Procedure for obtaining certificate of exemption under clause (xxa) of sub-section (1) in respect of
Circular No. 490 was issued by the Central Board of Direct Taxes on 22 June 1987. Its subject is Procedure for obtaining certificate of exemption under clause (xxa) of sub-section (1) in respect of.
This grants an exemption or a relief under a provision that allows one. Read the conditions attached: an exemption notification is construed strictly, and a condition missed is the exemption lost.
Fixes the procedure by which a company obtains, and its shareholders use, a certificate for the wealth-tax exemption under clause (xxa) of section 5(1). Companies had told the Board that assessing and appellate authorities were insisting on a certificate from the Board through the company. Following the pattern of the Board's Circular No. 69 dated 18 November 1971, which is annexed, the Board decides that the company should apply to the assessing authority in the form set out in the annexed Annex 'X' where it wants the exemption for equity shares of the kind described in that clause, and that the Income-tax Officer, who is also the Wealth-tax Officer, will issue the certificate in the form in Annex 'Y'. The annexed 1971 circular explains the exemption itself: clause (xxa) exempts from wealth-tax the value of equity shares held in a company of the type referred to in clause (d) of section 45, where the shares form part of the initial issue of equity share capital made by the company after 31 March 1964, for five successive assessment years beginning with the assessment year following the date the company commences the operations for which it was established. Rather than each shareholder proving this in his own assessment, the company obtains one certificate and furnishes copies to its shareholders, who produce it before their own Wealth-tax Officers.
Companies represented that authorities were insisting on a Board certificate, and shareholders were being put to avoidable inconvenience in establishing the exemption individually in their own assessments.
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 assessees 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 assessees 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).
Only in old wealth-tax records where the exemption for such shares was claimed and the certificate was called for.
Source: the Income Tax Department’s own published text — its page for this instrument.
