The Voluntary Disclosure of Income and Wealth Ordinance, 1975-Clarifications regarding - Income Tax - 183/1975

Circular No. 183 Dated 11/11/1975 Subject: The Voluntary Disclosure of Income and Wealth Ordinance, 1975-Clarifications regarding. The provisions of the Voluntary Disclosure of Income and Wealth Ordinance, 1975, have been explained in the Board's Circular No.180 (F.No.131(19)/75-TPL)* dated 15th October, 1975. Clarifications in respect of certain provisions of the Ordinance have been given in the Board's Circular No.181 (F.No.283/1/75-IT(Inv)+ dated 25th October, 1975). 2. Clarifications in respect of some further points raised are given hereunder: (i) Question.-- Whether under section 3(1) of the Ordinance, it is necessary to disclose the nature and source of income and wealth declared? Answer.-- It is not necessary to disclose the nature and source of income. Only the assets representing the income declared are to be shown in Form 'A'. (ii) Question.-- Whether a public servant as defined in section 21 of the Indian Penal Code can declare his income/wealth under the Ordinance? Whether secrecy provisions of section 12 of the Ordinance would be applicable to such case(s)? Answer.-- Any person can make a declaration under the Ordinance. Section 12 will apply in respect of all declarations made under section 3(1) of the Ordinance. (iii) Question.-- Whether section 4(3) is a bar to the same individual filing separate declarations under section 3(1) in different capacities, e.g., as karta of a Hindu undivided family, managing partner of a firm, trustee of a trust and managing director of a company? Answer.-- There is no bar to the same individual filing more than one declaration provided the various declarations are in respect of different taxable entities. (iv) Question.-- Whether a trustee can make a declaration under section 3(1) on behalf of a beneficiary of a trust of which he is trustee and whether the beneficiary can also make a separate declaration in respect of other income under section 3(1) of the Ordinance? Answer.-- Only one declaration should be made in respect of the undisclosed income of a person. (v) Question.-- Whether a declaration under section 3(1) of the Ordinance can be made by an assessee whose books of account or assets have been seized in the course of a search in respect of another assessee? Answer.-- A declaration under section 3(1) of the Ordinance cannot be made in respect of the income of the previous year in which such search was made or any earlier previous year. However such declaration can be made in respect of the undisclosed income for any previous year subsequent to the previous year in which the search was made. It is open to such assessee to make a declaration under section 14(1) of the Ordinance in respect of the income of the previous year, in which the search was made or any earlier previous year. (vi) Question.-- If a company makes a declaration under section 3(1) or section 14(1) and it states that the income declared is held for the company by the directors or shareholders (having substantial interest), can any assessment proceedings be taken against such directors or shareholders on the ground that it represents dividend under section 2(22) of the Income-tax Act? Answer.-- The provisions of section 2(22)(e) will not be attracted in cases where income declared by the company is represented by assets held on behalf of the company by its directors or shareholders. (vii) Question.-- Whether in search and seizure cases, the cash seized can be adjusted, on the declarant's specific request, towards tax payable according to the declaration under section 14(1) of the Ordinance if the time for passing an order under section 132(5) is not yet over or is available beyond December 31, 1975? Answer.-- An order under section 132(5) has to be passed before any portion of the seized cash can be considered for adjustment. If on passing an order under section 132(5), some cash is left to be released, the same can be adjusted. Regarding adjustment of cash retained under section 132(5), please refer to item (xi) of the Board Circular No.181* dated 25th October, 1975. (viii) Question.-- What is the tax to be paid by a firm along with a declaration under section 14(1) of the Ordinance if search and seizure has taken place in the case of the firm? Is it only the firm's tax or does it include tax payable by partners? If only firm's tax, what is the procedure for collecting tax payable by partners? Answer.-- Only the tax on the firm. In the cases of partners, normal assessment procedure will apply. A declaration by a firm under section 14(1) stands on a different footing from a declaration made by a firm under section 3(1) dealt with in item (iii) of the Board Circular No.181+ dated 25th October, 1975. (ix) Question.-- If a person pays one-half of the tax in cash, is it necessary for him to produce a bank guarantee or assign Government securities for half of the balance of the tax? Answer.-- Yes. (x) Question .-- What are the Government securities in which investment is to be made by declarants and procedure to be followed? Answer.-- The Government of India have notified (G.O.) Ministry of Finance (Department of Economic Affairs Notification No. G.S.R.533(E) ** dated 20th October, 1975) 5-3/4% Bonds, 1985, for the purpose. The applications for these Bonds will be received at:- (a) Offices of the Reserve Bank of India at Ahmedabad, Bangalore, Bombay (Fort and Byculla), Calcutta, Hyderabad, Kanpur, Madras, Nagpur, New Delhi and Patna; (b) Branches of the subsidiary banks of the State Bank of India conducting Government Treasury work except at Hyderabad; and (c) Branches of the State Bank of India at other places in India. Applications to be made in the prescribed form (available at all the receiving offices) should be accompanied by the necessary payment in the form of cash or cheque or draft. Cheques/drafts tendered at the office of the Reserve Bank of India, the State Bank of India or its subsidiary banks should be drawn in favour of the bank concerned at the place at which the application is tendered. (xi) Question .-- Whether the restriction on sale of securities in which the declarant is required to invest for a period of ten years can be removed, i.e., can securities be made negotiable? Whether it will be competent for a declarant to donate the notified securities purchased out of the declared income and if so, whether a deduction under section 80G of the Income-tax Act, 1961, would be permissible in respect of such a donation in the regular assessment of the declarant? Answer.-- Government of India 5-3/4% Bonds, 1985, notified under section 3(3) of the Ordinance are non-negotiable, and cannot be sold, transferred, assigned or otherwise disposed of by the holder, but subject to the provisions of any law, which is for the time being in force, may pass to the legal heir(s) or successor(s) of the holder, as the case may be.