Law:

Section:

Section 3 of the Wealth-tax Act, 1957, read with section 40 of the Finance Act, 1983 - Charge of tax - Companies - Assessment year 1984-85 - Whether section 40 of the Finance Act does not encompass entities which are not really companies, but recognised as companies by Board - Held, yes - Whether assessee, a members' club, catering social and cultural needs of its members and declared as a company by Central Board of Direct Taxes under section 2(h)(iii), was not a closely-held company and was not, therefore, exigible to wealth-tax under section 40 of Finance Act - Held, yes FACTS The assessee, a members' club, catering exclusively social and cultural needs of its members, was registered under the Societies Registration Act, 1860 in 1977. In 1960, by section 13 of the Finance Act, 1960, levy of wealth-tax on wealth of the companies was excluded. The assessee got itself declared as a company in 1982 by the Central Board of Direct Taxes (CBDT) under section 2(h)( iii) with retrospective effect from the assessment year 1974-75. Therefore, assessee-club became inexigible to wealth-tax from the assessment year 1974-75 onwards. However, by section 40 of the Finance Act, 1983, levy of wealth-tax on closely-held companies was revived. The assessee's request to the CBDT for granting exemption from wealth-tax under section 40(6) of the Finance Act, 1983, was rejected since the assessee was a deemed company under section 2(h)(iii ). The assessee's another request to declare the assessee-club as a company under section 2(17)( iv) of the Income-tax Act and then issue an order under section 2(18)( ab) of the Income-tax Act declaring the assessee-club as a company, in which the public are substantially interested, so as to enable it to continue to enjoy the benefit of exemption from wealth-tax as provided by section 13 of the Finance Act, 1960, was also rejected by the Board. For the assessment year 1984-85, the assessee contended that it, being an 'association of persons', was not assessable under section 3 of the Wealth-tax Act and as such its wealth was not exigible to wealth-tax. The WTO rejected the contention stating that the status of the assessee was of a company as…

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