ANNEX - TEXT OF SECTION 40 OF THE FINANCE ACT, 1983 - Wealth Tax Act, 1957

ANNEX TEXT OF SECTION 40 OF THE FINANCE ACT, 1983 1 [Omitted by the Finance Act, 1992, w.e.f. 1-4-1993.] -------------------- Notes:- 1. Before, section 40 of the Finance Act, 1983, as amended by the Finance Act, 1988, w.e.f. 1-4-1988/1-4-1989 and the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992, read as under : 40. Revival of levy of wealth-tax in the case of closely-held companies. (1) Notwithstanding anything contained in section 13 of the Finance Act, 1960 (13 of 1960), relating to exemption of companies from levy of wealth-tax under the Wealth-tax Act, 1957 (27 of 1957) (hereinafter referred to as the Wealth-tax Act), wealth-tax shall be charged under the Wealth-tax Act for every assessment year commencing on and from the 1st day of April, 1984 in respect of the net wealth on the corresponding valuation date of every company, not being a company in which the public are substantially interested, at the rate of two per cent of such net wealth : Provided that the amount of wealth-tax computed in accordance with the provisions of this sub-section shall, in relation to the assessment year commencing on the 1st day of April, 1988, be increased by a surcharge calculated at the rate of ten per cent of such wealth-tax. Explanation . For the purposes of this sub-section, "company in which the public are substantially interested" shall have the meaning assigned to it in clause ( 18 ) of section 2 of the Income-tax Act. (2) For the purposes of sub-section (1), the net wealth of a company shall be the amount by which the aggregate value of all the assets referred to in sub-section (3), wherever located, belonging to the company on the valuation date is in excess of the aggregate value of all the debts owed by the company on the valuation date which are secured on, or which have been incurred in relation to, the said assets : Provided that where any debt secured on any asset belonging to the assessee is incurred for, or enures to, the benefit of any other person, or is not represented by any asset belonging to the assessee, the value of such debt shall not be taken into account in computing the net wealth of the assessee. (3) The assets referred to in sub-section (2) shall be the following, namely : ( i ) gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals not being any such precious metal or alloy held for use as raw material in industrial production; ( ii ) precious or semi-precious stones whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel; ( iii ) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel; ( iv ) utensils made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals; ( v ) land other than agricultural land : Provided that nothing in this clause shall apply to any unused land held by the assessee for industrial purposes or for construction of a hotel for a period of two years from the date of its acquisition by him; ( vi ) building or land appurtenant thereto, other than building or part thereof used by the assessee as factory, godown, warehouse, cinema house, hotel or office for the purposes of its business or as a hospital, creche, school, canteen, library, recreational centre, shelter, rest room or lunch room mainly used for the welfare of its employees or used as residential accommodation, except as provided in clauses ( via ) and ( vib ), and the land appurtenant to such building or part; ( via ) any building used as residential accommodation in the nature of a guest house and land appurtenant thereto; ( vib ) any building and the land appurtenant to such building used as residential accommodation by any director, manager, secretary or any other employee of the assessee, such employee holding not less than one per cent of the equity share of the assessee or by any relative of any person who holds not less than one per cent of the equity share of the assessee. Explanation . For the purposes of this clause, "relative" shall have the meaning assigned to it in Explanation 1 to section 13 of the Income-tax Act; ( vii ) motor-cars; and ( viii ) any other asset which is required or represented by a debt secured on any one or more of the assets referred to in clause ( i ) to clause ( vii ) : Provided that this section shall not apply to any asset referred to in clause ( i ), ( ii ), ( iii ), ( iv ), ( v ) or ( vi ), which is held by the assessee as stock-in-trade in a business carried on by it or, in the case of motor-cars referred to in clause ( vii ), they are held as stock-in-trade in such business or registered as taxies and used as such in a business of running motor-cars on hire carried on by the assessee. Explanation . Where any question arises as to whether all or any of the assets referred to in clause ( i ), ( ii ), ( iii ) or ( iv ) are held by the assessee as stock-in-trade in a business carried on by it, the question shall be decided in accordance with such directions as the Board may, by general or special order, issue for the guidance of the Assessing Officer, having regard to the ratio which the yearly turnover of a business of trading in such assets bears to the average of the stocks of such assets held from time to time during the year in such business ordinarily and other relevant factors. (4) The value of any asset specified in sub-section (3) shall be either its value as on the valuation date determined in the manner laid down in Schedule III to the Wealth-tax Act or its value, disclosed in the balance-sheet of the company, on the valuation date, whichever is higher. Explanation . For the purposes of this sub-section, "balance-sheet", as drawn up on the valuation date, shall have the same meaning as in rule 11 of Schedule III to the Wealth-tax Act. (5) For the purposes of the levy of wealth-tax under the Wealth-tax Act, in pursuance of the provisions of this section, ( a ) section 5 and clause ( d ) of section 45 of that Act and Part II of Schedule I to that Act shall not apply and shall have no effect; ( b ) the remaining provisions of that Act shall be construed so as to be in conformity with the provisions of this section. (6) Nothing in this section shall apply to any institution, association or body, whether incorporated or not and whether Indian or non-Indian, which the Central Government may, having regard to the nature and object of such institution, association or body, specify by notification in the Official Gazette and every notification issued under this sub-section shall be laid, as soon as may be after it is issued, before each House of Parliament. (7) Subject to the provisions of sub-section (5), this section shall be construed as one with the Wealth-tax Act.