Net wealth computation limits debt deduction to the taxable portion of exempt house property under Wealth-tax law.

In computing net wealth under the Wealth-tax Act, a debt incurred for repairs and improvements to house property is deductible only to the extent it relates to the taxable portion of the asset after exemption under section 5(1)(iv) read with section 5(1-A). The statutory definition of net wealth in section 2(m) requires the liability to be matched against the taxable value, not the full debt against the entire property value. On the facts, the Tribunal's proportional deduction approach was consistent with the statutory scheme, and the debt was held deductible only to the extent of the house's taxable value.

---

---

Issues: Whether, in computing net wealth under the Wealth-tax Act, 1957, a debt incurred for repairs and improvements to a house property could be deducted only to the extent of the taxable portion of that property after allowing the exemption under section 5(1)(iv).

Analysis: The house property was valued at Rs. 5,00,000 and only Rs. 1,00,000 was exempt under section 5(1)(iv) read with section 5(1-A). The debt of Rs. 62,500 related to the house property itself. Applying the definition of net wealth in section 2(m), the deductible amount had to correspond to the taxable part of the asset, and not the entire debt irrespective of exemption. The Tribunal's approach of allowing deduction proportionately to the taxable value of the house was consistent with the statutory scheme.

Conclusion: The debt was deductible only to the extent of the taxable value of the house property, and the question was answered in favour of the assessee and against the Revenue.

---