TaxTMI 
TaxTMI 
1980 (1) TMI 70
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....mputing the net taxable wealth for the assessment year 1973-74 ? " We shall first take up for consideration the reference for the assessment year 1972-73. The assessee borrowed Rs. 40,000 from the Life Insurance Corporation of India on 10th March, 1971, on the security of his house bearing door No. 3, Ganesh Street, Gopalapuram, Madras, where he was residing. He invested Rs. 30,000 out of the said amount of Rs.40,000 in fixed deposit with Canara Bank for a period of one year on 12th March,1971 The deposit was repayable on 12th March, 1972. In the meantime, he borrowed moneys from the said bank on the security of the said fixed deposit and the borrowed amounts were utilised as follows: (1) Rs. 5,600 was utilised in purchasing a plot at Ambattur. (2) Rs. 17,500 was advanced as loan to the firm in which he was a partner. (3) Rs. 6,000 advanced as loan to the company in which he was a director. (4) Rs. 500 deposited with the Industries Department of the Government of Madras. The amounts due in respect of these loans were adjusted as against the fixed deposit when it matured. The assessee filed a return in which he deducted the sum of Rs. 36,000 being the amount owe....
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....ng to him. Section 2(m) defines " net wealth " and it runs to the extent relevant as follows : " ' Net wealth ' means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee 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. " It is unnecessary to refer to the rest of the provisions. Clause (ii) of s. 2(m) previously read is as follows " debts which are secured on, or which have been incurred in relation to, any property in repect of which wealth-tax is not chargeable under this Act ". At the time, when the amendment was made in 1964 by the W.T. (Amend.) Act, 1964, the memorandum accompanying the Bill stated that the amendment was formal and was intended to make the exclusion more precise. The result of these provisions in the present case is to....
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....ave to be uniform so as to cover cases where the value of the property exceeds the sum of rupees one hundred thousand. Section 5(1)(iv) provides for a ceiling on the exemption up to a sum of rupees one hundred thousand, and what is exempted is the property but the exemption is taken away proportionately, where the value of the property exceeds rupees one lakh. If so understood, then even in a case where the debt is taken on the security of the house property which exceeds the sum of rupees one lakh, the assessee would not be eligible for the deduction of the debt, at any rate up to a limit of a lakh, as it would be secured on a property which was exempt from assessment to that extent. Section 5(1) itself in its opening portion makes it clear that certain assets are not to be included in the net wealth of the assessee. Therefore, the exemption is either with reference to an asset as such or with reference to an amount as such. Looked at either way, wherever the debt is secured on such an asset, then the debt would have to be excluded from consideration under the provision of s. 2(m)(ii) ; there is no escape. The Allahabad High Court had to consider a similar claim for deductio....
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....h reference to which wealth-tax is not payable stands outside the net wealth so that no wealth-tax can be charged on it and no tax is " payable " by an assessee on it. Section 5(1) brings within its fold two ways of granting exemptions. One is where wealth-tax is not payable by an assessee, and the other where the asset is to be excluded in the computation of " net wealth ". In our opinion, the decision of the Allahabad High Court is not based on any peculiar significance attached to the word " payable " and would apply even to the provision as amended. The fact that the decision had to interpret cl. (vi) of s. 5(1) is not also material, because both sub-cls (iv) as well as (vi) are designed for the same purpose. Mr. Seetharaman, the learned counsel appearing for the assessee, submitted that the amount having been invested in a taxable asset, the debt in relation to it should be allowed to be deducted in the assessment. What he overlooked is that s. 2(m) had excluded the debt from consideration under the W.T. Act. There is no provision by which this excluded debt stages a comeback or re-entry for consideration again in the scheme of taxation. The scheme of the Act is to take the....