2006 (12) TMI 484 - AT - Income Tax

Summary

Issues Involved:
1. Deduction as 'debt owed' for motor vehicles u/s 2(m) of the Wealth-tax Act.
2. Valuation of motor vehicles for wealth-tax purposes.

Summary:

Issue 1: Deduction as 'debt owed' for motor vehicles u/s 2(m) of the Wealth-tax Act

The assessee claimed deductions for tied-up loans from employees for motor vehicles, which the Wealth-tax Officer rejected, stating that the loans were contributions from employees and not used to purchase the vehicles. The Commissioner of Wealth-tax (Appeals) upheld this decision, referencing a previous year's ruling in favor of the Revenue. The Tribunal examined the scheme, which allowed employees to purchase vehicles through loans repaid in installments, with the vehicles remaining in the company's name until full repayment. The Tribunal concluded that the conditions for 'debt owed' u/s 2(m) were met, as the loans had a clear nexus with the vehicles. Citing precedents, the Tribunal directed to allow the claim of debt to the assessee for both assessment years 1999-2000 and 2001-02.

Issue 2: Valuation of motor vehicles for wealth-tax purposes

The Assessing Officer adopted the written down value (WDV) of vehicles as per the books of account, rejecting the assessee's claim to use the WDV as per the Income-tax Act. The Commissioner of Wealth-tax (Appeals) supported this, noting that depreciation rates under the Income-tax Act include fiscal incentives. The Tribunal referred to the decision in Samrath Knitters (P.) Ltd. v. Deputy CWT, which suggested using insurance values to estimate market value. The Tribunal directed the Assessing Officer to redetermine the vehicle values based on this precedent, thus partly allowing the assessee's appeal for statistical purposes.

Conclusion:

The appeals were partly allowed, with the Tribunal directing the allowance of debt claims and the reassessment of vehicle values based on insurance estimates. The judgment was pronounced on December 21, 2006.