INCOME TAX

Circular No. 490

Dated 30/6/1969

Procedure for obtaining certificate of exemption under clause (xxa) of sub-section (1) in respect of equity shares held in certain companies

1. Certain companies have brought to the notice of the Board that various assessing/appellate authorities insist on the production of a certificate from the Board through the company in order to get exemptions under section 5(1)(xxa).

2. In this regard, your attention is invited to the Board's Circular No. 69 [F. No. 1/10/68-WT], dated 18-11-1971 [Annex] which sets out a procedure whereby the company applies and the Tax Officer issues necessary certificate for purpose of obtaining exemption under section 5(1)(xx). The Board has examined the matter and has decided that the concerned company should apply to the assessing authority in the form as per Annex "X" in case it desires an exemption under section 5(1)(xxa) for issue of equity shares of the nature specified in that clause. The form in which the certificate would be issued by the Income-tax Officer/Wealth-tax Officer to the company is specified as per enclosed Annex "Y".

Circular : No. 490 [F. No. 317/1/87-WT], dated 22-6-1987/14-7-1987.

Annex - Circular No. 69, dated 18-11-1971 referred to in clarification

1. Attention is invited to the provisions contained in clause (xxa) of sub-section (1) of section 5. Clause (xxa) exempts from wealth-tax the value of any equity shares held by the assesses in any company of the type referred to in clause (d) of section 45, where such shares form part of the initial issue of equity share capital made by the company after the 31st March, 1964, for a period of the five successive assessment years commencing with the assessment year next following the date on which such company commences the operations for which it has been established.

2. It has been found that the assesses experience some avoidable inconvenience in claiming exemption under section 5(1)(xxa) individually in their respective assessments before the Wealth-tax Officer. The Board, after careful consideration of such instances, have decided that, where the equity shares issued by a company qualify for exemption under section 5(1)(xxa), the company itself could make an application to the Income-tax Officer (who is also the Wealth-tax Officer) assessing the company, for the issue of an appropriate certificate. When the certificate is issued, the company should furnish copies of the same to each of its shareholders who can, in turn, produce it before his Wealth-tax Officer for claiming exemption under section 5(1)(xxa).

3. The Board have also decided that an application for the issue of certificate be submitted by the company to the Income-tax Officer assessing it in the form as per Annexure "A" (not attached). The form in which the certificate would be issued by the Income-tax Officer/Wealth-tax Officer to the company is specified as per enclosed Annexure "B" (not attached).

Annex 'X' - Application for issue of certificate for exemption under section 5(1)(xxa)

The Income-tax-cum-Wealth-tax Officer

.............................................................................

Sir,

I submit the following information with the request that the value of equity shares issued by M/s ............................. to the shareholders be declared as being exempt under section 5(1)(xxa) of the Wealth-tax Act, 1957 in the hands of the respective shareholders for assessment year 20 .......... 20.......... :—

1. Name of the company

2. Whether the conditions laid down in section 45(d) of the Wealth-tax Act, 1957 are satisfied (furnish details)

3. Place of registration and location of head office

4. Total amount of capital under issue :

(a) Initial issue of equity shares

(b) Others

5. Date of issue of initial issue of equity share capital

6. Date of commencement of the operation of the company for which it has been established

7. Whether the company manufactures or produces the item(s) specified in the Ninth Schedule to the Income-tax Act, 1961

8. Miscellaneous information

Declaration

I hereby declare that to the best of my knowledge and belief, the information given above is correct, complete and truly stated.

Place................ ...................................................

Date.................. Signature of the principal officer of the company, status and full address

Annex 'Y'

Office of the Income-tax-cum-Wealth-tax Officer

Place................

Date..................

The Principal Officer,

.............................................................................

Certified that M/s ............................ (name of the company) have issued initial issue of equity share on ............................ to its shareholders and the value of these equity shares qualifies for exemption under section 5(1)(xxa) read with section 45(d) of the Wealth-tax Act, 1957, in the hands of the respective shareholders. The company has issued the shares on (date) ...................... and the exemption is allowable only for the assessment years 20........... 20........... which are the ................ assessment years subsequent to the commencement of the operations for which the aforesaid company was established.

Income-tax-cum-Wealth-tax Officer

Ward....................