2013 (4) TMI 50

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....respondent Company from the directors for releasing mortgage which the bank had over the assessee's property is allowable deduction in the determination of net wealth under 2(m) of the Wealth Tax Act. We have heard Senior Counsel Sri. P.K.R. Menon appearing for the revenue and M/s. Menon & Pai, represented by Adv. Mr. A.K. Jayasanker Nambiar, for respondent assessee. 2. The respondent company owned 540 cents of land with buildings wherein they were running a tile and bricks factory. However, on account of financial difficulties, the factory remained defunct for several years. Major portion of the said land belonging to the assessee was urban land and 160 cents was within the Panchayat area. In the course of time, the company had borrowed ....

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....ndu undivided families and companies. There is no dispute that the land belonging to the assessee with the Quilon Corporation was assessable to wealth tax and assessee, in fact, included its value in the net wealth declared. 4. However, the question that arises for consideration is whether the funds borrowed from the directors for releasing mortgage over the said land is allowable deduction in the computation of net wealth under Section 2(m) of the Act. Since the dispute is in respect of the scope of "net wealth" under Section 2(m), we extract below the said provision for easy reference as follows: "(m) "net wealth" means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wher....

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.... said debt created in favour of directors as a debt in relation to the property the mortgage over which was released by utilizing borrowed funds. 7. Since factual position is not in controversy the short question to be considered is whether borrowal from directors for releasing charge over the property in the form of mortgage is a debt incurred in relation to the asset. The Tribunal upheld assessee's contention by holding that when the funds borrowed from directors were utilised for discharging bank liability which led to lifting mortgage and release of the property the debt should be taken as incurred in relation to the asset. 8. After hearing both sides and on going through the provision above stated, we are of the view that the debt in....