Dear All,

The CBDT has introduced an additional schedule (Schedule AL) in the Income tax returns forms requiring disclosure of cost of specified Assets and the related liabilities. This schedule is mandatory for individuals whose total income exceeds INR 50 Lacs.

Further, please note that the details to be reported in the Schedule AL includes:

• In case of Resident and Ordinarily Resident (ROR) assessees: Specified assets and related liabilities in India and outside India (in Overseas). Additionally, the assets located outside India needs to be reported separately in the Schedule FA.
• In case of Non Residents (NR) and Not Ordinarily Resident (NOR) assessees: Specified assets and related liabilities in India only.

Value to be reported in schedule AL:-

• the cost price of such asset to the assessee; or
• where wealth-tax return was filed by the assessee and the asset was forming part of the wealth-tax return, the value of such asset as per the latest wealth-tax return in which it was disclosed as increased by the cost of improvement incurred after such date, if any.
• in case the asset became the property of the assessee under a gift, will or any mode specified in section 49(1) of the Income-tax Act, 1961 and not covered above, the cost of such asset to be reported will be the cost for which the previous owner of the asset acquired it, as increased by the cost of any improvement of the asset incurred by the previous owner or the assessee, as the case may be.
• in case where the cost at which the asset was acquired by the previous owner is not ascertainable and no wealth-tax return was filed in respect of such asset, the value may be estimated at the circle rate or bullion rate, as the case may be, on the date of acquisition by the assessee as increased by cost of improvement, if any, or 31st day of March, 2016.

Notes

• Previous Owner shall have the meaning as provided in Explanation to section 49(1) of the Income-tax Act, 1961 (the Act).
• Circle rate is the minimum value at which the sale or transfer of a plot, built-up house, apartment or a commercial property can take place.
• Bullion is gold and silver that is officially recognized as being at least 99.5% pure and is in the form of bars or ingotsrather than coins. Bullion Rate is the rate at which the bullions were traded on the  specified date.
• In case of an individual, not being an Indian Citizen, who is in India on a business, employment or a student visa and who qualified as a ROR in the current previous year, an assets acquired during any previous year in which he was non-resident, needs to be reported in the Schedule AL despite the fact that the same is not mandatory to be reported in the Schedule FA if no income is derived from that asset during the current previous year.

Further, please note our observations:

1. Immovable Assets:

• In case of under construction building – In general terms, the advance given for property under-construction is considered as an advance / investments. Accordingly, the cost of under construction building should not be reported in the Schedule AL.

However, if the construction is in progress on self-owned land, in our view the cost of Land needs to be reported in the schedule AL along with related liability, if any.

• In case of co-owned property – Only assessee’s share of ownership in the property and the corresponding liability, if any, needs to be reported in the Schedule AL.
• In case if specified asset is in the name of third person and loan is taken by assessee with co-applicant – Since, it’s a case of gift of the specified asset to third person, we should not report the cost of the same in the return of income of the assessee. Further, the loan taken is also not related to his owned asset. Accordingly, the same is not required to be reported in the Schedule AL.
• Commercial Buildings – We understand that the schedule AL has been introduced because the Wealth-tax Act has been abolished in India. In our understanding Income-tax department is looking to have a control over the income and wealth of the assesses. Further, in the wealth tax return, the following were excluded from the definition of Assets.

-   any house which the assessee may occupy for the purposes of any business or profession carried on by him;

-   any residential property that has been let-out for a minimum period of three hundred days in the previous year;

-   any property in the nature of commercial establishments or complexes;

However, in our view the said disclosure in return of income is mainly to identify the total assets and liabilities of the assessee. Accordingly, irrespective of the exclusion in the Wealth-tax Act, in our view the cost of commercial building and rented property needs to be reported in the Schedule AL along with related liability, if any.

• Agricultural Land - Agricultural land is not a capital asset under the definition of capital assets as defined in the Act.

However, in our view the agricultural land is an asset for the assessee and the actual cost of agricultural land and related liability, if any, needs to be reported in the schedule AL.

• Land / Building purchased without sale deed [i.e. on Power of Attorney (POA)] – In a scenario, where the property is not actually registered in the name of the assessee, but the right to the property is acquired vide a Power of Attorney, there shall not be a sale deed / agreement, etc.  In such cases, though, the property is not registered in the name of the assessee, in our view, as the assessee qualifies as owner of the asset, the cost of the property and the related liability needs to be reported in the Schedule AL.

Notes:

• In case where the Land / Building is purchased before 01 April 1981, for purpose of capital gain tax, the cost of acquisition is the higher of the actual cost of acquisition of the asset or fair market value of the asset as on 01 April, 1981.​

However, for the purpose of Schedule AL, the cost of acquisition needs to be considered.

• As discussed above, in case of ROR, the details of specified assets and related liabilities in overseas as well needs to be reported in the Schedule AL. In this case, the cost of specified assets in overseas should be converted into INR considering the exchange rate on the date of acquisition of the specified assets. Further, the outstanding liability as on 31 March 2016 of such specified assets should be converted into INR considering the exchange rate as on 31 March 2016.

1. Cash In Hand:

In general terms, cash in hand includes cash at bank. However, the details of all the Bank accounts held in India is required to disclosed separately in the income tax return forms. Accordingly, we believe that we should disclose only cash in hand as on 31 March 2016 in this schedule.

Further, as discussed above in case of ROR, the details of specified assets and related liabilities in overseas as well needs to be reported in the Schedule AL. In this case, the foreign currency in hand as on 31 March 2016 needs to be reported in the Schedule AL. Further, for the purpose of reporting in the schedule AL, foreign currency in hand as on 31 March 2016 should be converted into INR considering the exchange rate as on 31 March 2016.

1. Jewellery: In our view, the actual cost of the Jewellery needs to be reported in the Schedule AL. However, we found different issues in case of reporting of Jewellery,

• In case of jewellery bought for Spouse: In our view, it’s a Gift to Spouse and need not require to be reported in the return of income of assessee.
• In case if Jewellery received as gift on marriage: In our view, it’s difficult to remember the name of person who gifted on the day of Marriage. Hence the cost can be determined basis the bullion rate on the day of Marriage.

1. Vehicles, yachts, boats and aircrafts: As we discussed above in case of commercial building, in the Wealth-tax Act, there was an exclusion in case of movable assets as below.

-    motor cars (other than those used by the assessee in the business of running them on hire or as stock-in-trade);

-    yachts, boats and aircrafts (other than those used by the assessee for commercial purposes) ;

However, In our view the said disclosure in return of income is mainly to identify the total assets and liabilities of the assessee. Accordingly, irrespective of the exclusion in Wealth-tax Act, the actual cost of the said assets along with related liability, if any, needs to be reported in the Schedule AL.

Note:

In case where the vehicle is taken on lease (Operating / Financial) by the employer and post completion of the lease period, the vehicle has been transferred to the employee, in our view, the actual amount paid by the employee towards the cost of vehicle needs to be reported in the Schedule AL. In other words, the lease rentals should not be considered as cost of the vehicle.

Regards
CA Gaurav Agarwal
9972425511 / 9910306225