1977 (6) TMI 38

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....which being less than the exempted limit of Rs.1,50,000, were not subjected to Wealth-tax. The assessee had raised a loan of Rs. 11,950 against mortgage of her agricultural lands. This liability was claimed as a deduction from the taxable assets. The WTO rejected the assessee's claim on the ground that when the loan was raised against an asset which was not chargeable to Wealth-tax, the assessee was not entitled to exemption. The assessee is in appeal before us. The WTO while refusing deduction of Rs. 11,950 relied on the provisions of s. 2(m) (ii) of the Act. 3. Before us, it was pleaded for the assessee that the loan was invested in taxable assets and, therefore, the provisions of s.2 (m) (ii) should not be construed against the assess....

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.... or which have been incurred in relation to, any property in respect of which Wealth- tax is not chargeable under this Act." On a plain reading of clause (ii) of s. 2 (m), it would appear that once a loan is taken or debt is secured on the properties which are not liable to be charged under the Wealth- tax Act, the debt cannot be deducted. Here, admittedly the agricultural lands of the assessee were exempt the value being less than the exemption limit. But on a careful serutiny of the provisions and also the general scheme of the Act, it is difficult to hold that the loan in this case is not deductible. The entire scheme of the Act is that all debts should be allowed as a deduction in arriving at the net wealth. First of all, the value o....

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....ave been acquired by incurring or securing the loan on such exempted property. We also like to refer to one more aspect and which is that R. 20 Sub rule (d) mentions as follows. '' Any debt owed by the assessee which has been specially utilised for acquiring an asset in respect of which Wealth- tax is not payable under the Act.'' No doubt that the rules cannot be taken in aid for construction of the provisions of the Act but they certainly give us some clarification as to the true scope of sub-clause (ii) of s. 2(m). 5. For the foregoing reason, we hold that the loan of Rs. 11,950 which was not utilised by the assessee for acquiring an exempted asset but a taxable asset, should have been allowed as a deduction as a debt proper. Tho....