1337. Whether deposit under "own your telephone" scheme is "asset" within the meaning of clause (e)
Circular No. 222 was issued by the Central Board of Direct Taxes on 10 June 1977. Its subject is 1337. Whether deposit under "own your telephone" scheme is "asset" within the meaning of clause (e).
Directs that a payment under the own your telephone scheme not be added to net wealth unless the assessee has himself shown it as an asset. The Board's analysis is that the payment is in the nature of advance rent for a telephone connection rather than a deposit, adjusted proportionately against the rental bills as they are issued, so the unadjusted amount on a valuation date is a debt due to the assessee and would ordinarily be an asset within section 2(e) of the Wealth-tax Act. To simplify matters, to avoid the practical difficulty of tracking a diminishing amount year after year, and to align with the earlier instruction of 2 April 1976 allowing the whole payment for income-tax in the year of payment whether or not the telephone was installed, the Board advises that it not be added to total wealth unless the assessee has shown it as an asset in his accounts or balance sheet.
The Board examined whether the own your telephone payment is an asset within section 2(e) and includible in net wealth, and weighed the practical difficulty of following the diminishing balance each year.
1337. Whether deposit under "own your telephone" scheme is "asset" within the meaning of clause (e)
1. The Board have examined the question whether the deposit made under "own your telephone" (OYT) scheme is an asset within the meaning of section 2(e) and, as such, includible in the net wealth of an assessee.
2. The payment made under OYT scheme is in the nature of advance payment of rent of a telephone connection and not in the nature of deposit. The proportionate amount is adjusted in the rental bills issued from time to time. The amount which has not been adjusted up to the relevant valuation dates is, therefore, a debt due to the assessee and has normally to be considered as an asset for the purpose of wealth-tax assessment. With a view to simplifying matters and removing practical difficulties involved in keeping track of the diminishing amount year after year, and also to bring the matter in line with instruction No. 943, dated 2-4-1976 issued from File No. 204/15/76-IT(A-II) (providing for the allowance of entire amount of payment under the OYT scheme for income-tax purposes in the year of payment irrespective of the fact whether the telephone had been installed or not), it is hereby advised that the deposit under the OYT scheme should not be added to the total wealth unless the same has been shown as asset by the assessee himself in his accounts or in the balance-sheet.
Circular : No. 222 [F.No. 317/48/76-WT], dated 10-6-1977.
In an old wealth-tax assessment where the telephone payment appears in the balance sheet and has been added to net wealth.
Source: the Income Tax Department’s own published text — its page for this instrument.