Section 109

"Distributable income", ''investment company" and "statutory percentage" defined.

109. For the purposes of sections ^8a[104, 105 and 107A] ⁹[and this section],—

(i) "distributable income" means the ^9a[gross total income] of a company as reduced by—

(a) the amount of income-tax ¹⁰[* * *] payable by the company in respect of its total income, but excluding the amount of any ^10a[income-tax] payable under section 104 ;

(b) the amount of any other tax levied under any law for the time being in force on the company by the Government or by a local authority in excess of the amount, if any, which has been allowed in computing the total income ;

¹¹[(c) any sum with reference to which a deduction is allowable to the company under the provisions of section 80G ;

(d) losses under the head "Capital gains" relating to capital assets other than short-term capital assets ;]

(e) income arising outside India in a country the laws of which prohibit or restrict the remittance of money to India :

Provided that, when the prohibition or restriction is subsequently removed, any reduction allowed under this provision shall be deemed to be a part of the distributable income of the previous year in which the prohibition or restriction is removed ;

(f) in the case of a banking company, the amount actually transferred to a reserve fund under section 17 of the Banking Companies Act, 1949 (10 of 1949) ;

¹²[(g)any expenditure actually incurred for the purposes of the business, but not deducted in computing the income chargeable under the head "Profits and gains of business or profession" being—

(1) a bonus or gratuity paid to an employee,

(2) legal charges,

(3) any such expenditure as is referred to in clause (c) of section 40,

(4) any expenditure claimed as a revenue expenditure but not allowed to be deducted as such and not resulting in the creation of an asset or enhancement in the value of an existing asset ;

(h) any expenditure wholly and exclusively incurred for the purpose of making or earning any income (other than income chargeable under the head "Profits and gains of business or profession") included in the ¹³[gross total income] but not allowed to be deducted in computing such income and not resulting in the creation of an asset or enhancement in the value of an existing asset ;]

(ia) [Omitted by the Finance (No. 2) Act, 1977, w.e.f. 1-4-1978. Earlier, it was inserted by the Taxation Laws (Amendment) Act. 1975. w.e.f. 1-4-1976.]

¹⁴[(ib) "consultancy service company" means an Indian company whose business consists wholly in the provision of technical know-how. or in the rendering of services in connection with the provision of technical know-how, to other persons.

Explanation : In this clause and in sub-clause (3) of clause (iii), the expression "provision of technical know-how" has the meaning assigned to it in sub-section (2) of section 80MM ;]

For the existing Explanation, the following Explanation shall be substituted by the Finance Act, 1983, w.e.f. 1-4 1984 :

Explanation : In this clause and in sub-clause (3) of clause (iii), the expression "provision of technical know-how" means,—

(i) the transfer of all or any rights (including the granting of a licence) in respect of a patent, invention, model, design, secret formula or process or similar property ;

(ii) the imparting of any information concerning the working of, or the use of, a patent, invention, model, design, secret formula or process or similar property ;

(iii) the use of any patent, invention, model, design, secret formula or process or similar property ;

(iv) the imparting of any information concerning industrial, commercial or scientific knowledge, experience or skill;

¹⁵[(ii) "investment company" means a company whose gross total income consists mainly of income which is chargeable under the heads "Interest on securities", "Income from house property", "Capital gains" and "Income from other sources" ;]

¹⁶[(iia) "trading company" means a company whose business consists ¹⁷[* * *] mainly in dealing in goods or merchandise manufactured, produced or processed by a person other than that company and whose income attributable to such business included in its ¹⁸[gross total income] is not less than fifty-one per cent of the amount of such ¹⁸[gross total income];]

(iii) "statutory percentage" means,—

19[(1) in the case of 20[* * *] a consultancy service company	45% ;
(2) in the case of an investment company other than an investment company which falls under sub-clause (3) of this clause	90% ;]
21[(3) in the case of an Indian company, not being an Indian company referred to in clause (a) of sub-section (4) of section 104 or a consultancy service company, a part of whose gross total income consists of profits and gains attributable to—
(i) the business of construction of ships or of manufacture or processing of goods or of mining or of generation or distribution of electricity or any other form of power ; or
(ii) the business of provision of technical know-how, or of rendering services in connection with the provision of technical know-how, to other persons—
(a) in relation to that part of its gross total income as is attributable to the business referred to in item (i) of this sub-clause	Nil ;
(b) in relation to that part of its gross total income as is attributable to the business referred to in item (ii) of this sub-clause	45% ;
(c) in relation to the remaining part of its gross total income—
(1) if it is an investment company or a company which satisfies the conditions specified in sub-clause (4)(a) of this clause	90% ;
(2) in any other case	60%.

Explanation : The provisions of this Chapter shall apply as if each of the aforesaid parts of the gross total income of the company were the gross total income of the company in relation to that part and as if the amount of dividends actually distributed and the distributable income were also similarly apportioned for the purposes of section 104 and this section ;]

(4) in the case of any other company not referred to in the preceding clauses,—

(a) where the accumulated profits and reserves (including depreciation reserves and any amounts capitalised from the earlier reserves) representing accumulations of past profits which have not been the subject of an order under section 104 or the corresponding provision of the Indian Income-tax Act, 1922 (11 of 1922), exceed either

 (I) the aggregate of—

(i) the paid-up capital of the company exclusive of the capital, if any, created out of its profits and gains which have not been the subject of an order under section 104, and

(ii) any loan capital which is the property of the shareholders ; or

(II) the value of the fixed assets as shown in the books of the company,

whichever of these is greater	90% :
22[Provided that in the case of such company, not being a trading company, sub-clause (a) shall have effect as if for the word "exceed", the words "exceed twice the amount of" were substituted ;]
(b) where sub-clause (a) does not apply	23[60%] ;

 

²⁴[(iv) "gross total income" means the total income computed in accordance with the provisions of this Act before making any deduction under Chapter VI-A]

 

 

 

[As amended by the Finance Act, 1983]