1353. Pettifogging enquiries into details of articles covered under the proviso to clause (viii) of sub-section (1) are not to be made – Object of amendment made by Finance (No. 2) Act, 1971 explained

1. Attention is invited to the provisions of section 5(1)(viii) as amended by section 32 of the Finance (No. 2) Act, 1971. Under This amendment the operation of the exemption in clause (viii) has been restricted prospectively in the following respects:

1. Furniture, utensils and other articles, which, though held for personal or household use of the assessee, are made of, or contain [whether by way of embedding, covering or otherwise], gold, silver, platinum or any other precious metal, or any alloy containing one or more of such precious metals, have been excluded altogether from the purview of the exemption.

2. Motor cars and other mechanically propelled vehicles, aircraft and boats will hereafter be exempt up to an aggregate value of Rs. 25,000 only.

2. During the course of the debates on the Budget for the year 1971-72 in the Lok Sabha, it was suggested that the inclusion of furniture, utensils or other articles which are made wholly or partly of, or contain (whether by way of embedding, covering or otherwise) gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals in the net wealth would result in unintended hardship inasmuch as taxpayers would be required to disclose the value of petty items like silver-plated cutlery, blades containing coating of platinum or other precious metals, etc. It was, accordingly, suggested that such furniture, utensils and other articles should continue to enjoy exemption from wealth-tax. In his reply to the debate, the Finance Minister had observed as follows:

“In giving an extended meaning to the term ‘jewellery’ and excluding furniture, utensils and other articles falling under the categories described above from the scope of the exemption, it is not the intention to enter into pettifogging enquiries into the details of such articles so as to cause embarrassment or harassment to taxpayers. This will be secured through suitable administrative instructions. Without the extended meaning of the term ‘jewellery’ and special provision excluding furniture, etc., which incorporate precious metals in their construction, it will leave a big loophole for tax evasion as wealthy persons could then convert their wealth into such assets which, in the ultimate analysis, do not add to the productive potential of the country.”

3. The Board desires that it should be impressed upon all the Assessing Officers in your charge that, while valuing the arti­cles as mentioned in the proviso to clause (viii) of sub-section (1) of section 5 of the Wealth-tax Act, the above observations of the Finance Minister are carefully borne in mind.

Circular : No 75 [F. No. 317/3/72-WT],dated 22-1-1972

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October 2020