WEALTH - TAX

FINANCE (NO. 2), ACT, 1996

Amendment of the term "assets"

57.1 The term "assets", on which tax is to be levied, is defined in clause (ea) of section 2. This definition includes any guest house and any residential house (including a farm house situated within 25 kms. of the local limits of any municipality) except the assets mentioned in sub-clauses (1) and (2) of this clause. If residential houses have been taken as assets, there seems to be no reason why commercial properties, other than those used by the assessee wholly and exclusively in his business or profession, should also be not taken as assets. By an amendment, commercial buildings, which are not occupied by the assessee for the purpose of his business or profession, other than the business of letting out properties, shall be brought to tax under the Wealth Tax Act, 1957.

FINANCE (NO. 2), ACT, 1996

57.2 This provision will take effect from the 1st day of  April, 1997 and,  accordingly, will apply in relation to assessment year 1997-98 and subsequent years.

[Section 56]

FINANCE (NO. 2), ACT, 1996

 Amendment of provisions regarding inclusion of certain assets in the net wealth

58.1 Under the Wealth-tax Act, specified assets are includible in the wealth of a legal owner.  An exception to this general rule is provided in section 4 of the Act. Sub-section (7) of section 4 provides that where a building or a part thereof is allotted or leased to a member of a Cooperative Housing Society under a house building scheme of the society, the member shall be deemed to be the owner of such building or part thereof.  The corresponding provisions, dealing with similar situations, in the Income-tax Act, 1961, are found in clause (iii), clause (iiia) and clause (iiib) of section 27 of that Act. These clauses deem the benefi­cial owner to be the owner for the purposes of taxation in the following situations :—

  (i)  a member of a co-operative society or a company or any association of persons, to whom a building or part thereof is allotted or leased under a house building scheme of the society or the company or the association, as the case may be,

 (ii)  a person who is allowed to take or retain possession of any building or part thereof in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882,

(iii)  a person who acquires any rights, excluding any rights by way of a lease from month to month or for a period not exceeding one year, in or with respect to any building or part thereof, by virtue of any such transaction as is referred to in clause (f) of section 269UA of the Income-tax Act.

FINANCE (NO. 2), ACT, 1996

58.2 In order to bring harmony between the provisions under the  Income-tax Act and Wealth-tax Act, the Wealth-tax Act has been amended. Henceforth the beneficial owners of properties in all the cases understood under clause (iii) or clause (iiia) or clause (iiib) of section 27 of the Income-tax Act, shall be liable to pay wealth-tax.

FINANCE (NO. 2), ACT, 1996

58.3 This provision will come into force with effect from the 1st day of April, 1997 and, accordingly, will apply in relation to assessment year 1997-98 and subsequent years.

[Section 57]

FINANCE (NO. 2), ACT, 1996

 Clarificatory amendment regarding assessment in cases of diver­sion of property, or of income from property,  held under trust for public charitable or religious purposes

59.1 Under the provisions of clause (i) of section 5, Wealth-tax shall not be payable by an assessee in respect of any property held by him under trust or other legal obligation for any public purpose of a charitable or religious nature in India. Section 21A provides three exceptions to this general rule of non-payment of Wealth-tax, in the following circumstances,  namely :—

  (i)  where any part of such property or any income of such trust is used or applied, directly or indirectly, for the benefit of any person referred to in sub-section (3) of section 13 of the Income-tax Act, or

 (ii)  where any part of the income of such trust enures, directly or indirectly, for the benefit of any person referred to in sub-section (3) of section 13 of the Income-tax Act, or

(iii)  where any funds of the trust or investment or deposit,  or any shares in a company are held by the trust in contravention of provision of clause (d) of sub-section (1) of section 13 of the Income-tax Act.

FINANCE (NO. 2), ACT, 1996

59.2 Clause (i ) of section 5 is a general section, dealing with non-payment of wealth-tax in respect of the assets held under a trust or other legal  obligation, while section 21A carves out three exceptions to this general rule. Therefore, under the normal rules of construction of statutes, provisions contained in section 21A  will override the provisions contained in clause (i) of section 5. Section 21A, as it stood prior to its amendment by the Finance Act, 1992, applicable with effect from 1-4-1993, contained a non obstante clause, embodying the aforesaid princi­ple of the construction. This clause was omitted by the finance Act, 1992. By an amendment the aforesaid position of law has been expressly clarified, by restoring the non-obstante clause.

FINANCE (NO. 2), ACT, 1996

59.3 This amendment will take effect retrospectively from the 1st day of April, 1993, and will, accordingly, apply in relation to assessment year 1993-94 and subsequent years.

[Section 58]

INCOME-TAX EXEMPTION TO NORTH-EASTERN
DEVELOPMENT FINANCE CORPORATION
LIMITED (NEDFC)

FINANCE (NO. 2), ACT, 1996

60.1 The North-Eastern Development Finance Corporation Limited is registered as a company under the Companies Act, 1956. The compa­ny has an authorised capital of Rs. 500 crores and the initial contributions to capital are to be provided by financial institu­tions such as IDBI, ICICI and UTI leaving scope for contribution from other investors subsequently. The company has been set up at Guwahati with the objective of financing creation, expansion and modernisation of industrial enterprises and infrastructure projects in the North-Eastern region of the country.

FINANCE (NO. 2), ACT, 1996

60.2 Being an infant development finance institution, serving in a very difficult region of the country, its income has been exempted from income-tax for ten years commencing from the as­sessment year 1996-97.

[Section 88]