74
VOLUNTARY DISCLOSURE OF INCOME SCHEME, 1997
NOTIFIED EFFECTIVE DATE OF VOLUNTARY DISCLOSURE OF
INCOME SCHEME, 1997
In exercise of the powers conferred by sub-section (2) of section 62 of the Finance Act, 1997 (26 of 1997), the Central Government appoints the 1st day of July, 1997, as the date on which the Voluntary Disclosure of Income Scheme, 1997, shall come into force.
Notification No. SO 435(E), Dated 9-6-1997
EXPLANATORY NOTES ON PROVISIONS RELATING TO
THE VOLUNTARY DISCLOSURE OF INCOME SCHEME, 1997
Introduction
The Finance Act, 1997 as passed by the Parliament received the assent of the President on the 14th May, 1997 and has been enacted as Act No. 26 of 1997. Sections 62 to 78 of the Finance Act, 1997 relate to the Voluntary Disclosure of Income Scheme, 1997. This circular explains the substance of the provisions of the Disclosure Scheme.
2. The Voluntary Disclosure of Income Scheme, 1997 shall come into force from the 1st day of July, 1997. Notification to this effect has been issued on 9th June, 1997. Any person can, therefore, make a disclosure of income on or after this date. The last date for making the disclosure of income is the 31st day of December, 1997.
3. In accordance with the provisions of section 64 of the Finance Act, 1997, a person may make a disclosure in respect of any income chargeable to tax under the Income-tax Act, for any assessment year—
(a) for which he has failed to furnish a return under section 139 of the IT Act, 1961;
(b) which he has failed to disclose in a return of income furnished by him before the date of commencement of the Scheme, i.e., 1st July, 1997;
(c) which has escaped assessment.
A person may, therefore, make a disclosure of income for any assessment year including assessment year 1997-98, provided he has either not furnished his return of income or has failed to disclose the income for which the declaration is being made. No disclosure of wealth is allowable under the Voluntary Disclosure of Income Scheme, 1997.
Rate of tax
4. The tax payable on the disclosed income in respect of any assessment year shall be at the rate of 35% in the case of companies and firms and 30% in the case of others.
The tax payable under the Scheme is required to be paid before the filing of the declaration. The declaration should be accompanied by the proof of payment of tax. In case a person is not in a position to pay the tax before the filing of the declaration, he may do so within 3 months of the date of filing of the declaration. In such a case simple interest @ 2% shall be charged for every month or part of a month comprised in the period beginning from the date of filing of the declaration to the date of payment of the tax. However, in cases where the declart fails to pay the tax within the said period of 3 months from the date of filing of the declaration, the declaration filed shall be deemed to be void. Any part payment of tax made in the above situation shall not be refundable. Any tax paid in pursuance of the declaration shall also not be refundable under any circumstances.
5. No person can make a voluntary disclosure of income for any assessment year in relation to which a notice under section 142 or 148 has been served upon him and the return has not been furnished before the 1st day of July, 1997. Further, a person is also debarred from making a disclosure of income in respect of the previous year in which a search is initiated under section 132 or requisition is made under section 132A or a survey under section 133A of the Income-tax Act is carried out. In the case where a search is initiated or a requisition is made under section 132 or 132A respectively, a person is also debarred from making a voluntary disclosure of income in respect of any earlier year prior to the previous year in which the search is initiated or requisition is made (section 64 of the Finance Act, 1997). Declaration can, however, be made in such cases for a previous year subsequent to the year of search, etc. In the case of survey under section 133A, a person will be barred from making a declaration only in respect of the assessment year in which the survey was carried out.
Form of declaration
6. The declaration shall be made to the Commissioner of Income-tax and shall be in the prescribed Form. The declaration can be signed in the case of an individual, by the individual himself. Where the individual is away from the country, the declaration may be signed by a person duly authorised by the individual. In a case where the individual is mentally incapacitated, the declaration may be signed by his guardian or any other person competent to act on his behalf. In the case of a Hindu Undivided Family, company, firm, association, etc., the declaration can be signed and verified by persons specified in section 65 of the Finance Act, 1997 which are the same as those mentioned in section 140 of the IT Act, 1961. A person can make a declaration in different capacities, namely, in respect of his individual income, in his capacity as karta of his Hindu undivided family, etc.
Where the voluntary disclosed income is represented by jewellery, the value of the jewellery or bullion so declared shall be substantiated by a registered valuer’s certificate. In case the jewellery declared is in respect of an assessment year prior to assessment year, 1987-88, the value for purposes of declaration shall be taken to be the value as on 1-4-1987. The expression ‘jewellery’ shall have the same meaning as assigned to it in Explanation (a ) to clause (ea) to section 2 of the Wealth-tax Act, 1957/Explanation 1 to clause (viii) of section 5 of the Wealth-tax Act, 1957.
7. The declaration shall be filed before the Commissioner of Income-tax. Where a taxpayer resides at a place other than the headquarters of the Commissioner, the declaration along with the challan for payment should be sent to the Office of the Commissioner of Income-tax, who in turn, would send the certificate of disclosure and payment of tax by post. The certificate will be issued by the Commissioner of Income-tax only on full payment of tax in respect of the disclosure made by a person.
8. The disclosure made in respect of any assessment year shall not affect the finality of any completed assessment. A declaration cannot, therefore, have the right to get any assessment or reassessment reopened on the ground that he has now made a disclosure of income in respect of that assessment year. No set-off or relief in any appeal, reference or other proceeding can also be claimed by a declarant in respect of the voluntarily disclosed income.
9. The voluntarily disclosed income shall not be included in the total income of the declarant for any assessment year if the declarant credits such amount in the books of account, if any, maintained by him or in any other record and intimates the credit so made to the Assessing Officer. If no books of account are maintained, it is expected that the declarant will make the credit in some other record. The second condition for the voluntarily disclosed income not to be included in the total income for any assessment year is that tax in respect of the disclosed amount is paid within the time specified in section 66 or section 67 of the Finance Act, 1997.
10. The particulars furnished by a declarant shall be kept a secret and shall be treated as confidential. No court or any other authority shall be entitled to require any officer of the Income-tax Department or the declarant himself to produce before it any such declaration or to give evidence before it in this regard. Further, nothing contained in any declaration shall be admissible as evidence against the declarant for the purpose of any proceeding relating to imposition of penalty or launching of prosecution under the Income-tax Act, Wealth-tax Act, Foreign Exchange Regulation Act, 1973 or the Companies Act, 1956.
11. In cases where the voluntarily disclosed income is represented by cash, bullion, shares or any other assets and where, (i) the declarant has failed to furnish a return under section 14 of the Wealth-tax Act for any assessment year, (ii) such assets have not been shown in the return of wealth, (iii) the disclosure relates to understated investment and where the same was understated in a return of wealth, then no wealth-tax shall be payable in respect of the assessment year for which the disclosure is made. Wealth-tax shall, however, become payable for the assessment years subsequent to the assessment years for which the declaration was made.
12. The provisions of Chapter XV of the Income-tax Act relating to liability in special cases shall apply in relation to proceedings under this Scheme as they apply in relation to proceedings under the Income-tax Act.
13. The secretary and immunity provisions of the voluntarily disclosure of income scheme shall not apply to—
(a) to any person in respect of whom an order or detention has been made under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 in certain circumstances.
(b) in relation to prosecution for any offence punishable under Chapter IX or Chapter XVII of the Indian Penal Code, the Narcotic Drugs and Psychotropic Substances Act, 1985, the Terrorists and Disruptive Activities (Prevention) Act, 1987, the Prevention of Corruption Act, 1988 or for the purpose of enforcement of any civil liability;
(c) to any person notified under section 3 of the Special Court (Trial of Offences Relating to Transaction in Securities) Act, 1992.
Circular : No.753, dated 10-6-1997
CLARIFICATIONS ON VDIS 1997
CLARIFICATION 1
The Finance Act, 1997 has introduced a Voluntary Disclosure of Income Scheme, 1997. In regard to the Scheme a number of queries have been received from the public about the scope of the scheme and the procedure to be followed. The Board has considered the same and decided to clarify the points raised by issue of Circular in the form of questions and answers as per Annexure.
Clarifications on Voluntary Disclosure of Income Scheme, 1997
Question No. 1: Whether the undisclosed income represented by Jewellery acquired prior to 1-4-1987 is required to be disclosed at the market value as on 1-4-1987 ? (Please see section 64 and section 73 of the Finance Act, 1997)
Answer : Yes.
Question No. 2: Whether the undisclosed income represented by flat/land and machinery, shares, etc., acquired prior to 1-4-1987 is required to be disclosed at the market value as on 1-4-1987? (Please see sections 64 & 73)
Answer : No. The value should be as on the date of acquisition of the asset.
Question No. 3: Whether the undisclosed income can be declared by the minor after the assessment year 1992-93 or it is to be declared by his parents in whose hands it is taxable ?
Answer : Minor can declare his undisclosed income of 1992-93 or earlier assessment years. From Assessment year 1993-94, his income is includible in the parents’ income and he is not obliged to file a return himself. Only parents can declare the minor’s income for assessment year 1993-94 or later.
Question No. 4: Can undisclosed income be declared by the minor for the assessment year prior to 1992-93 in his own hands ? (Please see sections 63 & 64)
Answer : Yes, for reasons given in Question No. 3.
Question No. 5: If the firm had concealed income, can the partners file declaration in respect of such concealed income ?
Answer : The declaration will be by the firm verified by the managing partner. If there is no managing partner, then by one of the partners. The partners need not make declaration regarding their respective share of income.
Question No. 6: Where search and seizure action has taken place in Financial Year 1995-96, the block period is 1985-86 to 1995-96, can disclosure under the present scheme be made by the persons searched for an Assessment Year prior to 1985-86 ?
Answer : No. In respect of a case where search has taken place in any financial year, the person cannot make a declaration in respect of any previous year prior to the previous year in which search has taken place.
Question No. 7: Where a Private Limited Company has not filed return of income for Assessment Year 1990-91 in respect of its income as per books of account, can it file a declaration under the scheme and pay tax at 35% ?
Answer : Yes.
Question No. 8: Will there be a time limit under the VDIS, 1997 Scheme for the declarant to credit the declared income in the books of account and inform the Assessing Officer ?
Answer : There is no time limit under VDIS, 1997 Scheme for crediting the same declared vide section 64.
Question No. 9: Whether under the VDIS, 1997, it is mandatory to credit the amount declared in the books of accounts, if so, in which year’s books of account it has to be credited - Whether the Assessment Year in respect of which it is declared or the Assessment Year relevant to Financial Year 1997-98 ?
Answer : It is expected that the declarant will credit the amount declared in his books of account or if there are no books of account in some other record. The year of credit is left to the declarant’s option.
Question No. 10 : Will there be a time-limit under the Scheme for the CIT to issue the certificate ?
Answer : Apparently, there is no time limit for issue of a certificate. If the declared income relates to a pending assessment, then, the CIT will be obliged to issue the certificate before the date on which the said assessment gets barred by limitation of time.
[Commissioners have now been advised to issue the certificates within two days if taxes are paid in full.]
Question No. 11 : Will the declaration under the Scheme be final in itself or it will be final only on its being accepted by the Commissioner of Income-tax ?
Answer : In respect of a valid declaration, it will be final only when the certificate is issued by the CIT.
Question No. 12 : The immunity granted under the scheme should be along the lines of section 245H of the Income-tax Act, i.e., should be extended to immunity from penalty and prosecution under IPC and also any other Central Act. The Central Government should recommend to the State Governments that no proceeding be initiated under the State Acts like Sales Tax, Excise, i.e., in respect of entries credited in the books as a result of declarations made under the VDIS, 1997.
Answer : The question of recommending to the State Governments that no proceeding should be initiated under the Sales Tax Act does not arise because the disclosed income is just a lump sum not falling under any head of income like business and profession, capital gains or other sources. Hence, there is no presumption that disclosed income relates to suppressed turnover or suppressed manufacture.
Question No. 13 : Immunity should also be granted to Directors of a company, partners of the firm and members of the AOP which makes a declaration under the scheme.
Answer : As far as firms and AOPs are concerned, it is enough if firm and AOPs declare. There is no need for partners and members to declare separately in respect of the income declared by the firm or AOP. In respect of disclosure by the company, no director of the company shall be prosecuted.
Question No. 14 : In the case of ladies and minors making declaration and amounts are later credited the books of account of the firm, etc., it needs to be clarified as to what will be the view of the Department, particularly whether the Assessing Officer can investigate into the source of the amounts so credited ? (Refer Supreme Court decision in Rattan Lal’s case).
Answer : The declarant lady or minor should first credit the amount declared in their own books of account or any other record. Thereafter, the advance can be made to other persons. Where the amounts credited in the books of the other persons are equal to or less than the amount declared by the lady or the minor then the Assessing Officer should accept the credit entries in the books of the firm. If the amount credited is more than the amount declared the Assessing Officer will be free to enquire into such excess.
Question No. 15 : Under section 68 of the Scheme the amount of the voluntary disclosed income is not to be included in the total income of any assessment year if (a) such amount is credited in the books of account or any other record and the credit so made is intimated to the Assessing Officer and (b) income-tax is paid on such amount.
In such a case, three questions arise (i) what is the meaning of "any other record" particularly when declarant maintains no record ? (ii ) who will be the Assessing Officer - whether the regular AO or the designated officer in the office of the Commissioner ? and (iii ) what is meaning of "credited in the books of account" ?
Answer : ( i) Where books of account are not maintained by the declarant, any other record means an entry which will evidence the availability of amount declared.
( ii) The regular Assessing Officer of the territory and not the designated officer in the office of the Commissioner of Income-tax.
( iii) The meaning of credit in the books of account will vary from case to case depending upon the nature of the disclosure whether it is under-statement of stock or under-statement of turnover or under-statement of sale consideration of a property, etc.
Question No. 16 : Will the value of assets declared be accepted by the Department as it is or will it be necessary to file a valuer’s certificate along with the declaration ? Can the matter be referred by the Department to Valuation Cell ? Is any evidence required to be filed regarding the year or purchase of the jewellery or other assets ? Whether the value of jewellery as on 1-4-1987 will be adopted only for purposes of VDIS or will it also be adopted for Wealth Tax in subsequent years ?
Answer : In respect of immovable property, the Department will not insist upon any valuation certificate along with the declaration. It is the responsibility of the declarant to declare the correct value. In respect of the jewellery if it has been acquired prior to 1-4-1987, the value will be taken as on 1-4-1987 as certified by valuer. Further, the value adopted as on 1-4-1987 is for the limited purpose of the scheme.
Question No. 17 : In the case of sale of immovable property,—
(a ) if the purchaser declares the "black" portion under the scheme, what will be the position of the seller ? Will the department proceed against him (seller) ?
(b ) if the property is sold subsequently, what will be the cost of acquisition ?
(c ) if, as a result of the declaration of the actual value of the property, it exceeds the limit laid down in Chapter XX-C, whether any proceedings will be initiated by Appropriate Authority ?
Answer : ( a) No.
(b) Cost of the acquisition as declared before the income-tax authorities and increased by the amount disclosed under the scheme in respect of the asset.
(c) Once the Appropriate Authority issues NOC u/s 269UL(1), his jurisdiction that transaction ceases. The Appropriate Authority cannot initiate any further proceedings.
Question No. 18 : As per section 65(3), only one declaration is permitted under the Scheme. Multiple declarations should be allowed to take care of certain situations, e.g., where piecemeal recoveries of undisclosed amounts are made from debtors ?
Answer : Only one declaration is permitted. Where piece-meal recovery of undisclosed amounts are made from debtors, the declarant may perhaps wait till the final recovery before the closure of the Scheme and then declare.
Question No. 19 : Whether wealth-tax will be chargeable on the assets declared only for Assessment year 1997-98 or also for earlier years ? Whether wealth-tax exemption will be available for subsequent years after the year of declaration ? In the case of a declaration for Assessment year 1997-98 whether wealth-tax exemption is available for Assessment year 1988-89 to Assessment year 1997-98 or not ? Whether the charge of wealth-tax @ 1% will be one-time or recurring ? (This provision has been deleted)
Answer : Under section 73(1)(c) of VDIS, 97 where an asset has been undervalued, and subsequently such under-valuation is disclosed, then to that extent wealth-tax is payable for the year of disclosure as well as earlier assessment year during which the asset was in existence. In respect of assets not at all disclosed, for subsequent assessment years, wealth-tax is payable.
For subsequent years, the value may change,
Question No. 20 : In the case of subsequent sale of assets declared under VDIS, whether the benefit of indexation will be available ? If yes, whether the cost of acquisition will be actual cost or the deemed cost as on 1-4-1987 ?
Answer : Yes. In case of jewellery, the cost of acquisition will be the actual cost and not deemed cost as 1-4-1987.
Question No. 21 : Section 64(2)( i) of the Scheme disentitles a person from making a declaration in respect of an assessment year, if for that assessment year a notice u/s 142 or 148 has been served upon him. What will be the position if a notice u/s 143(2) has been served ? Will it debar the assessee from making a declaration for that assessment year ?
Answer : Issue of section 143(2) notice is not a bar.
Question No. 22 : If an assessment is set aside in appeal, declaration for that assessment year should be permitted. If in the assessment proceedings, say any expenditure has been disallowed, whether this can be offered under VDIS after withdrawal of appeal?
Answer : This cannot be done.
[As regards assessments set aside in appeal, please refer to answer to Question No. 52. The Scheme does not provide for a declaration to be filed after withdrawing an appeal.]
Question No. 23 : The scope of the Scheme should be expanded so as to include cases where —
(a ) action u/ss 132, 133A has been taken.
(b ) appeal is withdrawn, as this will reduce litigation.
Answer : This is not possible. In respect of survey u/s 133A, the declarants are debarred for that previous year only.
[In respect of survey u/s 133A, the declarants are debarred for that previous year only. In respect of searches, please see reply to Question No. 6. NO disclosure can be made for any year by withdrawing an appeal - refer answer to Question No. 22 also.]
Question No. 24 : Say Rs. 100 is held abroad and declared under VDIS. Rs. 30 is paid as tax after remitting into India or out of Indian sources. Whether the balance Rs. 70 or the full Rs. 100, as the case may be, can be retained abroad or whether it must be brought into India before 31-12-1977 ?
Answer : The immunity from prosecution is against the commission of offence under FERA. It is not a permission for continuance of the offence.
Question No. 25 : Immunity has been granted under the Scheme only from penalty and prosecution, but interest has not been mentioned. It may be clarified that interest will not be charged in respect of declarations made under the Scheme for any assessment year ?
Answer : In respect of declared income a flat rate of 30% or 35%, as the case may be, is payable. No interest is payable except interest for late payment of tax on declared income.
Circular No. : 754, dated 10-6-1997
CLARIFICATION 2
Question NO. 26 : If disclosure of income is made in respect of assessment year 1988-89 and this is represented by an asset which has not been disclosed for wealth-tax purposes or which has been under-stated in the return of wealth, whether wealth-tax will be payable and, if so, for which assessment years ?
Answer : Some ambiguity has arisen as a result of the answer given to Question No. 19. It is hereby clarified that if a declaration is made during the period of operation of the Scheme relating to any assessment year, no wealth-tax will be payable by virtue of section 73(1) for any assessment year up to assessment year 1997-98. Wealth-tax will, however, be payable in accordance with the provisions of the Wealth-tax Act on the asset, if any, relatable to the income disclosed in terms of clause (a), ( b) or (c) of section 73(1) for assessment year 1998-99 and subsequent years.
Question No. 27 : Whether survey under section 133A(5) of the Income-tax Act, will also bar a person from making a disclosure ?
Answer : Yes, for the previous year in which the survey was carried out.
Question No. 28 : Whether any evidence regarding purchase of jewellery is to be furnished ?
Answer : It will be in the interest of the declarant to disclose the true year of purchase/acquisition. In case the jewellery declaration in respect of an assessment year prior to assessment year 1987-88, the value for purposes of declaration shall be as on 1-4-1987. Some evidence to show the year of acquisition has to be filed in all cases of declaration of jewellery.
Question No. 29 : A search under section 132 of the Income-tax Act bars a person from making a disclosure in respect of the previous year in which the search took place and also for any earlier previous year. In case, a search warrant is issued in the name of one person, can others who also reside at the same premises and whose statements may have been recorded during the course of the search, make a disclosure of their income ?
Answer : Yes, but not in respect of income, assets, etc., seized during the course of the search or discovered as a result of the search.
Question No. 30 : Will the tax payable in respect of the disclosed income be adjusted by the tax deducted at source earlier in respect of that income ?
Answer : No.
Question No. 31 : Will the tax payable in respect of the disclosed income be adjusted by the tax deducted at source earlier in respect of that income ?
Answer : Yes. There are, however, exceptions under section 64(1A) of the Income-tax Act, and in the following cases, the minor’s income shall not be included in the income of the parents :-
(i) Where the minor child suffers from any disability of the nature specified in section 80U;
(ii) Where income accrues or arises to the minor child on account of any - (a) manual work done by him/her; or (b) activity involving application of his/her specialised knowledge and experience.
Question No. 32 : Whether immunity from levy of penalty in respect of a disclosure is restricted only to penalty under section 271(1)(c) of the Income-tax Act ?
Answer : No. Penalties under other sections would also not be levied for the assessment year(s) to which the disclosure of income relates to.
Question No. 33 : If undisclosed long-term capital gains is offered for taxation under the VDIS, what is the rate at which tax has to be paid?
Answer : The rate of tax specified in section 64 of the Finance Act, 1997, i.e., in the case of a company or a firm, at the rate of 35% of the voluntarily disclosed income and in the case of others, at the rate of 30%.
Question No. 34 : Mr. Y and filed returns for assessment years 1984-85 to 1987-88 under the then Amnesty Scheme. tax was also paid under that scheme. Can he take the advantage of the VDIS and declare further income for the above years ?
Answer : Yes.
Question No. 35 : Action under section 132 of the Income-tax Act was taken in the case of Mr. A on 30-3-1992 and the same was concluded on 5-4-1992. Can he take advantage of VDIS for assessment year 1993-94 and subsequent years ?
Answer : Section 64(2)(ii) of the Finance Act, 1997 lays down that no disclosure of income can be made in respect of the previous year in which a search is initiated or in respect of any earlier previous year. In the case cited above, search was initiated in assessment year 1992-93. Therefore, disclosure can be made (except for the income/assets discovered seized during the search referred to), in respect of assessment year 1993-94 and subsequent years.
Question No. 36 : Survey operations were carried out u/s 133A of the Income-tax Act in case of Mr. ‘D’ on 30-9-1993. Can the make a declaration under VDIS in respect of assessment year 1993-94 and earlier years ?
Answer : If the survey operations were carried on 30-9-1993, i.e., "previous year 1993-94," no disclosure can be made for "assessment year 1994-95". The declaration of income can be made for assessment year 1993-94 and earlier assessment year. The declaration can also be made for assessment year 1995-96 and subsequent assessment years.
Question No. 37 : Whether multiple declarations can be made by a person at different time during which the VDIS is in operation and in respect of different assessment years ?
Answer : No.
Question No. 38 : If a person defaults in filing return for the assessment year 1997-98, can he file a declaration for the same year ?
Answer : Yes. Declaration can be filed for the assessment year 1997-98.
Question No. 39 : If return for assessment year 1996-97 has been filed, can a person make a disclosure in respect of this assessment year?
Answer : Yes.
Question No. 40 : Notices u/s 148 are issued in the case of a firm for assessment years 1992-93 to 1994-95 on 15-5-1997. The returns are due within thirty days. Can the firm make a disclosure for assessment years 1992-93 to 1994-95 ?
Answer : Under section 64(2) of the Finance Act, 1997, a person is barred from making a declaration in respect of any assessment year for which a notice under section 148 has been served upon such person and the return has not been furnished before the commencement of the scheme, i.e., 1-7-1997. If the returns has been filed before 1-7-1997, then a disclosure of income can be made for assessment years 1992-93 to 1994-95.
Question No. 41 : Mr. ‘Y’ is engaged in export business. Export income was not disclosed. Whether the amount undisclosed can be declared now ? Whether the gross amount, i.e., the export proceeds has to be disclosed or the net amount after computing the deduction under section 80HHC ?
Answer : If undisclosed income is solely from export business, there may be no need for a disclosure under the VDIS, 1997. However, if the undisclosed income is partly from exports and partly from domestic sales, then the declarant should disclose the net income after allowing for deduction under section 80HHC. The amount that should be disclosed is only the taxable income. the declarant would be will advised to keep with him the calculation sheet.
Question No. 42 : Whether the assessment in whose case quantum additions have been made u/s 143 (3) of the Income-tax Act, and the matter is in appeal, can make a declaration under the VDIS ?
Answer : A declaration can be made but the declarant shall not be entitled to get any relief in appeal, reference or other proceeding in relation to such assessment. Therefore, in case penalty proceedings have been initiated by the Assessing Officer and the quantum addition is sustained, penalty would be levied.
Question No. 43 : Mr. ‘A’ gifted Rs. 2 lakhs to his minor grandson in 1988. The grandson was 10 years’ only at that time. The amount was invested in Units of UTI. Dividend from UTI was deposited in the Bank account of the grandson every year. This transaction was not disclosed to the tax Department, Mr. ‘A’ wants to know how the VDIS can be utilised to regularise this matter ?
Answer : If the amount gifted to the minor grand son was out of undisclosed income, declaration can be made by the grandfather for the assessment years to which the said income relates to. Thereafter, income would have to be disclosed from the units of UTI in the hands of the grandfather upto assessment year 1992-93. From assessment year 1993-94 onwards, income from units would have to be disclosed in the hands of the parent of the parent up to the year when the grandson becomes a major.
Question No. 44 : Is the certificate to be issued in all cases by the Commissioner where a declaration is filed or only where an application is made ?
Answer : The certificate will be issued only after the total tax is paid in respect of a declaration. the certificate will be issued only on the receipt of an application. The application can be made on plain paper.
Question No. 45 : Whether a person who makes a declaration as karta of an HUF, can be questioned subsequently in respect of income accruing on the disclosed income with regard to the correctness of the status ?
Answer : No.
Question No. 46 : A person declares that his entire undisclosed income is invested in the construction of a building. Whether the Department would sub-sequently get the building valued ? Also, whether it would take action against the person if excess amount of investment is discovered ?
Answer : It is expected that the true investment will be disclosed under the scheme. No valuation would, therefore, be got done by the Department. However, if on the basis of other information, it is found that a higher amount was invested that the amount disclosed, then suitable proceedings under the Act can be taken in respect of the difference between the true value of investment and the amount disclosed.
Question No. 47 : ‘A’ purchases shares for Rs. 25 lakhs in previous year 1992-93 relevant to assessment year 1993-94. The shares were transferred in his name in assessment year 1994-95 when the market value was Rs. 28 lakhs. The current market value of the shares is Rs. 5 lakhs. On what value and for which year, should the disclosure be made ?
Answer : Investment in shares was made in previous year 1992-93 relevant to assessment year 1993-94, out of undisclosed income. The undisclosed income may relate only to assessment year 1993-94; in which case, the disclosure should be of Rs. 25 lakhs.
Question No. 48 : If disclosure is made on 31-12-1997, would the declaration be held to be valid if total tax payment is made by 31-3-1998?
Answer : Yes.
Question No. 49 : There will be cases where the income disclosed in the declaration from is less than the gross income. The cash to be introduced in the books of account will cash to be introduced in the books of account will consequently be a higher amount. This may create complications at a later stage when the Assessing Officer will only accept the amount specified in the declaration from. What should be done in such cases ?
Answer : Immunity is only is respect of income disclosed. The Commissioner of Income-tax will not go into the computation of income disclosed. The declarant would be well advised to keep with him the calculation sheet.
Question No. 50 : If a search is carried out after a declaration is made, what would be the consequences for the declarant ?
Answer : In respect of amount covered by VDIS no tax would be payable. The declarant will get the benefit of no levy of penalty and no prosecution would be initiated in respect of the disclosed income. In respect of any income other than the disclosed income discovered during the search, or computed on the basis of evidence gathered, the assessee will be liable to tax, interest, penalty and prosecution.
Question No. 51 : If the beneficial owner of a property makes a declaration of income in respect of a property held benami, whether he would get immunity under the Benami Transactions (Prohibition) Act, 1988 ?
Answer : Under the VDIS there is no immunity under the Benami Transactions (Prohibition) Act, 1988. However, in such a case income-tax Department will accept the declaration and treat the asset as belonging to the declarant.
Question No. 52 : Whether a declaration can be made in respect of assessment year for which assessment has been set aside ?
Answer : Where an assessment order has been completely set aside, the assessee can make a declaration for that year because on the date of declaration there is no surviving assessment. Where an assessment order has been partially set aside, the declaration can be made only with regard to the items of income which were not subject-matter of assessment and those which have been set aside.
Circular : 755 dated 25-7-1997
CLARIFICATION 3
MINUTES OF ASSOCHAM MEETING WITH CBDT ON
VDIS, 1997 HELD ON 23-7-1997
Question No. 1: Whether the Department will ask any question in relation to the capacity to earn, source of income or nature of earning in the case of income voluntarily disclosed by ladies, minors or HUFs ?
Answer : No such question would be asked by the Department in regard to the nature or source of earning in respect of the income disclosed by any declarant, including ladies, minors and HUFs.
Question No. 2: In the case of a company making a declaration under VDIS, where the income declared is represented by an asset which is held by a director or shareholder having substantial interest, will such holding of the asset by the concerned director or shareholder attract the provisions in relation to deemed dividend under section 2(22) of the Income-tax Act?
Answer : The provisions of section 2(22) will not be attracted in case where income declared by the company is represented by an assets held on behalf of the company by its director/shareholder.
Question No. 3: In view of the provisions of section 64(1) of the Finance Act, 1997, can a person declare [subject to the provisions of section 64(2)] any income for assessment year 1962-63 to assessment year 1997-98, which falls under clause 64(1)(a), (b) or (c) ?
Answer : Yes.
Question No. 4: Can a declaration for assessment year 1997-98 be filed by a person after the due date for filing the income-tax return under section 139(1) of the I.T. Act, but before the last date under the Scheme, i.e. , 31st December, 1997 ?
Answer : Yes.
Question No. 5: If the proceedings are initiated under section 132, 132A or 133A, after the filing of the declaration by the declarant but before the payment of taxes under the Scheme within the stipulated period of three months, whether the declarant would be entitled to immunities under the Scheme in respect of the income already declared ?
Answer : Yes.
Question No. 6: Section 64(2)(ii ) prohibits disclosure of income in respect of the previous year in which a search under section 132 was initiated or in respect of earlier previous years. This implies restriction in the case of a person in whose case search proceedings are initiated under section 132 by issue of search warrant. Keeping this in view, can disclosure be made for the earlier years, in a case which in inter-connected with some search proceedings, but where no direct search is initiated or no search warrant is issued under section 132 ?
Answer : Yes, there would be not bar for disclosure such cases where no direct is initiated under section 132.
Question No. 7: Section 69 states that the voluntarily disclosed income shall not affect finality of completed assessments. However, there seems to be no bar on making disclosure of income for any assessment year for which the assessment proceedings are pending finalisation or are under progress by way of scrutiny assessment (or even under course of investigation) under section 143(2) and availing relevant immunities under the Scheme in regard to such disclosure. Kindly clarify ?
Answer : A declarant avail immunities the Scheme in respect of any income disclosed before the finalisation of the assessment proceedings, even if detection of such undisclosed income is made during the course of scrutiny or investigation. Where an assessment is completed, immunities can be availed only in respect of any income disclosed which is over and above the assessed income. What section 69 prescribes is that the declarant shall not be entitled to claim any set off or relief in respect of the voluntarily disclosed income towards any income already assessed.
Question No. 8: Where during the course of the appeal proceedings, the entire assessment has been set aside and the Assessing Officer is required to frame an altogether fresh assessment order, can the declarant make disclosure of income for the concerned assessment year ?
Answer : If on the date of declaration, there is no surviving assessment, there should not be any difficulty for the declarant to make any disclosure for the concerned assessment year.
Question No. 9: Section 64(1) of the Finance Act, 1997 refers to disclosure of "any income chargeable to tax under the Income-tax Act". This implies that income exempt under section 10 need not be disclosed. Similarly, the income chargeable to tax needs to be computed in accordance with the provision of the Income-tax Act. Kindly confirm the current position in this regard ?
Answer : The disclosure of the income under the Scheme is required to be made in respect of "income chargeable to tax" as per the provisions of the Income-tax Act and hence the income exempt under section 10 need not be disclosed. Similarly, the computation of income chargeable to tax would be in accordance with the provisions of the Income-tax Act.
Question No. 10 : It needs to be clarified that no wealth-tax will be payable by the declarant for any assessment year upto and including the assessment year 1997-98 in respect of the assets specified in the declaration made as representing his voluntarily disclosed income. This is the only view that can be logically considered in the light of the clear provisions of section 73(1) of the Finance Act, 1997. Confusion has arisen in this regard on account of the erroneous interpretation as contained in the CBDT’s Circular No. 753 (para 11) and Circular No. 754 (answer to question No. 19).
Answer : There will be no wealth-tax liability on the declarant in respect of the assets specified in the declaration made as representing his voluntarily disclosed income right from the year of disclosure up to assessment year 1997-98. The wealth-tax liability in respect of the disclosed assets shall arise only from assessment year 1998-99 onwards. The interpretation in this regard as contained in Circular Nos. 753 and 754 to the above extent should be read as duly modified.
Question No. 11 The sale of an immovable property was originally shown at Rs. 7 lakhs. The declarant now discloses the correct sale value at Rs. 15 lakhs and pays the tax at the rate of 30% on the difference. Would he be held liable to prosecution or fine under section 276AB of the Income-tax Act for contravening the provisions of Chapter XXC of the Income-tax Act ?
Answer : In view of the provisions of section 71 of the Finance Act, 1997, the declaration made under section 64(1) not being admissible as evidence against the declarant for any proceedings relating to imposition of penalty or for the purpose of prosecution under the Income-tax Act, the question of any prosecution or fine under section 276AB would not arise.
Question No. 12 : Can the Assessing Officer initiate penalty proceedings under section 271A for failure to maintain accounts, 271B for failure to get accounts audited, 271C for failure to deduct tax at source, sections 271D and 271E for failure to comply with the provisions of section 269SS and 269T, in regard to connected transactions which give rise to such undisclosed income which is declared under the Scheme ?
Answer : In view of the provisions of section 71 of the Finance Act, 1997 which clearly assure that the declaration shall not be admissible in evidence against the declarant for the purpose of any penalty or per section under the Income-tax Act, no such penalty proceedings can be initiated by the Assessing Officer with reference to any transaction which relates to the income declared under the Scheme.
Question No. 13 : Keeping in view the reply to question No. 18 under the CBDT’s Circular No. 754 dated 10-6-1997, in case the declarant declare his undisclosed income as lying in the form of "receivables", recoverable from the debtors and credit the same in his books of accounts after 31-121997 ?
Answer : There should be no difficulty for the declarant in doing so.
Minutes: Assocham meeting dated 23-7-1997.
OTHER CLARIFICATIONS
CLARIFICATION REGARDING JEWELLERY
1
AFFIDAVIT FOR JEWELLERY : PRESS RELEASE DATED NIL
Circular No. 755 issued under the Voluntary Disclosure of Income Scheme, 1997 laid down that all jewellery declarations have to be supported by some evidence to show the year of acquisition. The Central Board of Direct Taxes has clarified that, inter alia, an affidavit by a declarant or other person specifying the year of purchase of jewellery would constitute evidence. In case the jewellery was valued for some purpose, a copy of the valuation report mentioning the date of valuation would also be treated as ‘some evidence’ regarding the year of acquisition.
2
AFFIDAVIT FOR JEWELLERY : EXTRACT OF MEMBER (INV.)’S D.O.
LETTER NO. M(INV)/VDIS/97/3153, DATED AUGUST 8, 1997
ADDRESSED TO ALL CHIEF COMMISSIONERS OF
INCOME-TAX AND ALL DIRECTORS OF INCOME-TAX (INV.)
It is hereby clarified that "Some evidence" as mentioned in answer to question No. 28 in Circular No. 755 will include—
(a) an affidavit or a self-declaration by the declarant mentioning the year of purchase of jewellery;
(b) in case the jewellery was acquired at the time of marriage, a declaration to that effect mentioning the date of marriage;
(c) where the jewellery was valued earlier for some purpose, a copy of the valuation report mentioning the date of valuation will be treated as "some evidence";
(d) if the jewellery was inherited from someone and was not declared, an affidavit or a self-declaration that states that the property was inherited from Mr. .......... in the year ........
3
VALUATION OF JEWELLERY : EXTRACT OF MEMBER (INV.)’S D.O.
LETTER NO. M(INV.)/VDIS/97, DATED AUGUST 14, 1997
ADDRESSED TO ALL CHIEF COMMISSIONERS OF INCOME-TAX
AND ALL DIRECTORS GENERAL OF INCOME-TAX (INV.)
A doubt has been raised in some quarters that where jewellery or bullion is acquired during the previous year, relevant to the assessment year 1987-88 or subsequent years whether the valuation as on 1-4-1987 should be taken as the value. The confusion has arisen because of answer to question No. 16 in Circular No. 754, the point has been made clear while answering question No. 28 of Circular No. 755. It is confirmed that where the jewellery or bullion was acquired during the previous year relevant to assessment year 1987-88 or subsequent years, the value at the time of acquisition will be taken to be the value, This point may be clarified to all the officers as well as to the tax payers, Declaration filed without affidavit prior to the issue of the press note shall be treated as valid.
4
SILVER UTENSILS : DO NO. 3760/M/INV.-VDIS/97, DATED 3-10-1997
Reference has bee received from several Commissioners as to the treatment to be given regarding disclosure of silver utensils and other articles which are not covered by the definition of jewelery like gold/ silver coins, watches. The law as it stands now does not prohibit declaration of silver utensils or other assets which are to covered by the definition of jewellery at the value at which they were acquired. Therefore, in all cases of such declarations, the assessee should be asked to file an affidavit indicating period of acquisition of those articles and also the number/weight of these articles and on receipt of this affidavit, declaration should be accepted and certificate should be issued as per law.
5
WHERE DECLARED JEWELLERY TO CLAIMED TO HAVE BEEN SOLD : DO NO 3965/M/INV.-VDIS/97, DATED 16-10-1997
Instances have come to notice where declarants have declared jewellery but have also claimed that they has sold these prior to the date of declaration. According to the scheme, the declarant has to declare the asset that he holds at the time of making the declaration. Therefore, such declarations are contrary to the provisions of the Scheme. Such cases of declarations should not be accepted. Necessary instructions may be issued to the Commissioners.
6
VALUATION OF JEWELERS : CC/CO-ORDN./PRO/VDIS-Q/97-98,
DATED 10-10-1997*
It has been brought to the notice of the Chief Commissioner that under the VDIS some disclosures are being made in terms of "packet of loose diamonds" giving gross weight of these diamonds. This has raised some confusion leading to complication in issue of certificate for such declaration.
2. The matter has since been examined and has been looked into by the CCIT. I am directed to say that under rule 8D of the Wealth-tax Rules, the valuation report in respect of jewellery including precious metals (diamonds) is required to be submitted in Form O-8 of W.T. Rules.
Further, the prescribed from for statement of valuation of jewellery is given in Form No. O-8A of the W.T. Rules. This Form also required mentions of value of each precious or semi-precious stone.
LETTER D.O. NO. 296/31/97-IT (INV. III), DATED 25-11-1997
Instruction were issued by letter dated 3-10-1997 to the effect that in the case of disclosure of silver utensils/gold or silver coins, etc., which are not covered by the definition of "jewellery", the value as on the date of acquisition will be adopted for the purpose of determining income under VDIS. It was also mentioned that an affidavit indicating the period of acquisition of those articles could be treated as evidence of period of acquisition.
2. It is notice that a large number of unscrupulous tax-payers are misusing the provision and declaring unusual amount of silver articles, utensils, gold coins which as per their claim were acquired long back, say 1963-64, etc. Apparently, this is an attempt to reduce the burden of tax as value of silver in those days was much below the value that prevails now.
3.The matter has been reconsidered by the Government. It is now decided that in all such cases of unusual declaration of silver articles, utensils, gold or silver coins, watches, etc., it should be treated as if they have been acquired in the current year unless the declarant is able to produce credible and satisfactory evidence about the year of acquisition. A simple affidavit would not suffice. Where such evidence is not produced, the value as on 1-4-1997. In cases where certificates have already been issued, the Commissioners concerned should call the declarants and ask them to produce credible and satisfactory evidence of the year of acquisition, failing which the Commissioners should take steps to review the certificates.
PRESS NOTE, DATED 3-12-1997
Queries have been raised in certain quarters as to what is meant by the term ‘jewellery’ under the VDIS, 1997. It had been clarified through Circular No. 753, dated 17th June, 1997, that the expression "jewellery" shall have the same meaning as assigned to it in Explanation (a) to clause (ea) of section 2 of the Wealth-tax Act, 1957/Explanation 1 to clause (viii) of section 5 of the Wealth-tax Act, 1957. As per this definition "jewellery" includes,—
(i) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stones, and whether or not worked or sewn into any wearing apparel;
(ii) precious or semi-precious stones, whether or not set in any furniture, utensils or other article or worked or sewn into any wearing appeared.
This definition applies to disclosures and declarations made under VDIS. The date for purposes of valuation will be 1-4-1987 for acquisitions made prior to that date. For acquisitions made subsequent to 1-4-1987, the year of acquisition will be the relevant year for valuation.
CBDT hopes that this Press Release will set at rest unnecessary and erroneous impressions on this issue.
In respect of valuable articles such as silver utensils, gold coins, etc., not falling within the definition of ‘jewellery’, the CBDT communication dated 25-11-1997 (see below) will apply. A quick review of the information furnished by the Commissioners indicates that there were only a small number of cases (out of the several thousand declarations) where the quantity of disclosed silver utensils, gold coins, etc., appears to be of an unusual nature. It is only these small number of cases which will be reviewed by the Commissioners concerned. In all other cases, where the quantity of disclosed silver utensils, gold coins, etc., is normal, the Commissioner’s certificate will stand and will not be reviewed. New declarations of a normal nature will also continue to be accepted and certificates will be issued promptly. The object of the communication dated 25-11-1997 was to curb any obvious misuse of VDIS, and it is hoped that this objective will be appreciated by the general public.
PERMISSION TO HOLD ASSETS ABROAD UNDER VDIS :
PROCEDURE FOR FERA CLEARANCE
RBI’S PRESS RELEASE DATED 4-7-1997
The Government of India has introduced the Voluntary Disclosure of Income Scheme (VDIS), 1997 as indicated in Chapter IV of the Finance Act, 1997. Those wishing to take advantage of the Scheme, are inter alia, required to furnish details of the assets held by them, the name in which the assets are held and the amount. If the assets declared include assets held abroad then such declarants will required to obtain permission under the provisions of the Foreign Exchange Regulation Act (FERA) to hold assets abroad.
In pursuance of the announced Scheme it has been decided that declarants will be given permission under FERA to hold; (i) immovable properties up to one house or one flat/apartment; (ii) existing investments in shares, securities, bonds, debentures, and life insurance policies provided that in the case of insurance policies, bonds and debentures, the maturity value will not be allowed to be reinvested in any manner and should be repatriated to India on maturity and (iii) fixed deposits, provided that they will be allowed to run till their maturity and the proceeds will be repatriated thereafter. Current/Saving accounts will be allowed to be maintained if these is neat to do so for purposes such as collection of current income on investments, etc., subject to maintenance of minimum necessary balances. Excess over the minimum balance should be repatriated to India.
Those wishing to take advantage of the VDIS and declare assets abroad should approach the Reserve Bank of India for necessary permission in Form FAD-I indicated in Exchange Control Manual Vol. 11 together with a copy of the certificate issued by the Commissioner of Income-tax within 30 days of receiving the certificate.
OTHER CLARIFICATIONS
CALCULATION OF INTEREST : DO NO. 3953/M/INV/VDIS/97, DATED 15-10-1997
Doubts have been raised as to method of calculating interest on delayed payment of tax under VDIS-1997. The matter has been considered in the Board and it is decided that the period of 30 days will constitute a month and to be calculated with reference to date of filing of declaration. However, for period short of 30 days, interest will be charged for the entire month. The following example will clarify the position :—
A files declaration on 25-8-1997 and pays taxes on 3-10-1997.
In this case, the period of delay will be reckoned as under :—
25-8-1997 to 24-9-1997 - One month
25-9-1997 to 3-10-1997 - Part of a month. However, interest will be charged for the whole month. Thus, in the above example, A will have to pay interest for two months.
INSTRUCTIONS ISSUED BY RESERVE BANK OF INDIA TO ALL ITS PUBLIC
ACCOUNTS DEPARTMENTS AND CHAIRMAN/MANAGING DIRECTORS
OF STATE BANK OF INDIA AND ITS ASSOCIATES AND 14 BANKS
(NATIONALISED IN 1969). VIDE GB NO. 2/42.01.001-98-99,
DATED JULY 1, 1997 AND GB NO. 3-42.01.001-99-98
DATED JULY 1, 1997
We advise that the Voluntary Disclosure of Income Scheme has come into force with effect from 1st July, 1997. Under the scheme any individual, HUF, Company, Trust, NRI etc. can declare undisclosed income and pay tax at 30% (35% for corporates and firms). According to the Income-tax Department, the scheme covers declarations of income, cash, jewellery, property and any other asset in India or abroad. The person making a disclosure would have to file a declaration in a prescribed form before the Commissioner of Income-tax.
2. Accordingly, the declarations will be approaching your bank’s branches for payment of the tax under the scheme. It will be necessary for your office to make adequate arrangements for receipt of such taxes. It should be noted that no assessee/declarant should be turned away under any circumstances. As regards the form of declaration and the attendant formalities etc., the assessee declarant may be advised to approach the Commissioner of Income-tax as the required forms are available in the Income-tax Department.
3. Necessary instructions in the matter during the branches to gear up the machinery for receipt of taxes under VDIS, may be issued immediately. It may also be made clear that the currency chest branches should not refuse to accept the remittances/deposits from other bank branches at the centre during the currency of the scheme.
CLARIFICATION REGARDING FERA : PRESS RELEASE DATED 18-6-1997
Section 71 of the Finance Act, 1997 provides that a declaration under the VDIS shall not be admissible in evidence against a declarant for the purpose of any proceeding relating to imposition of penalty or for the purposes of prosecution under four Acts, including FERA. In the first place this section provides a rule of evidence. Secondly, it is obvious that this section will apply only in the case of "undisclosed" income which is disclosed under the VDIS. Where proceedings have been initiated against a person under FERA or a summons has been issued to him or an enquiry is pending against him or a prosecution has been launched against him, it is obvious that he cannot purport to "disclose" any income, which is the subject matter of such proceedings. The rule of evidence contained in section 71 would have no application in such a case. Those proceedings will, therefore, continue in accordance with the law. Hence, no unusual benefit will be conferred under the VDIS upon persons who are facing enquiries or proceedings or prosecutions under FERA.
The Ministry of Finance has also clarified that surveys, searches etc. under the Income-tax Act as provided for under various sections will continue and the VDI Scheme will in no way interfere with the normal action of the Government.
AUTHORISED BANK BRANCHES AND RBI TO
ACCEPT VDIS TAXES : RBI’S PRESS RELEASE, 1997-98/5
The Reserve Bank of India has advised all its offices handling Government work (acceptance of direct taxes) and all controlling offices of State Bank of India, its associates and public sector banks to make adequate arrangements to receive taxes under the Voluntary Disclosure of Income Scheme (VDIS). Banks have also been instructed to advise all their branches authorised to collect income tax to gear up their machinery and ensure that all assessees/declarants are in a position to pay the taxes without any difficulty.
It may be noted that under the VDIS announced by the Government which commenced today, special challans have to be collected from the office of the Income-tax Department before depositing taxes in authorised bank branches.
CLARIFICATIONS BY CHIEF COMMISSIONER, BOMBAY
1
CLARIFICATIONS DATED 12-9-1997
Question No. 1: Whether excessive expenditure claimed against income from other sources in a return filed in July, 1997 for assessment year 1996-97 (after the commencement of VDIS) can be disclosed under the Scheme.
Answer : Yes
Question No. 2: An assessee received NRI Gift of Rs. 1 lakh under the Foreign Exchange (Immunities) Scheme 1991 during the assessment year 1993-94. The said assessee received summons under section 40 of FERA Authorities. Till date he has not received notice under section 148 of the Income-tax Act. Whether the above amount of Rs. 1 lakh can be disclosed under VDIS 1997.
Answer : No. It cannot be disclosed under VDIS.
Question No. 3: In respect of deduction under section 80-O claimed at an higher figure in the return of income filed, whether a negotiated settlement can be made with the Commissioner of Income-tax in respect of dispute relating to deduction under section 80-O and such amount can be disclosed under VDIS.
Answer : Since the VDIS does not provide for any settlement procedure, no prior ruling binding on Assessing Officer can be given by the C.I.T. However, problems in individual cases, if any, can be discussed with the Commissioner.
Question No. 4: Whether VDIS can be made under the following circumstances :
(a ) A.Y. 1992-93 : Notice under section 148 issued before 1-7-1997 and return filed before 1-7-1997.
(b ) A.Y. 1993-94 : Notice under section 148 issued after 1-7-1997 and return to be filed as on 27-8-1997.
(c ) A.Y. 1994-95 : No Notice under section
& 1995-96 148 issued so far.
(d ) A.Y. 1996-97 : Assessment proceedings in progress.
Answer : Yes
Question No. 5: Whether disclosure can be made under VDIS in relation to a deduction claimed from gross total income in the return of income filed for the assessment year 1996-97 as the assessee apprehends that the deduction claimed may not be allowed in the light of a view taken by the Department on the issue which came to the notice of the assessee after filing the return of income. The assessment proceedings for assessment year 1996-97 are already in progress and the Assessing Officer has called for certain details in respect of the deductions claimed.
Answer : Yes
Question No. 6: Whether disclosure under the VDIS will be permissible in relation to deductions claimed from gross total income in the returns of income for years prior to assessment year 1996-97 under each of the following different circumstances,
(i ) The assessment has already been completed, granting the deductions, and a Notice under section 148 was issued before 1-7-1997 and the return was also filed before 1-7-1997.
(ii ) The assessment has been completed granting the deduction and a Notice under section 148 is issued after 1-7-1997 but return of income has not been filed so far.
(iii ) The assessment has been completed granting the deductions and a Notice under section 148 has been issued after 1-7-1997 and the return of income has been filed in pursuance of the said Notice.
(iv ) The assessment has been completed granting the deductions but no Notice under section 148 has yet been issued and there is still time for issuing Notice under section 148 and the assessee apprehends that the deductions already granted may be sought to be disallowed by re-opening the assessment under section 148 in the light of the view taken by the Department on similar issues in other cases.
Answer : Under section 64(2)(i) of the VDIS 1997 the benefit of the disclosure is not available only in respect of the assessment year for which notice under section 148 of the Income-tax Act has been served upon the declarant and the return has not been furnished by the declarant before the commencement of this scheme (1-7-1997). In all other cases the benefit of declaration will be available to the declarant.
Question No. 7: If the Answers to the above questions are positive, whether the Assessing Officer is bound to consider the disclosures while framing the assessment for assessment year 1996-97 and the re-assessments for earlier years and NOT make any addition in respect of the deductions claimed earlier but in respect of which VDIS Declarations have been filed, tax paid and intimation given to Assessing Officer.
Answer : While completing the re-assessment the Assessing Officer will allow the benefit of disclosure under VDIS in respect of the income disclosed over and above the returned/assessed income.
Question No. 8: Whether an intimation by the assessee to the Assessing Officer, enclosing a fresh tax computation in which deductions are NOT claimed would be treated as sufficient compliance with the requirement of ‘credit’ in "any other records"?
Answer : Yes
Question No. 9: ( a) If a notice under section 148 or 142 (1) is issued after the scheme becomes operational (i.e. after 1st July, 1997), can the assessee take the benefit ?
( b) If yes, whether the filing of return in response to notice under section 148 or 142 (1) is a condition precedent ? And if so, whether the declaration is required to be filed before filing of the return or the same can be filed after filing of the return ?
Answer : ( a) Yes.
( b) Filing of the return in response to notice under section 148 or 142(1) is not a condition precedent in the circumstances stated above.
Question No. 10 : The immunity provided under section 71 of the Finance Act being confined to the provisions of the Income-tax Act, Wealth-tax Act, FERA and Company Law, would a person making a declaration in respect of the gold ornaments owned, possessed or held by him (out of undisclosed income) become liable for penal action under the Gold Control Act, which was in force until June, 1991, if his holding together with items covered under the declaration exceed the ceiling laid down under the said Act ?
Answer : Since Gold Control Act, 1968 has been repealed in June 1990 by the Gold (Control) Repeal Act, 1990 the question of penal action or starting of enquiry under the said Act does not arise.
Question No. 11 : Can a dealer in gold ornaments and jewelleries make a declaration in respect of the undisclosed stock in gold ornaments, diamonds and other precious stones by adopting the valuation as on 1st April, 1987 in respect of the purchases of the said items made before the said date ?
Answer : Yes
Question No. 12 : Considering such a dealer was liable to file or make certain declaration in respect of his personal holdings of gold ornaments as well as the stock in trade before the Gold Control Authorities, whether such a declaration under the VDIS, would be starting point for initiating penal action under the said Gold Control Act ?
Answer : Since Gold Control Act, 1968 has been repealed by the Gold (Control) Repeal Act, 1990 the question of penal action or starting of enquiry under the said Act does not arise.
Question No. 13 : Under the provisions of the Gold Control Act, even the partners of a firm dealing in gold ornaments, were under an obligation to make a declaration of their personal holding and even subsequent acquisition so long as the said Act was in force, and even whether a declaration under the VDIS now made covering certain items of Gold Control Act render the person concerned liable for penal action under the said Act ?
Answer : Since Gold Control Act, 1968 has been repealed by the Gold (Control) Repeal Act, 1990 the question of penal action or starting of enquiry under the said Act does not arise.
Question No. 14 : A trader makes a declaration under the VDIS covering all the realisable investments and advance made by him out of his undisclosed earnings, ignoring certain debts, which he considered to be not realisable. Can such a person subsequently on realisation of the said debts or on being assured of its recovery file a second/revised declaration subsequently ?
Answer : No. Please refer Answer to question Nos. 18 and 37 issued by CBDT vide Circular Nos. 754 and 755.
Question No. 15 : In so far as no immunity has been provided by the State Governments under the Sales Tax Laws, can a dealer make a declaration in respect of his unaccounted purchase and sales not of the estimated sales tax liabilities under such sales tax laws and yet claim full immunity under the Income-tax Act in respect of the entire gambit of such transactions ?
Answer : In view of provisions contained in section 43B of Income-tax Act, 1961 a deduction of sales tax is allowed from income on actual payment basis. Declarants are advised to claim such deductions only in the year of actual payment.
Question No. 16 : Will a person in the event of search and seizure be entitled to immunity in respect of the items covered in the declaration, which though handed over to his tax consultants or advocates for submission to tax authorities, has remained to be submitted till the date of such search and seizure action or where such a declaration is in course of transmission by post or otherwise; presuming that the declarant has not made the payment with interest as provided under the Scheme ? Will it make any difference, if the tax has been paid before hand ?
Answer : The declarant will get the benefit of declaration only if he has either filed a declaration or made a payment of VDIS tax before the search.
Question No. 17 : A trader who in good faith makes a declaration of the concealed profits arising out of the cost of goods having been inflated in the past years, and if the trader is not in a position to maintain the adjusted gross profit margin as emerging in the subsequent year, will the tax authorities be justified in drawing adverse inference from the declaration so made under the VDI Scheme ?
Answer : The fact of declaration under the VDIS will remain confidential and therefore would not come into the consideration of the tax authorities while making the assessment in respect of the year other than the year of declaration.
Question No. 18 : In the context of the proceeding which are pending in the cases of a bank involved in the charge of money laundering, can a person holding term deposits with the said bank in fictitious name make a declaration in respect of such investments in term deposits under the VDI Scheme, particularly considering that so far no action has been initiated against the declarant in respect of the said deposits receipts and that he has not lodged any claim before the tax authorities in this behalf ?
Answer : If the fact of the term deposits has been discovered in the course of search and seizure or survey action the deposit holder cannot make the declaration in view of the provisions of section 64(2) and section 78. This is also explained in Q. Nos. 29 and 35 of Circular No. 755.
Question No. 19 : If undisclosed assets are declared and related to voluntary disclosure income, then section 73(1) and the CBDT’s clarification exempts them from the levy of wealth tax up to the assessment year 1997-98. But if undervaluation of assets is disclosed, whether such exemption would be available raises a debatable question. Logic demands that exemption should be available even for such disclosure ?
Answer : Such undervaluation is covered by the Scheme and wealth-tax on enhanced valuation will be payable from assessment year 1998-99 and onwards.
Question No. 20 : Section 64 of the Finance Act, 1997 states declaration under VDIS can be furnished in respect of income for any assessment year for which there has been a failure to disclose income in a return furnished under the Income-tax Act before the date of commencement of this Scheme. To claim VDIS benefits under such circumstances, returns should have been furnished before commencement of the Scheme. So anyone who has not furnished return of income for assessment years 1996-97 and 1997-98 before the commencement of VDIS cannot furnish declaration under the said Scheme for such assessment years. The benefit proposed to be given to non-filers of returns is, prima facie, extra legal ?
Answer : Such declarants are covered by the scheme.
Question No. 21 : A Partnership firm have accumulated over the years certain credits in their suppliers accounts. These credits are not payable as they represent credit notes which has been adjusted by the firms while settling the bills. This being a 44AB case, in case the partnership firm disclose whether the Auditor is protected ?
Answer : Yes.
Question No. 22 : A Partnership firm has to pay 35 per cent Income-tax under the Disclosure Scheme. To save 5 per cent, can the income of the partnership be transferred to partners account and declare under individual disclosures.
Answer : Since the income belongs to the firms and not the partners, the firm has to make the disclosure.
Question No. 23 : What is the method of valuing jewellery, will the Government and tax people accept my valuation date ?
Answer : The jewellery has to be valued by a Government approved valuer and supported by a affidavit or other evidence that it was purchased on the said date of purchase.
Question No. 24 : Does that mean that first valuer’s report and then affidavit must be obtained. How can we know who all are valuer approved by the Government ?
Answer : They can be obtained in whatever sequence, it does not matter as long as both are submitted along with the declaration. The list of approved valuers is available in all Income-tax Offices.
Question No. 25 : A Partnership Firm wish to file declaration under VDIS for the assessment year 1996-97. Can the firm file a combined return consisting of its regular income in the year as well as hitherto undisclosed income for previous years.
Answer : No. It has to file separate declaration for VDIS in respect of all the hitherto undisclosed income.
Question No. 26 : Can a minor child avail of the VDI Scheme ? Can a minor child of an NRI (foreign passport holder) also declare ?
Answer : Yes.
Question No. 27 : If the Answer is yes, who makes the declaration on the minor’s behalf ?
Answer : The guardian can sign the declaration.
Question No. 28 : Whether declarants under the VDIS Scheme be actually immune from future prosecution ? Can laws be changed in the future ?
Answer : The VDIS Scheme has Parliamentary approval. The benefit of disclosure will be available.
Question No. 29 : Whether, when the declarant desires to disclose the investment in cash purchase of stock in a sum of Rs. 5 lakhs in VDIS 1997, he will have to separately, apart from Rs. 5 lakhs, disclose 20 per cent of Rs. 5 lakhs (i.e. 1 lakh) under section 40A(3) of the Income-tax Act, 1961.
Answer : Disclosure of Rs. 5 lakhs will cover entire cash purchase.
Question No. 30 : What are the formalities for bringing back money from outside ?
Answer : In this regard a press release has been issued by Alpana Killawala, Deputy General Manager, Reserve Bank of India on 4th July, 1997. The relevant part of the press release is as below :
"In pursuance of the announced scheme it has been decided that declarants will be given permission under FERA to hold, (i) immovable properties upto one house or one flat/apartment (ii) existing investments in shares, securities bonds, debentures, and life insurance policies, provided that in the case of insurance policies, bonds and debentures, the maturity value will not be allowed to be reinvested in any manner and should be repatriated to India on maturity and (iii) fixed deposits, provided that they will be allowed to run till their maturity and the proceeds will be repatriated thereafter. Current/savings accounts will be allowed to be maintained if there is need to do so for purposes such as collection of current income on investments, etc., balance. Excess over the minimum balance should be repatriated to India.
Those wishing to take advantage of the VDIS and declare assets abroad should approach the Reserve Bank of India for necessary permission in Form FAD-I indicated in Exchange Control Manual Vol. II together with a copy of the certificate issued by the Commissioner of Income-tax within 30 days of receiving the certificate".
* Subject to maintenance of minimum necessary.
2
CLARIFICATION DATED 29-8-1997
Question No. 1: Whether the certificate can be issued by speed post ?
Answer : The choice may be left to the declarant; i.e., if he desires the certificates to be issued to his Authorised Representative, it may be delivered to the Authorised Representative. If he desires it to be despatched by speed post it may be so despatched.
Question No. 2: Whether loose diamonds are jewellery ?
Answer : Clause (iii) of section 73(1) of the VDIS-1997 provides that the term jewellery shall have the same meaning as assigned to it in Explanation 1 to clause (viii) of sub-section (1) of section 5 of the Wealth-tax Act. The said explanation defines jewellery as under :
"(a) Ornaments of gold, silver, platinum or any other precious metals or any other alloy containing one or more of such precious metals, where or not containing any previous or semi-precious stone, and where or not worked or sewn into any wearing apparel;
(b) Precious semi-precious stones, whether or not set in any furniture, utensils or other article or worked or sewn into any wearing apparel."
In view of the above, the loose diamonds are covered within the meaning of jewellery. Silver/gold utensils will also be covered within the definition of jewellery.
Question No. 3: Whether declaration can be made in respect of assessment years where time for filing return has not expired and also the returns of income have not been filed ?
Answer : Where the date for filing the Return has not expired and the assessee has not filed the Return, the declaration will be covered by the scheme.
Question No. 4: Whether in respect of gifts received self declaration will constitute evidence ?
Answer : This point is covered by para-2(b) of Member Investigation’s letter No. M/Inv./VDIS/97, dated 8-8-1997 wherein it is stated that in case the jewellery was acquired at the time of marriage a declaration to that effect mentioning the date of marriage will be covered by some evidence.
Source : MC No. 266/Form(M)/VDIS/1997-98.
3
PRESS RELEASE DATED 27-8-1997
One of the frequently sought clarification in respect of VDIS is whether in cases where taxes in VDIS challan are deposited in the bank in Government account periodically and if search is conducted before making the declaration but after payment or part payment of tax, the declarant would get the benefit or proportionate benefit of the VDIS.
The matter has been considered by the CBDT. It is clarified that if the declarant is holding the relevant challan for VDIS payment, then to that extent, he would enjoy protection of the VDIS. The declarant would not be denied the benefit of the Schedule if he has already made the payment of tax which is done in terms of a special challan even if there is delay in making the declaration and search action takes place before declaration is filed.
4
PRESS NOTE DATED AUGUST, 1997
1. Central Board of Direct Taxes has further clarified certain aspects of this Scheme.
2. As regards Wealth-tax liability in respect of Income disclosed under VDIS is clarified that no Wealth-tax is payable for any assessment year upto assessment year 1997-98 irrespective of the assessment year for which the income disclosed under the Scheme.
3. As regards disclosure of income represented by jewellery declared in respect of an assessment year prior to assessment year 1997-98 some evidence to show the year of acquisition has to be filed with the declaration, which should also accompany with Valuer’s report in respect of the declared jewellery. Purchase bill in respect of the jewellery may not be necessary. The declarant has the choice of evidence including his own affidavit in this regard.
4. Where the assessment order has been completely set aside and there is no surviving assessment, a declaration can be made in respect of that assessment year. Where the assessment has been set aside partly, declaration can be made with regard to items of income which were not subject matter of assessment and those which have been set aside.
5. In case of survey under section 133A declaration can be made in respect of any assessment year other than the year of survey. This position applies also in respect of survey under section 133A(5) relating to expenses incurred on ceremonial occasions.
6. Chief Commissioner of Income-tax, Mumbai has constituted a local committee on VDIS for Mumbai Region comprising of himself, three Commissioners, three Representatives from Businessmen and two Chartered Accountant and two Advocates with a view to facilitate disclosures in Mumbai Region under the VDIS 1997.
5
PRESS RELEASE, DATED 13-8-1997
The Central Board of Direct Taxes has further clarified certain aspects of this scheme.
2. The onus of satisfying that the declarant does not come under the prohibited category lies entirely on the person making the declaration. Hence, no enquiry shall be made by the department before issue of certificates.
3. Apart from the Statutory Forms, even locally printed declaration forms that are in conformity with the Statutory Forms can be used for filing declaration and payment of taxes.
4. To prove the year of purchase of jewellery a mere affidavit or a self declaration will be sufficient.
5. The RBI has stated that declarants under VDIS will be given permission under FERA to hold to immovable properties, investments in shares, securities, etc. Fixed deposits under certain conditions as mentioned in the Press Release dated 4-7-1997.
Those wishing to declare assets abroad under VDIS should approach the RBI for necessary permission in Form FAD-I indicated in Exchange Control Manual Vol. II together with the copy of the certificate issued by the Commissioner of Income-tax, within 30 days of receiving the certificate.
CLARIFICATION BY PUNE CHIEF COMMISSIONER’S
LETTER DATED 15-7-1997 TO THE COMMISSIONERS
[EXTRACT FROM THE CC’S LETTER NO. PN/CC/VDIS/97-98
DATED 15-7-1997 TO ALL THE COMMISSIONERS]
Question No. 1: Whether enquiry has to be made with the declarant to the effect that he is eligible to make the declaration under the VDI Scheme 1997 and that he is not hit by any of the disabilities mentioned in section 64(2) or section 78 of the Finance Act, 1997 ?
Answer : No enquiry is to be made when a person files a declaration under the VDI Scheme, 1997.
Question No. 2: Whether the Commission should carry-out verification with the outside agencies before issuing the certificates or else obtain an affidavit from the declarants to the effect that they are not hit by any of the disabilities mentioned in section 64(2) and section 78 of the Finance Act, 1997 ?
Answer : The CIT will not make any enquiry/verification whatsoever while issuing certificate under section 68(2).
Only when the assessee claims before the Assessing Officer that he has made certain disclosure and to the extent he should not be subjected to double tax, the Assessing Officer will examine whether the assessee was eligible for filing the declaration.
Question No. 3: Whether a person who has not filed his return of income for assessment year 1996-97 or 1997-98 upto 30-6-1997 and on whom no assessment has been made for these years can file a declaration under the scheme for these two assessment years ?
Answer : It is clarified by the Board that reference to section 139 under section 64 will be treated as reference to section 139(1) only. Therefore, persons who have not file return for 1996-97 by the due date are eligible to file declaration under the scheme.
Question No. 4: Whether declaration filed under VDI Scheme will be treated invalid on the ground of its not being full and true if income/assets in excess of what has been declared under the scheme are unearthed during search after the filing of the declarations and before issue of certificate by the CIT ?
Answer : The answer to this Query is No. To the extent the declaration has been made will be treated as valid. Anything discovered after search in excess of what is declared will be dealt with as per the provisions of Income-tax Act, 1961.
Question No. 5: Whether in computing block income under chapter XIV B, the amount declared under VDIS will be treated as income declared ?
Answer : Yes. Since the assessee will be declaring income with reference to a particular assessment year and income for that year will be income declared as per return filed or assessed if any and income returned under the scheme.
VALUATION OF LOOSE DIAMONDS : CLARIFICATION BY
CCIT, MUMBAI : NOCC/CO-ORD/PRO/VDIS-Q/97-98/
DATED 29-10-1997
Reference is invited to letter of even No. dated 10-10-1997 about the disclosure in respect of ‘loose diamonds’. In this letter it was stated that the valuation report for jewellery prescribed in Form O-8 and O-8A under the Wealth-tax Act may be kept in view while dealing with such disclosures.
It has since been represented to the Chief Commissioner that there is some confusion in respect of valuation of ‘loose diamonds’. The Chief Commissioner of Income-tax has since looked into it. I am directed to clarify those points as under :—
1. Where the diamonds are studded and are part of the jewellery the valuation of the jewellery including the diamonds is sufficient. Separate valuation of the diamonds studded in the jewellery is not necessary.
2. Where the declarant gives number of pieces of diamonds and the aggregate weight in Cts. and the value thereof and says that the declared diamonds are of the similar size, that would meet the requirements of the valuation.
3. Where the loose diamonds declared are of different sizes in Cts., the declarant may size-wise specify the number of diamond pieces, for example, as under :
(a) 500 Pieces weighing 13.50 Cts. (0.02 Cts. to 0.03 Cts. each)
(b) 1300 Pieces weighing 69.50 Cts. (0.04 Cts. to 0.05 Cts. each)
___________ _________
2800 Pieces 143.00 Cts.
4. Where the declarant makes the disclosures of ‘diamond dust’ and says that therefore the number of dividual diamonds cannot be identified, the declaration of total weight in Cts. would meet the requirements of the declaration.
Clarification regarding Voluntary Disclosure of Income Scheme, 1997 - Declaration of undisclosed salary by the employees - Action against the employers
LETTER NO. 266/FORMS (M)/VDIS/97-98, DATED 12-12-1997, ISSUED BY THE OFFICE OF CHIEF COMMISSIONER OF INCOME-TAX MUMBAI
As directed, extract of letter No. 296/31/97-IT (Inv. III), dated 8-12-1997 of the Member (Inv.), Central Board of Direct Taxes, New Delhi is reproduced below for favour of information and necessary action :
"Section 75 of the Finance Act, 1997, stipulates that nothing contained in the Voluntary Disclosure of Income Scheme, 1997 (hereinafter referred to as the Scheme) shall be constructed as conferring any benefit, concession or immunity on any person other than the person making the declaration, except as expressly provided under Explanation to section 73(1) of the Scheme.
2. A question has been raised as to whether, in a case where an employee declare his undisclosed salary income under the Scheme, the employer will be proceeded against under section 201(1), 201(1A), 221 or 271 or 271C of the Income-tax Act, 1961 for the purpose of levy of interest/penalties.
3. The issue has been considered by the Government. According to section 192 of the Income-tax Act, any person responsible for paying any income chargeable under the head "Salaries’ shall, at the time of payment, deduct tax on the estimated income of the assessee under that head for the relevant financial year and any failure to do so shall at least levy of penalties and interest on the employer.
4. However, according to section 68(1) of the Scheme, ‘the amount of the voluntarily disclosed income shall not be included in the total income of the declarant for any assessment year under the Income-tax Act’, if the conditions relating to the payment of tax and the credit of the disclosed income in the books of account are duly satisfied. In other words, the income disclosed under the Scheme does not form part of the total income of the assessee under the Income-tax Act, much less being income chargeable under the head ‘Salaries’, within the meaning of section 192.
5. Therefore, strictly construed, the question of liability under section 192 or the consequence for any breach thereof would not arise. In any case, as the information’ relating to the disclosure by the employees will be treated as confidential under the express provisions of section 72(1) of the Scheme, there is no way the same can be used as evidence in any proceedings against the employer. In somewhat similar context, it was earlier clarified answer to Question No. 17 in the Circular No. 754, dated 10th June, 1997 that, if the purchaser of an immovable property declares any undisclosed consideration, the seller will not be proceeded against.
6. It is, therefore, clarified that no action either to impose a penalty or to levy interest shall be initiated against the employer based merely on the disclosure under the Scheme of any salary income by the employees."
OTHER CLARIFICATIONS
RBI CLARIFICATIONS REGARDING VDIS
EOEC CO NRFAD VDIS 812/22, 12.00/97-98, DATED 5-11-1997
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Issue raised
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Comments
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1. Whether RBI approval is necessary
for
repatriation of proceeds to India before disclosing
the income under the Scheme?
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No. RBI approval is not necessary for bringing the
undisclosed income to India through banking
channels.
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2. Where a resident declares immovable
property
held abroad, whether RBI would allow remittance for
maintenance thereof? If the property is rented out,
whether he can pay outgoings (taxes), etc., out of
rent and repatriate the balance?
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The rental income earned can be used for payment
of taxes/ maintenance charges and balance has to
be repatriated to India. If rental income is not
adequate or property does not fetch income, RBI
would permit remittance of reasonable amount for
maintenance, etc., of the property. If the declarant is
holding more than one property, he would be
allowed to keep only one property and remaining
houses/ flats/ apartments have to be sold and
proceeds repatriated to India.
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3. Whether RBI permission is automatic
or
discretionary?
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RBI would grant permission in all the cases where
the Commissioner of Income-tax has issued a
certificate under VDIS, provided the declarant has
already not come to the adverse notice of
Enforcement Director/ RBI
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4.1 ERA violations involve a series
of transactions
over a period. Where immunity is granted under
VDIS, will it cover all the transactions and all
parties?
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(a)
A person who has disclosed income/ assets
under VDIS would get immunity under FERA in
respect of series of transactions relating to disclosed
income unless any of the transactions has already
come to the adverse notice or is being investigated.
(b) The immunity is available only to the declarant
under VDIS and not to others.
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4.2 Person ‘B’, a
non-resident Indian citizen sends a
remittance to Person ‘A’, a resident in India as gift
out of A’s black money abroad. If ‘A’ now wants to
declare the transaction whether he would get
immunity under FERA and whether ‘B’ would also
get immunity under FERA for abetment?
|
(a)
The immunity under FERA would be available to
‘A’ provided he has already not come to adverse
notice of RBI/Enforcement Directorate in regard to
the assets in question.
(b) Normally, immunity is available only to declarant.
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4.3 ‘A’ had sent Rs.
180 lakh in 1981 and got $
10,000 which he invested in a bank deposit. Now he
would get Rs. 3.60 lakh (on maturity). Whether
immunity under FERA is available on the entire
amount? Further, whether he should disclose Rs.
1.80 lakh?
|
As regards the amount to be disclosed, a
clarification may be obtained from I.T. Authorities.
Immunity from FERA would be available to the
amount certified by I.T. Authorities.
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5. ‘A’ had concealed
income of Rs. 1 lakh which was
kept abroad. Of this, he spent Rs. 40,000. Whether
he should disclose Rs. 1 lakh or Rs. 80,000? If he
makes a disclosure of Rs. 1 lakh since he can bring
in only Rs. 60,000, whether immunity is available for
the entire amount of Rs. 1 lakh?
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(a)
The clarification on which amount to declare
should be obtained from Income-tax Authorities.
From reply to question 47 (of the VDIS booklet
published by the Government of India) it appears
that the declarant has to declare the entire amount
of Rs. 1 lakh.
(b) He would get immunity for the amount declared
as certified by I.T. Authorities.
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6. Mauritius Overseas Corporate
Bodies (OCBs) are
floated by Indians by sending black money. Whether
immunity is available only to shareholder who
declares investment in OCB or to both, i.e.,
shareholder as well as OCB?
|
The immunity would be available to the individual for
his investment in OCB. These investments would be
allowed to continue. Income earned from OCB will
have to be repatriated to India. The OCB, being an
entity incorporated abroad, would be subject to the
laws of Mauritius.
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7. BCCI Bank :
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Residents who would have placed deposits
(unauthorised) with BCCI bank might have received
lower amount from liquidator. Which amount
(whether amount of deposit or amount received from
liquidator) should be disclosed?
|
The clarification should be obtained from I.T.
Authorities. From answer to question 47 of the
Government of India’s VDIS booklet, however, it
appears that the amount of deposit should be
disclosed.
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8. Form FAD-1.
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8.1 Certain columns are
not applicable.
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The declarant may indicate against these columns
as "not applicable".
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8.2 Details of bank account/assets
are required to be
indicated.
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If the declarant has any other foreign currency
assets, these should be declared in Form FAD-1.
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9.1 Whether a person against whom
any action has
been/is being taken under FERA, whether he can
made a disclosure under VDIS?
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If a person has already come to the adverse notice
of Enforcement Director/RBI in regard to assets
which he has disclosed under VDIS, immunity from
provisions of FERA would not be available.
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9.2 CBDT has gone one step further.
If assessment
proceedings are going on and tax officer has found
some undisclosed income but not yet passed final
orders, the person can make a declaration under
VDIS and get immunity? Similar facility should be
extended in the case of FERA violations.
|
The scheme is for voluntary disclosure of income for
getting immunity under the provisions of Income-tax
Act and is not a scheme for immunity under FERA.
Immunity under FERA is incidental to the income
from foreign sources declared under VDIS. It is not
the intention that VDIS should be used for closure of
cases already under investigation by ED.
|
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10. Resident Indians who are un-authorisedly
carrying on business as proprietors or as partners in
overseas partnership concern. Whether they should
after disclosure repatriate the amount after paying
tax or whether they should pay applicable taxes for
each year and continue with the proprietorship/partnership? Also whether declarant would
get immunity
under FERA?
|
The declarant should repatriate his share to India
and disclose under VDIS. A resident Indian will not
be allowed to continue proprietorship/ partnership
abroad.
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CIRCULAR NO. CST NO. 1097-1379, DATED 6-11-1997, ISSUED
BY GOVERNMENT OF GUJARAT
Central Government has launched a Voluntary Disclosure of Income Scheme, 1997 (VDIS) to harness untaxed money for productive purposes. The Scheme has inbuilt provisions under which complete confidentiality has been assured in respect of the particulars contained in the declarations which cannot be produced before any court or any other authority. Central Government has, however, requested State Governments to give some assurance allaying the apprehensions of would be declarants regarding inquiries and proceedings under State Acts.
2. Government of Gujarat has taken the following decisions on sales tax liabilities arising out of disclosure under VDIS :
(i) Government of Gujarat has decided to grant remission, under section 55 of the Gujarat Sales Tax Act, of the amount of interest and penalties that may become leviable on evasion of sales tax which is disclosed and paid to the State Government consequent to the disclosure of income under VDIS.
(ii) In respect of sales tax liability arising out of such disclosure, Sales Tax Department will undertake simple assessment based on revised return of sales tax filed by the declarant.
(iii) Sales Tax Department will ensure that no harassment is caused to a declarant under VDIS who has paid the sales tax to the State Government consequent to the declaration under VDIS.
3. However, no immunity shall be granted in the following cases :
(i) in respect of transactions for which a registered dealer in Gujarat has separately collected from his purchaser any amount of sales tax;
(ii) transactions and tax liabilities disclosed by a registered dealer in his returns or declarations earlier filed by him;
(iii) sales tax liability arising out of assessment, reassessment or suo motu revisions already done by Sales Tax Department prior to disclosure under VDIS.
(iv) Sales tax liability arising out of enforcement activities undertaken by Sales Tax Department prior to the declaration and VDIS by a dealer.
4. Sales Tax Department shall implement this decision and issue a circular in this regard.
LETTER NO. CC/CO-ORD/PRO/VDIS-Q/97-98, DATED 31-10-1997
ISSUED BY CCIT, MUMBAI
It has been represented to the Chief Commissioner, Mumbai that persons who have entered into lease transactions of questionable nature want to make declaration under VDIS, 1997 the amount of depreciation and other expenses like brokerage, etc., which are claimed as deduction in respect of such lease transaction and pay tax @ 30%, or 35%, as the case may be Clarification has also been sought as to whether the declarant can adjust against such depreciation and other expenses the amount of lease rent which is offered as income from the lease transaction.
After consultation with the CBDT, the Chief Commissioner of Income-tax, Mumbai has directed me to clarify that in case of lease transactions which are not bona fide, the amount of depreciation and other expenses like brokerage wrongly claimed as deduction can be declared under the VDIS, 1997. The declarant will be well advised to keep his calculation of the declared income which, if necessary, can be produced before the Assessing Officer for necessary action. The Commissioner in his certificate will certify only the amount of income declared and the taxes paid thereon under the VDIS, 1997.
LETTER NO. CC/CO-ORD/PRO/VDIS/97-98, DATED 13-11-1997
ISSUED BY CCIT, MUMBAI
Kind reference is invited to this office letter of even No. dated 10-10-1997 and 29-10-1997 about the disclosure of jewellery and loose diamonds.
2. In letter dated 15-10-1997 it was stated that the Valuation Report for jewellery prescribed in Form Nos. O-8 & O-8A under the Wealth-tax Rules may be kept in view while dealing with such disclosures.
3. It has been represented to the Chief Commissioner that there is some confusion in respect of Valuation Reports in Form Nos. O-8 & O-8A. It is stated that some Commissioners are insisting for both the reports together.
4. It has also been represented to the Chief Commissioner that the affidavits filed along with the declaration is not being accepted by some of the Commissioners saying that it should given description of the declarant, his religion, his age, sex, etc., and that such affidavits should be signed before the Notary by the declarant who has been identified by someone else to the Notary.
5. The matter was considered at length and I am directed to clarify as under :—
(a) In respect of Valuation Report of jewellery, the Valuation Report in conformity with Form No. O-8 which is to be given by approved valuer will meet the requirement of VDIS, 1997. One the Valuation Report in conformity with the Form No. O-8 is filed, there is no need for filing another statement of valuation of jewellery in Form No. O-8A which is required to be signed by the assessee.
(b) As regards affidavit to be filed, it is clarified that so long as solemn affirmation states that the date or the month and approximate cost of acquisition of jewellery or states that such jewellery was acquired for filing another statement of valuation of jewellery in Form No. O-8A which is required to be signed by the assessee.
(c) As regards affidavit to be filed, it is clarified that so long as solemn affirmation states that the date or the month and approximate cost of acquisition of jewellery or states that such jewellery was acquired prior to a certain date and gives approximate cost of acquisition, and is solemnly affirmed before the Notary, such declaration/affidavit should be accepted as no form of affidavit/declaration has been prescribed by the VDIS or by the CBDT. It is also clarified that it should not be insisted that such declaration is titled as affidavit and should include the declarant’s religion, sex, etc., and that the declarant should be identified to the Notary by a third person, so long as the declaration is made before a Notary and is evidence by an Official Seal.
6. I am also directed to request you that the assessees coming forward for making declarations should be attended to promptly. Any delay in either receiving the declaration or issuing acknowledgement should be avoided.
JUDICIAL ANALYSIS
VDIS 1997
Note the following case laws :
n Petition challenging validity of VDIS, 1997which suffered from vice of gross delay and laches, could not be entertained - Raghunandan Saran Ashok Saran (HUF) v. Union of India [1998] 232 ITR 33 (Delhi).
n Writ-challenging validity of CBDT letter dated 25-11-1997 regarding production of evidence about year of purchase of jewellery declared under VDIS, 1997 cannot be treated as public interest litigation so as to be admitted - Kanpur Income-tax Bar Association v. Union of India [1998] 99 Taxman 266 (All.).
n It is not possible to take the view that in view of the provisions of the VDIS, 1997, the power conferred on the officers of the Department under section 132 is impliedly suspended till the Scheme comes to an end - United Credit and Investments v. Director of Income-tax (Investigation) [1998] 231 ITR 660 (Kar.).
n Continuance of power of search under section 132 while VDIS, 1997 is in force does not result in discrimination and violation of rights guaranteed under article 14 of the Constitution - United Credit and Investments v. Director of Income-tax (Investigation) [1998] 231 ITR 660 (Kar.).
n Where the Bombay High Court had upheld the constitutional validity of the Voluntary Disclosure Scheme, 1997 and before the Supreme Court the Attorney General had placed a statement indicating the policy the Government was following and would be following in checking tax evasion, the special leave petition against the judgment of the Bombay High Court decision was to be dismissed - All India Federation of Tax Practitioners v. Union of India [1998] 231 ITR 24 (SC).
Meaning of expression ‘in respect of all income chargeable to tax under the 1961 Act for any assessment year’ used in Voluntary Disclosure of Income Scheme, 1997 will have to be confined to assessment year 1962-63 and onwards and income chargeable to tax under the Indian Income-tax Act, 1922, will not fall within scope of this expression - Smt. Vidya Devi v. CIT [1998] 101 Taxman 363 (Punj. & Har.).
Where CBDT by a letter to a bank stated that deposit holders in the bank whose accounts wee restrained under section 132(3) could not avail of VDIS 1997, such letter of CBDT could not be held to be a ‘direction’ or ‘instruction’ under section 119 – Chotubhai v. Union of India [1997] 95 Taxman 629 (Delhi).