1364. Interpretation of expression “Initial issue of equity share capital” used in clause (xx) of sub-section

1. Attention is invited to the provisions of clause (xx) of sub-section (1) of section 5, as amended by the Finance (No. 2) Act, 1971. Prior to this amendment, the value of any equity shares, held by the assessee in any company of the type referred to in clause (d) of section 45, i.e., a company established with the object of carrying on an industrial undertaking in India where such shares formed part of the initial issue of equity share capital made by the company after March 31, 1964, was exempted from wealth-tax; the exemption being available for a period of 5 years commencing with the assessment year next following the date on which such company commenced the operations for which it had been established. The exemption has been withdrawn by the amendment effected through section 32 of the Finance (No. 2) Act, 1971, in respect of shares forming part of an initial issue of equity share capital made after May 31, 1971.

2. Some doubts have been raised about the interpretation of the expression “initial issue of equity share capital”. It is clari­fied that in respect of an initial issue of equity share capital which opened for subscription before June 1, 1971, shares forming part of such issue would continue to qualify for the exemption under clause (xx ) of sub-section (1) of section 5, irrespective of whether such shares are actually subscribed for before or after that date.

3. It may be added here that in terms of clause (xxiii) of sub-section (1), read with sub-section (1A) of section 5, shares in any Indian company which are not entitled to the exemption referred to in the said clause (xx ) will be included in the categories of investments which are exempt from wealth-tax up to the aggregate value of Rs. 1,50,000.

Circular : No. 74 [F. No. 317/2/72-WT], dated 15-1-1972.

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