Additional wealth-tax on urban immovable properties. - Income Tax - 406/CBDT

INSTRUCTION NO. 406/CBDT Dated: April 15, 1972 Attention is invited to section 70 of the Finance Act, 1965 amending the provisions of Wealth-tax Act, 1957, so as to provide for the levy of addl. wealth-tax on urban immovable properties. A clarification has been sought from the Board on the following issues- (i) Whether for the purposes of levy of additional wealth-tax on the value of urban immovable properties situated in towns of different categories, the debts charged to the properties have to be deducted from the value of the urban assets? (ii) Whether the other debts not relatable to any particular asset should be proportionately deducted from all assets in working out the levy? 2. Under section 7 of the Wealth-tax Act the value of any asset shall be estimated to be the price which, in the opinion of the Wealth-tax Officer, it would fetch if sold in the open market on the valuation date. Under the Schedule to the Wealth-tax Act additional wealth-tax is levied on the total value of the assets mentioned therein. It is, therefore, the price that could be realised for the asset in question. In other words only the value of the equity or redemption should be taken for the purposes of paragraph (B) of Part-I of the Schedule in respect of such urban properties which are charged with debts. 3. It would appear that the problems adverted to above would be felt only upto the assessment year 1970-71 since, with effect from 1-4-1971, the position had been clarified in the Schedule by stating that any debt, whether secured or not, incurred for the purposes of acquiring, improving, constructing etc. any urban asset shall be deducted from the gross value of such asset and any other debts shall be deducted first from the value of the other assets; and to the extent that they exceed such value they will be deducted against the urban assets. 4. The Board are advised that the position prior to the assessment year 1971-72 would be as under:- (i) there should be no question of a person being, made liable to pay additional wealth-tax when he is not liable to pay any wealth-tax on the ground that his net wealth is a negative figure, or does not exceed that exempted limit; and (ii) where the value of urban asset exceeds the net wealth, there could be two types of cases. In one case, a person may not be liable to wealth-tax at all on the ground that his net wealth is either a minus figure or it does not exceed the exempted limit. In the other case, the net wealth may be much lower than the value of the urban property. It would not be correct to levy additional Wealth-tax on any sum exceeding the net wealth. 5. The contents of the above letter may kindly be brought to the notice of all the officers working in your charge.