70. Under the Public Provident Fund Scheme, as formulated in 1968, only individuals could contribute to the Public Provident Fund. Under an amendment made to the Income-tax Act by the Finance Act, 1968, such contributions were made eligible for deduction under section 80C relating to the deduction in respect of savings. The amount standing to the credit of a taxpayer’s account in the Public Provident Fund was also excluded from the net wealth under section 5(1)(xviia) of the Wealth-tax Act.

70.1 Hindu undivided families (HUF) and association of persons (AOP) or bodies of individuals (BOI) consisting only of husband and wife governed by the Portuguese Civil Code were made eligible to contribute in the Public Provident Fund in 1983. With a view to extending to these categories of taxpayers the same concession as was available to individuals, section 80C was amended in 1983. Corresponding amendment to section 5 of the Wealth-tax Act had, however, remained to be made.

70.2 With a view to removing this anomaly, section 5(1)(xviia) of the Wealth-tax Act has been amended to provide exemption from wealth-tax in respect of deposits under the Public Provident Fund Scheme held by the HUFs and AOPs or BOIs consisting of husband and wife governed by the Portuguese Civil Code.

70.3 This amendment will apply retrospectively from 1st April, 1984, the date from which the corresponding concession under the Income-tax Act was extended to these categories of taxpayers.

71. Under the existing provisions of section 27 relating to reference to High Court, a reference application can be filed for statement of a case to the High Court with regard to the orders made by the Appellate Tribunal under section 24 or section 26 of the Wealth-tax Act. The Appellate Tribunal can also rectify any of its orders passed under section 24, in view of the provisions of clause (e) of sub-section (1) of section 35. Such an order also needs to be brought within the ambit of section 27.

71.1 Section 27 of the Wealth-tax Act has, therefore, been amended by inserting a reference therein to an order made under clause (e) of sub-section (1) of section 35. Similar amendment has been made to the corresponding provisions in section 26 of the Gift-tax Act.

72. For the purposes of levy of wealth-tax, the rules of valuation of assets aim at capturing their market value, or near about, as on the valuation date. A distortion has crept into these rules. When an individual holds any asset in his name, its valuation is at the market value. However, if a group of persons holds assets through an investment company, the taxable value of these assets gets reduced considerably because it is based on the book value and not on the market value. This anomaly has now been removed by amending rule 12 of Schedule III of the Wealth-tax Act to provide that in valuing unquoted shares of an investment company, the break-up value of the share will be determined after revaluing the assets of the company at the value determined in accordance with the rules applicable to that particular asset (i.e., rules 3 to 19 of Schedule III).

72.1 Further, in order to even out the distortioning effect caused by an upsurge in the share market, rule 9A of Schedule III of the Wealth-tax Act has been amended so that, for valuation of quoted shares, averaging of the market quotation of shares will now be over a period of ten years instead of over a period of five years.

73. Under the provisions of section 40 of the Finance Act, 1983, wealth-tax at the rate of 2 per cent is levied in the case of closely-held companies on the net value of certain unproductive assets. The value of these assets, for the purpose of levy of wealth-tax is determined at the price which in the opinion of the Wealth-tax Officer or the Valuation Officer these assets would fetch if sold in the open market. This provision was made on the same lines as in the then existing provisions in section 7 of the Wealth-tax Act relating to valuation of assets. The Direct Tax Laws (Amendment) Act, 1989, however, substituted section 7 of the Wealth-tax Act, by a new section under which the value of an asset is determined in accordance with rules of valuation laid down in Schedule III of Wealth-tax Act.

73.1 In order to bring the provisions relating to valuation of assets for the purposes of levy of wealth-tax in the case of closely-held companies, in line with the provisions relating to valuation of assets in other cases under the Wealth-tax Act, section 40 of the Finance Act, 1983 has been amended.

73.2 Under the existing provisions, land held for industrial use by closely held companies is not charged to wealth-tax for a period of two years. This concession has been provided on the consideration that it is generally not feasible to commence construction of a factory building soon after the acquisition of land for that purpose.

73.3 On a parity of reasoning, the same concession has been extended to any land held for constructing a hotel which remains unused for a period of two years from the date of acquisition.