MUMBAI, November 23: India is traditionally known as a country for its fascination for jewellery, gold and silver, diamond ornaments. Gold and silver jewellery and diamonds are even now the favourites of Indian ladies irrespective of age, which has now also caught the fancy of people coming forward to make disclosure under VDIS 1997.

This can be gauged by the fact that upto now the CBDT has received maximum number of queries regarding jewellery and has also clarified the doubts in various circulars and press releases on this issue. The Income Tax Department has recently issued certain clarifications regarding diamond and jewellery which are produced hereunder.

Valuation of loose diamonds - clarification by CCIT Mumbai: NGCC/CO-ORD/PRO/VDIS-Q97-98, dated 29.10.1997. Reference is invited to letter of even number, 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 No 0-8 and 0-8A 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. The following points have been clarified.

1. Where the diamonds are studded and are part of 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 carats (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 carats 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)
(c) 1000/2800 pieces weighing 60.00/143.00 Cts (0.06 Cts. each)

4. Where the declarant makes the disclosures of `diamond dust' and says that therefore the number of individual diamonds cannot be identified, the declaration of total weight in Cts would meet the requirements of the declaration.

Clarification regarding allied subjects:

Whether loose diamonds are jewellery?
Clause (iii) of section 73 (1) of the vd IS 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 jewllery 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 precious or semi-precious stone, and where or not worked or sewn into any wearing apparel, and (b) Precious or 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 and gold utensils will also be covered within the definition of jewellery.

In the above clarification issued by Mumbai Charge on 29.8.97, it has been stated that silver and gold utensils will also be covered within the definition of jewellery. However, the Board has, vide its clarification issued vide DO No 3760/M/INV. VDIS/97, dated 3.10.97 clarified as under:Reference has been 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 jewellery like gold and silver coins and watches.

The law as it stands now does not prohibit declaration of silver utensils or other assets which are not 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 and weight of these articles and on receipt of this affidavit, declaration should be accepted and certificate should be issued as per law.

This view runs counter to the clarification offered by the Mumbai charge. It is hoped that the clarification issued by the CBDT will hold sway and the declarations relating to gold and silver coins, watches, silver utensils would not be treated as declaration of jewellery.

In view of the above clarifications, and earlier circulars issued by the Board, persons making disclosure under the jewellery should prudently take care of the necessary affidavit, valuation and details as required, should be filed along with the disclosure to avoid any litigation at a later stage and the scheme does not become a headache instead of 100 per cent peace of mind.

The Jindals are Delhi-based chartered accountants

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