TaxTMI 
TaxTMI 
TaxTMI 
1982 (2) TMI 80
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....ongly allowed a deduction of Rs. 3,75,000 in each assessment year from the value of an urban asset, namely, "Mangalbag Bungalow" and thus the levy of additional wealth-tax had been undercharged. The amount of Rs. 3,75,000 deducted was of a loan which was obtained from Harshavadan Mangaldas Investment Co. on the mortgage of the aforesaid urban asset. This debt was claimed by the assessee as deduction against the value of immovable property, i.e., "Mangalbag Bungalow", and the same was allowed by the WTO for the three years. The amount of loan was utilised by the assessee for making advances to Aryodaya Mills Ltd. and Victoria Mills Ltd. The Commissioner was of the view that as the loan obtained against the pledge of the immovable property ha....
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....arket value, the value of encumbrance, i.e., the mortgage loan amount. It was next contended that the deduction of mortgage loan will be a part of arriving at the value of a mortgaged immovable property which is an asset by itself under section 7 of the Act and it is not a deduction of the type which is referred to in rule 2 of Schedule I. He also relied on the Gujarat High Court's decision in CWT v. Smt. Shirinbanoo [1976] 102 ITR 735, where the scope of this rule was considered in the context of a mortgaged property as the revenue had referred to rule 2 under consideration here. 4. On behalf of the revenue, it was contended that the view taken by the Commissioner was correct and attention was invited to Paragraphs A and B of Part I of Sc....
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....ethod of valuing such an encumbered asset usually is to ascertain the market price on the particular valuation date of the asset without encumbrance and deduct therefrom the value of encumbrance and, thus, arrive at the value of the encumbered asset. In other words, even for the purposes of determining the value under section 7, the true nature of the asset belonging to an assessee will have to be considered and if such an asset is encumbered by a mortgage, what is to be valued is the encumbered asset itself. It can also be said that what is to be valued in such a case is the property rights in an immovable property, which in the eye of law belong to an assessee. If such rights are less than that of full ownership as known to law, then only....
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....he valuation of the asset less the valuation of encumbrance thereon. On a plain reading of rule 2(a) of Paragraph B, which has been made effective from the assessment year 1971-72, it is clear that it permits deduction of any debt incurred for purposes of acquiring, improving, constructing, renewing or reconstructing an urban asset while valuing such asset. It does not provide for the inclusion of any debt which is secured on property. It provides for inclusion of any debt which is incurred for the above purposes irrespective, of the fact whether it is charged on the property or not. In that view of the matter, therefore, the contention of the revenue that exclusion of a debt charged on the property is not permissible while evaluating an e....