TaxTMI 
TaxTMI 
1995 (12) TMI 23
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....apital account in the firm, Messrs. Sonpal Vidya Charan ?" The assessee in the status of an individual filed his wealth-tax return for the assessment year 1976-77 claiming deduction in respect of his debit balance of Rs. 79,896 in the capital account of the firm ; Sonpal Vidya Charan, in which he was a partner in view of the provisions of section 2(m) of the Act. The Wealth-tax Officer rejected the claim of the assessee observing : " The assessee's capital in Sonpal Vidya Charan shows debit balance of Rs. 79,896. The firm attracts provision of section 5(1)(xxxii). Capital balance whether debit or credit in the books of the firm cannot be considered for any other purposes. " Rejecting the claim of deduction of the debit balance, the....
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....d it has also to exclude such of withdrawals out of it as have gone to create assets as exempt under section 5 of the Wealth-tax Act. If the amount so adjusted becomes a positive figure, it would be exempt under section 5(1)(xxxii), but if it becomes a minus figure, it shall be allowed as a debit under section 2(m) of the Wealth-tax Act." The Judicial Member of the Appellate Tribunal differed from the view taken by the Accountant Member. He was of the view that under section 2(m)(ii) of the Act only debts owed by the assessee on the valuation date other than the debts which are secured on or which has been incurred in relation to, any property in respect of which the wealth-tax is not chargeable under this Act are deductible. To elabo....
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....t, this portion at the relevant time was as under : "on the valuation date other than --- . . . . (ii) debts which are secured on, or which have been incurred in relation to, any property in respect of which wealth-tax is not chargeable under this Act." From the exclusionary sub-clause (ii) to section 2(m), it is clear that the debts which are secured on, or which have been incurred in relation to, any property in respect of which wealth-tax is not chargeable under this Act are not deductible under section 2(m) while computing the net wealth of the assessee. Both the Accountant Member and the Judicial Member have fallen into error, inasmuch as they did not bear in their mind the true meaning of the exclusionary sub-clause (ii) to s....
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....tion " and that expression is qualified by the words " movable or immovable ". Properties which do not ordinarily answer the test of movability or immovability such as intangible rights or incorporeal rights, could not be regarded to be the " assets " within the meaning of section 2(e). Debit balance in the capital account of the firm cannot be said to be a tangible right and, therefore, that cannot be regarded an asset forming part of an industrial undertaking belonging to the firm of the assessee within the meaning of section 5(1)(xxxii). If the Judicial Member wanted to take the view that the debit balance in the capital account of the firm tantamounted to a debt covered by the exclusionary sub-clause (ii) to section 2(m), then the relev....
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....t the debit balance in the capital account of the firm was the debt owed by the assessee to the firm. No exception can be taken to this finding. The only question for consideration is whether the debit balance is a debt not covered by the exclusionary sub-clause (ii). Before deciding this question, the Appellate Tribunal was required to make due enquiry into the fact whether the debt was incurred in relation to any property which is or is not chargeable to wealth-tax. If not, the exclusionary sub-clause (ii) will come into play, inasmuch as under section 2(m) only that debt which is incurred in relation to any property which is chargeable to tax, can be allowed to be deducted. If a property, in respect of which the debt is incurred, is not ....