided by the hotel, the person who carries on the business of such hotel; and

(b) if such expenditure relates to any of the services, specified in sub-clause (b) or sub-clause (d) of clause (1) of section 5, provided by the other person referred to therein, such other person,

shall collect the expenditure-tax at the rate specified in clause (a) of section 4.

(2) Where any chargeable expenditure is incurred in a restaurant referred to in clause (2) of section 3 ⁶[before the lst day of June, 1992] in relation to any services specified in clause (2) of section 5 and where such services are,-

(a) provided by the restaurant, the person who carries on the business of such restaurant; and

(b) provided by the other person, such other person,

shall collect the expenditure-tax at the rate specified in clause (b) of section 4.

(3) The tax collected during any calendar month in accordance with the provisions of sub-sections (1) and (2) shall be paid to the credit of the Central Government by the 10th of the month immediately following the said calendar month.

(4) Any person responsible for collecting the tax, who fails to collect the tax in accordance with the provisions of sub-section (1) or sub-section (2) shall, notwithstanding such failure, be liable to pay the tax to the credit of the Central Government in accordance with the provisions of sub-section (3).]

8. Person responsible for collecting tax to furnish prescribed return

(1) Every person responsible for collecting the tax shall before the expiry of four months from the 31st day of March in each year, furnish or cause to be furnished to the ¹⁶[Assessing] Officer in the prescribed form and verified in the prescribed manner,²⁰ a return in respect of the immediately preceding financial year showing-

(a) the aggregate of the payments received in respect of chargeable expenditure;

(b) the amount of the tax collected;

(c) the amount of the tax paid to the credit of the Central Government; and

(d) such other particulars as may be prescribed.

(2) In the case of any person who, in the opinion of the ¹⁶[Assessing] Officer, is responsible for collecting tax under this Act and who has not furnished a return under sub-section (1), the ¹⁶[Assessing] Officer may, before the expiry of the financial year in which the return is to be furnished, issue a notice to him and serve the same upon him, requiring him to furnish within thirty days from the date of service of the notice the return in the prescribed form and verified in the prescribed manner²⁰ setting forth such other particulars as may be prescribed.

(3) Any person responsible for collecting the tax who has not furnished the return within the time allowed under sub-section (1) or sub-section (2) or having furnished a return under sub-section (1) or sub-section (2) discovers any omission or wrong statement therein, may furnish a return or a revised return, as the case may be, at any time before the assessment is made.

9. Assessment

(1) For the purpose of making an assessment under this Act, the ¹⁶[Assessing] Officer may serve on any person who has furnished a return under section 8 or upon whom a notice has been served under sub-section (2) of section 8 (whether a return has been furnished or not) a notice requiring him on a date therein to be specified, to produce or cause to be produced such accounts or documents or other evidence as the ¹⁶[Assessing] Officer may require for the purposes of this Act and may, from time to. time, serve further notices requiring the production of such further accounts or documents or other evidence as he may require.

(2) The ¹⁶[Assessing] Officer, after considering such accounts, documents or other evidence, if any, as he has obtained under sub-section (1) and after taking into account any relevant material which he has gathered, shall, by an order in writing, assess the chargeable expenditure and the amount of tax payable on the basis of such assessment.

10. Best judgment assessment

If-

(a) any person fails to make the return required by any notice given under sub-section (2) of section 8 and has not made a return or a revised return under sub-section (3) of that section, or

(b) any person having made a return fails to comply with all the terms of a notice issued under sub-section (1) of section 9, or

(c) the ¹⁶[Assessing] Officer is not satisfied with the correctness or the completeness of the accounts of the assessee,

the ¹⁶[Assessing] Officer, after taking into account all the relevant material which he has gathered, shall, by an order in writing, make the assessment of the chargeable expenditure to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment.

11. Chargeable expenditure escaping assessment

If-

(a) the ¹⁶[Assessing] Officer has reason to believe that by reason of omission or failure on the part of the assessee to make a return under section 8 for any assessment year or to disclose wholly and truly all material facts necessary for his assessment for any assessment year, chargeable expenditure for that year has escaped assessment or has been under-assessed, or

(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the ¹⁶[Assessing] Officer has, in consequence of information in his possession, reason to believe that chargeable expenditure assessable in any assessment year has escaped assessment or has been under assessed,

he may, in cases falling under clause (a), at any time, and in cases failing under clause (b), at any time within four years from the end of that assessment year, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under section 8 and may proceed to assess or reassess the chargeable expenditure, and the provisions of this Act shall, so far as may be, apply, as if the notice were a notice issued under that section.

12. Rectification of mistake

(1) With a view to rectifying any mistake apparent from the record, the tax authority referred to in section 6 which passed any order under the provisions of this Act may, within four years of the date on which such order was passed, amend the order.

(2) Where any matter has been considered and decided in any proceeding by way of appeal or revision relating to an order referred to in sub-section (1), the authority passing such order may, notwithstanding anything contained in any law for the time being in force, amend the order under that sub-section in relation to any matter other than the matter which has been so considered and decided.

(3) Subject to the other provisions of this section, the authority concerned-

(a) may make an amendment under sub-section (1) of its own motion, and

(b) shall make such amendment if any mistake is brought to its notice,-

(i) by the assessee; or

(ii) where the authority concerned is the Commissioner (Appeals), by the ¹⁶[Assessing] Officer.

(4) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall not be made under this section unless the authority concerned has given notice to the assessee of its intention so to do and has allowed the assessee a reasonable opportunity of being heard.

(5) Where an amendment is made under this section, an order shall be passed in writing by the tax authority concerned.

(6) Subject to the other provisions of this Act where any such amendment has the effect of reducing the assessment, the ¹⁶[Assessing] Officer shall make any refund which may be due to such assessee.

(7) Where any such amendment has the effect of enhancing the assessment or reducing the refund already made, the ¹⁶[Assessing] Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable and such notice of demand shall be deemed to be issued under section 20 and the provisions of this Act shall apply accordingly.

13. Time limit for completion of assessment and reassessment

(1) No order of assessment shall be made under section 9 or section 10 at any time after the expiration of a period of four years from the end of the assessment year in which the chargeable expenditure was first assessable, or one year from the date of the filing of the return or revised return under section 8, whichever is later.

(2) No order of assessment or reassessment shall be made under section 11,-

(a) where the assessment or reassessment is to be made in a case falling within clause (a) of section 11 for which a notice has been served upon. the assessee, at any time after the expiration of a period of four years from the end of the assessment year in which the said notice was served;

(b) where the assessment or reassessment is to be made in a case falling within clause (b) of section 11, for which a notice has been served, after the expiration of a period of-

(i) four years from the end of the assessment year in which the chargeable expenditure was first assessable, or

(ii) one year from the date of service of such notice, whichever is later.

(3) Notwithstanding anything contained in sub-sections (1) and (2), an order of fresh assessment in pursuance of an order passed under section 21, section 22 or section 23, setting aside or cancelling an assessment, may be made at any time before the expiry of four years from the end of the financial year in which the order under section 21 is passed by ²²[the Commissioner, or the order is received by the Chief Commissioner or Commissioner, as the case may be, under section 22 or section 23].

(4) The provisions of sub-sections (1) and (2) shall not apply to the assessment or reassessment made in consequence of, or to give effect to, any finding or direction contained in an order under section 21, section 22, section 23 or any order of a High Court or Supreme Court in a proceeding by way of reference or appeal under this Act or any order of any court in a proceeding otherwise than by way of an appeal or reference under this Act and such assessment or reassessment may, subject to the provisions of sub-section (3), be completed at any time.

Explanation.-In computing the period of limitation for the purposes of this section, the period during which the assessment proceeding is stayed by an order or injunction of any court shall be excluded.

14. Interest on delayed payment of expenditure-tax

Every person responsible for collecting expenditure-tax and paying it to the credit of the Central Government in accordance with the provisions of section 7, who fails to credit the tax to the account of the Central Government within the period specified in that section, shall pay simple interest at the rate of one and one-half per cent for every month or part of a month by which such crediting of tax is delayed.

²³[15. Penalty for failure to collect or pay expenditure-tax

Any person responsible for collecting expenditure-tax in accordance with the provisions of sub-section (1) or sub-section (2) of section 7, who-

(a) fails to collect such tax; or

(b) having collected the tax, fails to pay such tax to the credit of the Central Government in accordance with the provisions of sub-section (3) of that section,

shall pay,-

(i) in the case referred to in clause (a), in addition to paying tax in accordance with the provisions of sub-section (4) of that section, by way of penalty, a sum equal to the amount of tax that he failed to collect; and

(ii) in the case referred to in clause (b), in addition to paying interest in accordance with the provisions of section 14, byway of penalty, a sum which shall not be less than one hundred rupees but which may extend to two hundred rupees for every day during which the failure continues, so, however, that the penalty under this clause shall not exceed the amount of tax that he failed to pay.]

16. Penalty for failure to furnish prescribed return

If a person fails to furnish in due time the return which he is required to furnish under sub-section (1) of section, 8 or by notice given under sub-section (2) of that section, he shall pay, by way of penalty, a sum which shall not be less than one hundred rupees, but which may extend to two hundred rupees for every day during which the failure continues.

17. Penalty for concealment of chargeable expenditure

If the ¹⁶[Assessing] Officer or the Commissioner (Appeals) in the course of any proceedings under this Act is satisfied that any person has concealed particulars of chargeable expenditure or has furnished inaccurate particulars of such chargeable expenditure, he may direct that such person shall pay by way of penalty, in addition to any expenditure-tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of tax sought to be evaded by reason of concealment of particulars of chargeable expenditure or the furnishing of inaccurate particulars of such chargeable expenditure:

Provided that if the amount of chargeable expenditure (as determined by the ¹⁶[Assessing] Officer on assessment) in respect of which particulars have been concealed or inaccurate particulars have been furnished exceeds a sum of twenty-five thousand rupees, the ¹⁶[Assessing] Officer shall not issue any direction for payment by way of penalty without the previous approval of the ¹⁴[Additional Commissioner or, as the case may be, of the] ²⁴[Deputy] Commissioner.

18. Penalty for failure to comply with notice

If the ²⁵[Assessing] Officer in the course of any proceedings under this Act is satisfied that any person has failed to comply with a notice under sub-section (1) of section 9, he may direct that such person shall pay by way of penalty, in addition to any tax payable by him, a sum which shall not be less than ten per cent but which shall not exceed fifty per cent of the amount of the tax, if any, which would have been avoided if the chargeable expenditure returned by such person had been accepted as the correct chargeable expenditure.

19. Penalty not to be imposed in certain cases

Notwithstanding anything contained in the provisions of section 15, section 16, section 17 or section 18, no penalty shall be imposable on the assessee for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.

20. Notice of demand

When any tax, interest, penalty or any other sum is payable under this Act, the ¹⁶[Assessing] Officer shall serve upon the assessee a notice of demand in the prescribed form²⁶, specifying the sum so payable and the amount of chargeable expenditure in relation to which such sum is payable.

21. Revision of orders by the Commissioner

(1) The Commissioner may, either of his own motion or on application by the assessee for revision, call for the record of a proceeding under this Act which has been taken by the ¹⁶[Assessing] Officer subordinate to him and may make such enquiry or cause such enquiry to be made and, subject to the provisions of this Act, may pass such order thereon as he thinks fit.

(2) No order which is prejudicial to the assessee shall be passed under this section unless the assessee has been given an opportunity of being heard.

(3) No order under this section shall be passed by the Commissioner, if an appeal against the notice of demand issued by the ¹⁶[Assessing] Officer under section 20 is pending before the Commissioner (Appeals).

(4) No order under this section shall be passed after the expiry of two years from the end of the financial year in which the order sought to be reviewed has been passed.

¹⁵[(6) On every application by an assessee for revision under this sub-section, made on or after the lst day of October, 1998, an order shall be passed within one year from the end of the financial year in which such application is made by the assessee for revision.

Explanation.-In computing the period of limitation for the purposes of this sub-section, the time taken in giving an opportunity to the assessee to be re-heard under the proviso to section 24 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded.

(7) Notwithstanding anything contained in sub-section (6), an order in revision under that sub-section may be passed at any time in consequence of or to give effect to any finding or direction contained in an order of the Appellate Tribunal, High Court or the Supreme Court.]

22. Appeals to the Commissioner (Appeals)

(1) Any person objecting to the amount of expenditure-tax for which he is assessed by the ¹⁶[Assessing] Officer, or denying his liability to be assessed under this Act, or objecting to an order levying penalty under this Act, may appeal to the Commissioner (Appeals).

²⁷[(2) Every appeal shall be in the prescribed form and shall be verified in the prescribed manner²⁸ and in respect of appeals filed on or after the lst day of October, 1998, shall be accompanied by a fee of two hundred and fifty rupees.]

(3) Any appeal shall be presented within thirty days of the receipt of the notice of demand relating to tax, interest or penalty under this Act:

Provided that the Commissioner (Appeals) may admit an appeal after the expiration of the said period if he is satisfied that the appellant had sufficient cause for not presenting it within that period.

(4) The Commissioner (Appeals) shall hear and determine the appeal and, subject to the provisions of this Act, pass such orders as he thinks fit and such orders may include an order enhancing the assessment or penalty:

Provided that an order enhancing the assessment or penalty shall not be made unless the person affected thereby has been given a reasonable opportunity of showing cause against such enhancement.

²⁹[(4A) In every appeal, the Commissioner (Appeals), where it is possible, may hear and determine such appeal within a period of one year from the end of the financial year in which such appeal is filed under sub-section (1).]

(5) The procedure to be adopted in the hearing and determination of the appeals shall, with any necessary modification, be in accordance with the procedure applicable in relation to income-tax.

23. Appeals to Appellate Tribunals³⁰

(1) Any assessee aggrieved by an order passed by a Commissioner under section 21, or an order passed by a Commissioner (Appeals) under any provision of this Act, may appeal to the Appellate Tribunal against such order.

(2) The Commissioner may, if he objects to any order passed by the Commissioner (Appeals) under any provision of this Act, direct the ¹⁶[Assessing] Officer to appeal to the Appellate Tribunal against the order.

(3) Every appeal under sub-section (1) or sub-section (2) shall be filed within sixty days of the date on which the order sought to be appealed against is communicated to the assessee or to the Commissioner, as the case may be.

(4) The ¹⁶[Assessing] Officer or the assessee, as the case may be, on receipt of a notice that an appeal against the order of the Commissioner (Appeals) has been preferred under sub-section (1) or sub-section (2) by the other party may, notwithstanding that he may not have appealed against such order or any part thereof, within thirty days of the receipt of the notice, file a memorandum of cross-objections, verified in the prescribed manner³¹, against any part of the order of the Commissioner (Appeals), and such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in sub-section (3).

(5) The Appellate Tribunal may admit an appeal or permit the filing of a memorandum of cross-objections after the expiry of the relevant period referred to in sub-section (3) or sub-section (4), if it is satisfied that there was sufficient cause for not presenting it within that period.

(6) An appeal to the Appellate Tribunal shall be in the prescribed form and shall be verified in the prescribed manner and shall, except in the case of an appeal referred to in sub-section (2) or a memorandum of cross-objections referred to in sub-section (4), be accompanied by a fee of ³²[one thousand rupees in the case of appeals filed on or after the lst day of October, 1998].

(7) Subject to the provisions of this Act, in hearing and making an order on any appeal under this section, the Appellate Tribunal shall exercise the same p6wers and follow the same procedure as it exercises and follows in hearing and making an order on any appeal under the Income-tax Act.

24. Application of provisions of Income-tax Act

The provisions of the following sections and Schedules of the Income-tax Act and the Income-tax (Certificate Proceedings) Rules, 1962, as in force from time to time, shall apply with necessary modifications as if the said provisions and the rules referred to expenditure-tax instead of to income-tax:-

³⁴[2(44), 118, 120, 129, 131 to 136 (both inclusive)], 138, ³⁵[139A, 140, 144A, 145] 159 to 163 (both inclusive), 166, 167, 170, 171, 173 to 179 (both inclusive), 187, 188, ³⁶[188A,] 189, 220 to 227 (both inclusive), 229, ³⁷[***] 232, 237 to 245 (both inclusive), 254 to 262 (both inclusive), 265, 266, 268, 269, 278B, 278C, 278D, 278E, ³⁶[279B,] 281, 281B, 282, 283, 284, 287, 288, 288A, 288B, 289 to 293 (both inclusive), the Second Schedule and the Third Schedule:]

Provided that references in the said provisions and rules to the "assessee" shall be construed as references to an assessee as defined in this Act.

25. Wilful attempt to evade tax, etc.

If a person wilfully attempts in any manner whatsoever to evade collection or payment of any tax, penalty or interest chargeable or imposable under this Act, or to understate the aggregate of the chargeable expenditure, he shall, without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.

Explanation.-For the purposes of this section, a wilful attempt to evade collection or payment of any tax, penalty or interest chargeable or imposable under this Act shall include a case where any person-

(i) has in his possession or control any books of account or other documents (being books of account or other documents relevant to any proceeding under this Act) containing a false entry or statement; or

(ii) makes or causes to be made any false entry or statement in such books of account or other documents; or

(iii) wilfully omits or causes to be omitted any relevant entry or statement in such books of account or other documents; or

(iv) causes any other circumstances to exist which will have the effect of enabling such person to evade collection or payment of any tax, penalty or interest chargeable or imposable under this Act.

26. Failure to furnish prescribed returns

If a person fails to furnish in due time the return which he is required to furnish under sub-section (1) of section 8 or by a notice given under sub-section (2) of that section, he shall without prejudice to any penalty that may be imposable on him under any other provision of this Act, be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.

27. False statement in verification, etc.

If a person makes a statement in any verification under this Act or any rule made thereunder, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.

28. Abetment of false return, etc.

If a person abets or induces in any manner another person to make and deliver an account or a statement or declaration relating to any chargeable expenditure which is false and which he either knows to be false or does not believe to be true or to commit an offence under section 25, he shall be punishable with rigorous imprisonment, for a term which shall not be less than three months but which may extend to seven years and with fine.

29. Certain offences to be non-cognizable

Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), an offence punishable under section 25 or section 26 or section 27 or section 28 shall be deemed to be non-cognizable within the meaning of that Code.

30. Institution of proceedings and composition of offences

(1) A person shall not be proceeded against for any offence under section 25 or section 26 or section 27 or section 28, except with the previous sanction of the ³⁸[Chief Commissioner or Commissioner]:

Provided that no such sanction shall be required where the complainant before the court is a Commissioner (Appeals).

(2) The ³⁸[Chief Commissioner or Commissioner] may, either before or after the institution of proceedings, compound any offence punishable under section 25 or section 26 or section 27 or section 28.

31. Power to make rules

(1) The Board may, subject to the control of the Central Government, by notification in the Official Gazette, make rules, for carrying out the provisions of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:-

(a) the manner in which the room charges may be determined under ³⁹[sub-clause (a) of clause (1) of section 3] in cases where composite charges are payable in respect of residential accommodation and food;

(b) the cases and the circumstances in which payments made in Indian currency by conversion of foreign exchange into Indian currency shall be deemed to have been made in foreign exchange for the purposes of clause (a) of the Explanation to ⁴⁰[clause (1) of section 5];

(c) the form in which returns under section 8 may be furnished, the manner in which they may be verified and the other particulars which a form may contain;

(d) the form in which a notice of demand may be served on the assessee under sub-section (7) of section 12;

(e) the form in which appeals under section 22 or under sub-section (6) of section 23 may be filed and the manner in which they may be verified;

(f) the manner in which a memorandum of cross-objections under sub-section (4) of sections 23 may be verified;

(g) any other matter which by this Act is to be or may be prescribed.

(3) The power to make rules conferred by this section shall on the first occasion of the exercise thereof include the power to give retrospective effect to the rules or any of them from a date not earlier than the date of commencement of this Act.

(4) The Central Government shall cause every rule made under this section to be laid, as soon as may be after it is made, before each House of Parliament, while it is in session for a total period of thirty days which may be comprised in one session or in two or more successive sessions and if, before the expiry of the session immediately following the session or the successive sessions aforesaid both Houses agree in making any modification in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only in such modified form or be of no effect, as the case may be; so however, that any such modification or annulment shall be without prejudice to the validity of any thing previously done under that rule.

32. Power to remove difficulties

If any difficulty arises in giving effect to the provisions of this Act, the Central Government may, by order, not inconsistent with the provisions of this Act, remove the difficulty:

Provided that no such order shall be made after the expiry of a period of two years from the commencement of this Act.

33. Consequential amendments

(1) In section 2 of the Central Boards of Revenue Act, 1963 (54 of 1963), in sub-clause (1) of clause (c),-

(a) in item (viii), the word "and" occurring at the end shall be omitted;

(b) after item (viii) as so amended, the following item shall be inserted, namely:-

"(ix) the Expenditure-tax Act, 1987; and".

(2) In the Economic Offences (Inapplicability of Limitation) Act, 1974 (12 of 1974), in the Schedule, after entry 2B relating to the Hotel-Receipts Tax Act, 1980 (54 of 1980), the following entry shall be inserted, namely:-

"2C. The Expenditure-tax Act, 1987."

EXPENDITURE-TAX RULES, 1987¹

In exercise of the powers conferred by section 31 of the Expenditure-tax Act, 1987 (35 of 1987), the Central Board of Direct Taxes hereby makes the following rules, namely: -

1. Short title and commencement

(1) These rules may be called the Expenditure-tax Rules, 1987.

(2) They shall come into force on the 1st day of November, 1987.

2. Definitions

In these rules, unless the context otherwise requires:-

(a) "Act" means the Expenditure-tax Act, 1987 (35 of 1987);

(b) "Form" means a form set out in the Appendix to these rules.

3. Determination of room charges in the case of composite charge

For the purposes of sub-section (2)² of section 3 of the Act, in a case where a composite charge is payable in respect of residential accommodation and food, the room charges included therein shall be determined by deducting from the composite charge, the charges for food in the following manner, namely:-

4. Expenditure incurred in Indian currency deemed to have been incurred in foreign exchange

For the purposes of clause (a) of the Explanation to section 5, any expenditure incurred or any payment made in Indian currency, obtained by conversion of foreign exchange into Indian currency, shall be deemed to have been incurred or, as the case may be, made in foreign exchange in the cases and in the circumstances mentioned below:-

(i) where the payment in respect of any expenditure incurred in a hotel has been made out of Indian currency obtained by conversion of foreign exchange brought into India through an authorised dealer by a travel agent on behalf of a foreign tourist or a group of foreign tourists;

(ii) where the payment in respect of any expenditure incurred in a hotel has been made in the manner referred to in clause (i), by an airline on behalf of a foreign tourist or a group of foreign tourists:

Provided that the travel agent or, as the case may be, the airline furnishes to the hotel a certificate in Form No. 1 at the time of payment in respect of such expenditure; and

(iii) where the payment in respect of any expenditure incurred in a hotel has been made by a national of Czechoslovakia, German Democratic Republic, Poland, Romania and the USSR:

Provided that the foreign national furnishes to the hotel a certificate in Form No. 2 at the time of payment in respect of such expenditure.

Explanation.-For the purposes of this rule,

(i) "airline" and "travel agent" respectively mean an airline or travel agent which holds a valid licence granted under section 32 of the Foreign Exchange Regulation Act, 1973 (46 of 1973), by the Reserve Bank of India; and

(ii) "authorised dealer" shall have the meaning assigned to it in clause (b) of section 2 of the Foreign Exchange Regulation Act, 1973 (46 of 1973).

³[5. Return of aggregate of the payments received in respect of chargeable expenditure under section 8

The return of the aggregate of the payments received in respect of chargeable expenditure required to be furnished under sub-section (1) or sub-section (2) of section 8 of the Act, shall be furnished in Form No. 3 and shall be verified in the manner indicated therein.]

³[6. Notice of demand

The notice of demand under section 20 of the Act shall be in Form No. 4.]

³[7. Form of appeal to the Commissioner (Appeals)

(1) An appeal under section 22 of the Act to the Commissioner (Appeals) shall be made in Form No. 5 and shall be verified in the manner indicated therein.

(2) The form of appeal prescribed by sub-rule (1), the grounds of appeal and the verification appended thereto shall be signed,-

(a) in the case of an individual, by the individual himself; where the individual is absent from India, by the individual concerned or by some person duly authorised by him in this behalf; and where the individual is mentally incapacitated from attending to his affairs, by his guardian or by any other person competent to act on his behalf ;

(b) in the case of a Hindu undivided family, by the karta, and where the karta is absent from India or is mentally incapacitated from attending to his affairs, by any other adult member of such family;

(c) in the case of a company, by the managing director thereof, or where for any unavoidable reason such managing director is not able to sign and verify the return, or where there is no managing director, by any director thereof or where in the case of a non-resident, the assessment has been, made on any person who has been treated as his agent under section 163 of the Income-tax Act as applied to expenditure-tax under section 24 of the Act, by such person ;

(d) in the case of a firm, by the managing partner thereof, or where for any unavoidable reason such managing partner is not able to sign and verify the return, or where there is no managing partner as such, by any partner thereof, not being a minor ;

(e) in the case of a local authority, by the principal officer thereof ;

(f) in the case of any other association, by any member of the association or the principal officer thereof; or

(g) in the case of any other person, by that person or by some person competent to act on his behalf.]

⁵[8. Form of appeal and memorandum of cross-objections to Appellate Tribunal

(1) An appeal under sub-section (1) or sub-section (2) of section 23 of the Act to the Appellate Tribunal shall be made in Form No. 6 and shall be verified in the manner indicated therein.

(2) A memorandum of cross-objections under sub-section (4) of section 23 of the Act to the Appellate Tribunal shall be made in Form No. 7 and shall be verified in the manner indicated therein.]

Name of the travel agent/ airline :……………………………………..

Address: ………………………………………………………

* Licence Number: ……………………………………………

** I/ We hereby certify :

(i) that ** I/ We have paid Bill No. ………………….… of………..…………......................

(Name of the hotel)

dated ……………… on behalf of foreign tourist(s) in Indian currency ;

(ii) that the aforesaid payment has been made out of Indian currency obtained by conversion of foreign exchange received in, or brought into, India through an authorised dealer ;

(iii) that the details of foreign tourist(s) and other particulars stated below are correct :

1. Reference/name of the group/ traveller

2. Name of the foreign agent, i.e., remitter

3. Name and address of the authorised dealer

4. Date(s) of receipt of foreign exchange by the authorised dealer

5. Number, date and the amount of the bill of claim of the travel agent / airline on the overseas remitter.

I hereby declare that I am giving this certificate in my capacity as ……................... (designation).

Notes

* Licence number granted by the Reserve Bank of India under section 32 of the Foreign Exchange Regulation Act, 1973, should be mentioned against this item.

** Delete whichever is not applicable.

Certificate of payment of hotel charges by the nationals of
Czechoslovakia, German Democratic Republic,
Poland, Romania and the USSR

* I/ We hereby certify that * I/ We have paid bill No. ………….of ................................................ dated............................................... in Indian currency obtained

(Name of the hotel)

by conversion of foreign exchange into Indian currency.

* Delete whichever is not applicable.

⁶FORM No. 3: EXPENDITURE-TAX

PART I: Statement of chargeable expenditure

PART II: 1. Statement of expenditure-tax

(Monthwise break-up of chargeable expenditure, expenditure-tax collected and paid)

2. Balance of expenditure-tax not yet collected (Total of column 3 - Total of column 4) : in figures Rs. ………………….. in words (Rupees ……………………………..)

3. Balance of expenditure-tax collected and to be paid to Government (Total of column 4 - Total of column 5): in figures Rs……………….. in words (Rupees…………………………………..)

PART III: Other sums not Included In chargeable expenditure and claimed to be not taxable

[See section 5(1)(i) to (iv)]

Verification

(See Notes 2 and 3)

I, ………................................................................................................. son/ daughter/ wife

(Name in full and block letters)

of ……………………. being the …………………..……………....................................…

(designation)

of………………………………...........................................................................................…

(Name of hotel/ restaurant, beauty parlour, health club, swimming pool, etc.) solemnly declare that to the best of my knowledge and belief the information given in this return and the statements accompanying it is correct and complete and that the amount of chargeable expenditure and other particulars shown therein are truly stated and relate to the financial year relevant to the assessment year commencing on the 1st day of April, 19……….

I further solemnly declare that during the said financial year, no other chargeable expenditure has been incurred in the hotel/ restaurant/ beauty parlour/ health club/ swimming pool or in respect of any other service to which the Act applies.

I further declare that in my capacity as ………………………………….......................… I am

(designation)

competent to make this return and verify it on behalf of the hotel/ restaurant / beauty parlour health club/ swimming pool/ any other (specify) ............…………

Notes

1. Strike out whichever is not applicable.

2. This return should be signed by the appropriate person as prescribed in section 140 of the Income-tax Act read with section 24 of the Expenditure-tax Act.

3. Before signing the verification, the signatory should satisfy himself that this return and the accompanying statements are correct and complete in all respects. Any person making a false statement, in this return or the accompanying statements, shall be liable to prosecution under section 27 of the Expenditure-tax Act, 1987, and on conviction, be punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine.

4. The tax collected during any calendar month in accordance with the provisions of sub-section (1) of section 7 of the Expenditure-tax Act, 1987, shall be paid to the credit of the Central Government by the 10th day of the month immediately following the said calendar month, and proof of such monthly payment should be attached along with this return.

Notice of demand under section 20 of the Expenditure-tax Act, 1987

Status……………………

PA No. ………………..

To

……………………………..

……………………………….

This is to give you notice that for the assessment year a sum of Rs ........................................ has been determined to be payable by you as under :-

2. The amount should be paid to the Manager, State Bank of India/ Reserve Bank of India/ authorised bank at……………… within 35 days/……………. days of the service of this notice. The previous approval of the Deputy Commissioner has been obtained for allowing a period of less than 35 days for the payment of the above sum. A challan is enclosed for the purpose of payment.

3. If you do not pay the amount within the period specified above, you will be liable to pay simple interest at the rate of fifteen per cent per annum from the date commencing after the end of the period aforesaid in accordance with section 220(2) of the Income-tax Act, 1961, as applied to expenditure-tax by section 24 of the Expenditure-tax Act, 1987.

4. If you do not pay the amount of tax within the period specified above, penalty (which may be as much as the amount of tax in arrear) may be imposed upon you after giving you a reasonable opportunity of being heard in accordance with section 221 of the Income-tax Act, 1961, as applied to expenditure-tax by section 24 of the Expenditure-tax Act, 1987.

5. If you do not pay the amount within the period specified above, proceedings for the recovery thereof will be taken in accordance with sections 222 to 227, 229, 231, 232 and the Second Schedule and the Third Schedule to the Income-tax Act, 1961, as applied to expenditure-tax by section 24 of the Expenditure-tax Act, 1987.

6. If you intend to appeal against the assessment/ fine/ penalty, you may present an appeal under section 22 of the Expenditure-tax Act, 1987, to the Commissioner of Income-tax (Appeals) .............. within thirty days of the receipt of this notice in Form No. 5 duly verified as laid down in that Form.

Notes

1. If you wish to pay the amount by cheque, the cheque should be drawn in favour of the Manager, State Bank of India/ Reserve Bank of India/ authorised bank.

2. If you intend to seek extension of time for payment of the amount or propose to make the payment by instalments, the application for such extension or, as the case may be, permission to pay by instalments, should be made to the Assessing Officer before the expiry of the period specified in paragraph 2. Any request received after the expiry of the said period will not be entertained in view of the specific provisions of section 220(3) of the Income-tax Act, 1961, applied to expenditure-tax by section 24 of the Expenditure tax Act, 1987.

3. Delete the inappropriate words.

* No. …………….of 19 ……. 19………

1. Name and address of the appellant

2. Permanent Account No.

3. Assessment year in connection with which the appeal is preferred

4. Assessing Officer passing the order appealed against

5. Section and sub-section of Expenditure-tax Act, 1987 under which the Assessing Officer passed the order appealed against and the date of such order

6. Where the appeal relates to any assessment or penalty or fine, the date of service of the relevant notice of demand

7. In any other case, the date of service of the intimation of the order appealed against

8. Relief claimed in appeal

9. Address to which notices may be sent to the appellant

!STATEMENT OF FACTS

!GROUNDS OF APPEAL

Verification

I, ....…………... the appellant, do hereby declare that what is stated above is true to the best of my information and belief.

Verified today the ………………day of……………… 19……………….

Notes

1. The form of appeal, ground of appeal and form of verification appended thereto should be signed by a person in accordance with the provisions of rule 7(2).

⁷[2. This memorandum of appeal, statement of facts and the grounds of appeal must be in duplicate and shall be accompanied by a copy of the order appealed against and the notice of demand in original, if any, and fee of two hundred and fifty rupees, in case of an appeal by the assessee. It is suggested that the fee should be credited in a branch of the authorised bank or a branch of the State Bank of India or a branch of the Reserve Bank of India after obtaining a challan from the Assessing Officer and a copy of challan sent to Commissioner of Income-tax (Appeals).]

3. Delete inappropriate words.

4. * These particulars will be filled in the office of the Commissioner (Appeal).

5. * If the space provided herein is insufficient, separate enclosures may be used for the purpose.

IN THE INCOME-TAX APPELLATE TRIBUNAL ...............................………………………

* Appeal No. ........…………. of ……………............ 19…..............… 19…......................

1. The State in which the assessment was made.

2. Section under which the order appealed against was passed.

3. Assessment year in connection with which the appeal is preferred.

4. ** The Assessing Officer passing the original order.

5. * Section and sub-section of the Expenditure-tax Act, 1987, under which the Assessing Officer passed the order.

6. ** The Commissioner (Appeals) passing the order under section 17/ 22 of the Act/ section 131(2) of the Income-tax Act, 1961, as applied to expenditure-tax by section 24 of the Expenditure-tax Act, 1987.

7. ** The Commissioner passing the order under section 21 of the Act.

8. Date of communication of the order appealed against.

9. Address to which notices may be sent to the appellant

10. Address to which notices may be sent to the respondent.

11. Date on which the return of chargeable expenditure, if any, for the assessment year referred to in item 3 was filed.

12. Date on which the assessee was served with a notice, if any, calling upon him to file the return of chargeable expenditure for the assessment year referred to in item 3.

13. !Relief claimed in appeal.

!GROUNDS OF APPEAL

Verification

I, ………………………., the appellant, do hereby declare that what is stated above is true to the best of my information and belief.

Verified today, the ………………. day of……………… 19 ………….........

Notes

1. The memorandum of appeal must be in triplicate and should be accompanied by two copies (at least one of which should be a certified copy) of the order appealed against and two copies of the relevant order of the Assessing Officer.

2. The memorandum of appeal in the case of an appeal by an assessee under section 23(1) of the Act must be accompanied by a fee of ⁸[Rs. 1,000]. It is suggested that the fee should be credited in any branch of the State Bank of India or a branch of the Reserve Bank of India or a branch of the authorised bank after obtaining the challan from the Assessing Officer and the triplicate challan sent to the Appellate Tribunal with the memorandum of appeal. The Appellate Tribunal will not accept cheques, drafts, hundies or other negotiable instruments.

3. The memorandum of appeal should be written in English or, if the appeal is filed in a Bench located in any such State as is for the time being notified by the President of the Appellate Tribunal for the purposes of rule 5A of the Income-tax (Appellate Tribunal) Rules, 1963, then, at the option of the appellant, in Hindi, and should set forth concisely and under distinct heads, the grounds of appeal without any argument or narrative and such grounds should be numbered consecutively.

4. * The number and year of appeal will be filled in, in the office of the Appellate Tribunal.

5. ** Delete the inapplicable items.

6. ! If the space provided is found insufficient, separate enclosures may,be used for the purpose.

IN THE INCOME-TAX APPELLATE TRIBUNAL ………………………………….............................…………...

* Cross-objection No. ……………..of………………19…………..19 ………………..

** In Appeal No. ……………..of ………….19 …………. 19 ……………….

1. ** Appeal No. allotted by the Tribunal to which memorandum of cross-objection relates.

2. The State in which the assessment was made.

3. Section and sub-section under which the order appealed against was passed.

4. Assessment year in connection with which the memorandum of cross-objections is preferred.

5. Date of receipt of notice of appeal filed by the appellant to the Tribunal

6. Address to which notices may be sent to the respondent (cross-objector).

7. Address to which notices may be sent to the appellant.

8. Relief claimed in the memorandum of cross objections.

GROUNDS OF CROSS-OBJECTIONS

Verification

I, …………..., the respondent, do hereby declare that what is stated above is true to the best of my information and belief.

Verified today, the ……………… day of ………………… 19………………

Notes

1. The memorandum of cross-objections must be in triplicate.

2. The memorandum of cross-objections should be written in English or, if the memorandum is filed in a Bench located in any such State as is for the time being notified by the President of the Appellate Tribunal for the purposes of rule 5A of the Income-tax (Appellate Tribunal) Rules, 1963, then, at the option of the respondent, in Hindi, and should set forth, concisely and under distinct heads, the cross-objections without any argument or narrative. and such objections should be numbered consecutively.

3. * The number and year of memorandum of cross-objections will be filled in, in the office of the Appellate Tribunal.

4. ** The number and year of appeal as allotted by the office of the Tribunal and appearing in the notice of appeal received by the respondent is to be filled in here by the respondent.

5. If the space provided is insufficient, separate enclosures may be used for the purpose.

Chamber Practice.com, the legal service provider