SECTION 6 – EXCLUSION OF ASSETS/DEBTS OUTSIDE INDIA
1375. Location of assets – Instructions for general guidance
1. Section 6 provides that in computing the net wealth of (a) an individual or a Hindu undivided family not resident in India or resident but not ordinarily resident in India, or (b) a company not resident in India, during the year ending on the valuation date, the value of assets and debts located outside India should be excluded. In the case of individuals and Hindu undivided families resident and ordinarily resident in India or companies resident in India, all assets (other than exempted assets), whether located in India or abroad have to be included in the net wealth, but certain concessions are provided elsewhere in the Act for resident and ordinarily resident persons which require the determination of the location of assets even in such cases. Under section 31(2), the wealth-tax chargeable on the assets situated in a foreign country, which prohibits or restricts the remittance of moneys, has to be held in abeyance, while under rule 4 of the Schedule, in the case of individuals and Hindu undivided families (but not companies) resident and ordinarily resident in India the wealth-tax on the value of assets located outside India has to be computed at half the average rate of tax applicable to the net wealth of the assessee.
2. The question as to where the asset is located is essentially one of fact and will have to be decided in the light of evidence. The following instructions are issued for general guidance :
(a) Tangible immovable property is situated in India if the property lies in India.
(b) Rights or interests in or over immovable property (otherwise than by way of security) or benefits arising out of immovable property are located in India if the immovable property to which the rights are attached or out of which the benefits arise lies in India.
(c) Rights or interests (otherwise than by way of security) in or over tangible movable property are located in India if such property is located in India, or if it is in transit to India.
(d) Debts, secured or unsecured (other than those dealt with below) are located in India if they are contracted to be repaid in India or, if the debtor is residing in India.
(e) Moneys kept in a bank account in the form of deposits or otherwise are located in India if the branch of the bank at which the account is kept is situated in India.
(f) Securities issued by the Central Government or a State Government or a municipality or other local authority in India are located in India unless they are inscribed for payment outside India.
(g) Shares, stock, debentures or debenture stock in a company are located at the place where the company is incorporated.
(h) Ships or aircraft are located in India if they are registered in India.
(i) Copyright or licence to use any copyrighted material, patent, trade mark, or design is located in India if the rights arising therefrom are exercisable in India.
(j) Patents, trade marks and designs are located in India if they are registered in India.
(k) Rights or cause of action ex delicto not included in any of the items mentioned above are situated in India if they are enforceable in India. It is not possible to give an exhaustive list of assets and the principles to be applied in determining the location of all such assets. For assets which are not covered by the above items, the location has to be fixed having regard to the nature of the assets.
Circular : No. 3 (WT) of 1957 (relevant extracts), dated 28-9-1957.
1. Attention is invited to the Board’s Circular No. 3 of WT of 1957, dated 28-9-1957 [Clarification 1] on the subject of location of assets.
2. According to para 2(d ) of the aforesaid circular the situs of debts is in India if they are contracted to be repaid in India. If the contract is silent about the place of repayment, the debts are located in India if the debtor is residing in India.
3. The Board are advised that the general principle of law is that the debts are situate where the debtor resides and a stipulation that the payment should be made in a country where the debtor is not residing does not affect the general rule. In view of this position para 2(d) of the aforesaid circular may please be substituted by the following :
“2(d) Debts, secured or unsecured (other than those dealt with below) are located in India if they are contracted to be repaid in India or if the debtor is residing in India.”
Circular : No. 392 [F. No. 321/78/75-WT], dated 24-8-1984.