5. Legal background
Wealth-tax Act, 1957
Eight chapters
47 main sections
Three Schedules
Wealth-tax Rules, 1957
13 main rules
Various forms
Act extents to whole of India
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6. Wealth-tax on whom
Persons not liable for wealth-tax
Company Registered S. 25
Co-op Society
Social Club & Incorporated Club – Willingdon Sports Club v. WTO (1982)
137 ITR 83 (Bom)
Political Party
Mutual Fund
RBI
AOP (Shares are determinate)
Local Authority
AJP
Public or religious Charitable trust
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7. Wealth-tax on whom (Cont.)
Wealth is payable by
Individual
HUF
Company
Partners of Firm or members of AOP on
their respective share in net wealth of
firm/AOP
AOP – Shares of whom are indeterminate
or unknown
Trust – if trust diverts its income as
referred in S. 21A
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Paras Savla Wealth-tax 5/5/2013
8. Valuation date
Last date of the previous year ie 31st
March of every previous year
31st March 2013 for AY 2013-14
Net wealth on last movement of last date
should be assessed and not the net wealth
at the first movement of the last date –
Banarasi Das v CWT (1970) 76 ITR 104
(All); Dwarkanath v. WTO (1982) 137 ITR
83 (Bom)
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Paras Savla Wealth-tax 5/5/2013
9. Valuation date - case
Mr M’s cash of Rs. 0.5 crs was seize and Gold of Rs. 1 cr
was confiscated by Government authorities on 31-3-2013
What is taxability?
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10. Compliance
Rate of wealth tax – 1% on assets exceeding Rs.
30,00,000
No Surcharge & Education cess is payable
Due date of return of wealth is due date of filing return of
income
Return Forms
Form A – Individual & HUF
Form B – Company
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11. Wealth-tax on what
Productive Assets
Generates Active Income
No wealth Tax
Non-productive Assets
Generates no income /
passive income
Wealth–
tax
W
E
A
L
T
H
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Paras Savla Wealth-tax 5/5/2013
12. What is wealth
Wealth
S. 2(ea)
Building &
Land
Motor Car
Jwellery
Yatchs
Boats
Aircrafts
Urban
Land
Cash
>50K
(Individual)
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13. Building & Land appurtenant
Any building or land appurtenant
thereto (house), whether used for
residential or commercial purposes or
otherwise such as farm house situated
within 25 km from local limits of any
municipality or a cantonment board
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14. Building & Land appurtenant-Cont.
Scope excludes
House meant exclusive for residential purpose & allotted by a
Company to an employee or an officer or a director who is in whole-
time employment, having gross annual salary lf less than Rs.
10,00,000 (w.e.f. AY 2013-14), Rs. 5,00,000 (up AY 2012-13)
House for commercial / residential purpose held as stock-in-trade
Any house occupied for the purposes of the business / profession of
assessee
Any house property that is let out for minimum period of 300 days in
previous year
Any property in the nature of commercial establishment or complexes
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15. House – Case 1
Assessee is a professional owning 2 flats in residential
building
One used for his residence and another used for meeting
One flat used for residence exempt u/s 5(vi)
Another flat since used for purpose of business or
profession is not an asset
Issue – Depreciation – Short term capital gains
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16. House – Case 2
Assessee owning house
Occupied for his business for 100
Rented 265 days
What would be taxability?
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17. House – Case 3
Assessee individual owning factory building
Granted an lease to the company in which he is director or
shareholder / firm in which he is partner
Market rent was charged
What is the taxability?
Whether it is an asset 2(ea)(1)(3)/(4)/(5)?
Whether exemption can be claimed u/s 5(vi)?
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18. House – Case 4
Assessee individual owns residential accommodation
It has granted rent free accommodation to its employees
earning annual salary of Rs. 200,000
Whether it is a wealth?
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19. House – Case 5
Housing limited is in business of construction. During the year
it has constructed residential building ‘A’, intend to sell,
residential building ‘B’, intends to give on rent and
Commercial Complex also intent to be given on rent.
Unsold flats in building ‘A’ were let on rent on 30 Sep 2012
and few on 2 Feb 2013
Flats in building ‘B’ were given on rent to an Multinational
company 15 Jan 2013
Commercial Complex was ready for giving on rent on 31-1-
2013, but no licensee were available
Whether these are asset for wealth-tax?
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20. House – Case 6
M Limited engaged in services of electronics is holding shop
in a building. Building comprises of 2 shops and 25 flats.
Shop has been given on rent on 5 May 2012
Whether it is taxable to wealth-tax?
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21. Motor Car
Motor car other than used by the assessee in the business of
running them on hire or as stock in trade
Motor Car includes
Jeep
Sport Utility Vehicle (SUV)
Multi Utility Vehicles (MUV)
Motor car excludes
Buses
Trucks
Tempo etc
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22. Motor car – Case 1
Cer Leasing Limited is in business of car leasing.
As on 31 March 2013 it owns 100 cars which are given in
lease
Whether it would be assets?
Would answer be different in case motor vehical is given on
hire purchase?
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23. Jewellery
Jewellery includes ornaments made of
Gold
Silver
Platinum or
Any precious metal or any alloy containing one or more of such
precious metals
Precious or semi-precious stones whether or not set in any
furniture, utensils or other article or worked or woven into any
wearing apparel
Bullion
Furniture, utensils or any other article made wholly or partly
of above
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24. Yatchs, Boats, aircrafts
Yatchs, Boats and aircrafts (other than those used by the
assessee for commercial purposes).
What commercial purposes means?
Whether ships & vessels covered?
Motor car v/s aircrafts
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25. Urban land
Up to from Ay 2013-14 Urban land means land situate :
in any area which is comprised within the jurisdiction of a
municipality (whether known as a municipality, municipal
corporation, notified area committee, town area committee,
town committee, or by any other name) or a cantonment
board and which has a population of not less than 10,000
or
In any distance measured - Not more than 8 km from the
limits of local authority and has been notified by Central
Government
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26. Urban land (Contd.)
W.e.f. from Ay 2014-15 (as per Finance Bill 2013) Urban land
means land situate —
in any area which is comprised within the jurisdiction of a
municipality (whether known as a municipality, municipal
corporation, notified area committee, town area committee,
town committee, or by any other name) or a cantonment board
and which has a population of not less than 10,000 or
In any distance measured aerially
Not more than 2 km from the limits of local authority and has a
population between 10,000 and 1,00,000
Not more than 6 km from the limits of local authority and has a
population between 1,00,000 and 10,00,00
Not more than 8 km from the limits of local authority and has a
population exceeding 10,00,000
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27. Urban land (Contd.)
It excludes –
land classified as agricultural land in the records of the
Government and used for agricultural purposes (as per Finance
Bill 2013) or
land on which construction of a building is not permissible under
any law for the time being in force in the area in which such
land is situated
the land occupied by any building which has been constructed
with the approval of the appropriate authority
any unused land held by the assessee for industrial purposes for
a period of two years from the date of its acquisition
any land held by the assessee as stock-in-trade for a period of
ten years from the date of its acquisition
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28. Urban Land – Case 1
M Industries Ltd. has purchased land for construction of
factory building on 1-4-2007
Necessary permission for constructions were granted on 1-
1-2010
Construction of factory building commenced on 1-4-2012
What is wealth-tax liability?
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29. Urban Land – Case 2
C Builders Ltd has acquired land for construction on 1-4-
2002
Property was in litigation and permission could not be
obtained in time
Necessary permission were granted on 1-4-2012
Development of property began on 10-4-2012
What is wealth-tax liability?
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30. Cash
In case of individual & HUF cash exceeding Rs. 50,000 to
be included in assets
In case of other persons cash not recorded in books of
accounts to be treated as an asset.
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31. Clubbing when (Deemed Assets)
Assets transferred to spouse / minor child / son’s wife for
inadequate consideration
Assets transferred to person or AOP for the benefit of such
person or his/her spouse or son’s wife for inadequate
consideration
Assets transferred to person or AOP for inadequate
consideration, under an irrevocable transfer
Property converted into family property
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32. Deemed Assets
Holder of impartial estate
House in a co-operative society, company, AOP
Building on lease
Retain possession of building under part performance of
contract u/s 53A of TOPA, 1882
Building on lease
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33. Clubbing - Case 1
J transfer to his spouse
Shares on 31-3-2010
House on 31-3-2011
On 31-3-2012 Mrs J sold shares and purchased Diamonds
On 31-3-2013 Mrs J sold house ans invested money into
Government Bonds
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34. Clubbing – Case 2
Mr P transferred house to his wife on 31-3-2001
Said house is let on rent yielding annual rent of Rs. 150,000
pa
Out of rent for past 13 years Mrs P purchases jewellery of
Rs. 15,00,000
What is wealth-tax liability?
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