2018 (1) TMI 17 - AT - Wealth-tax

Disallowance of claim for deduction of debts incurred in relation to the taxable assets from gross wealth - Held that - Admittedly, the assessee is engaged in hire purchase and leasing the vehicles. Proportionate basis for determination of the debt can be adopted if multiple assets were brought under wealth tax. In the computation of wealth, the assessee has declared value of own vehicles as well as value of leased vehicles and no other assets exist or compounded with any other assets so as to find difficult to determine the debt on proportionate basis. Thus, adoption of proportionate basis for determination of the debts does not arise in this case as rightly held by the ld. CIT(A). We find no fault if the assessee has borrowed the funds for acquiring capital assets, which is exactly, nothing but leased vehicles. However, the assessee has not brought on record and cogent evidences as to whether the borrowed funds were utilized for leased vehicles. From the above, the stated fact is that the assessee has, initially, acquired leased vehicles and thereafter borrowed funds from Banks and utilized. To accept the above contention of the assessee, the assessee is required to file complete details of acquisition of leased vehicles, utilization of borrowed funds for both the assessment years before the Assessing Officer and accordingly, the Assessing Officer is directed to verify the details as may be filed and decide the issue afresh in accordance with law after allowing sufficient opportunity of being heard to the assessee.

Summary

Issues involved:
1. Condonation of delay in filing appeals before the Tribunal.
2. Disallowance of claim for deduction of debts incurred in relation to taxable assets from gross wealth.

Detailed Analysis:

1. Condonation of Delay:
The appeals filed by the assessee were 25 days late in filing before the Tribunal. The assessee filed a condonation petition explaining that they were under the impression that filing a single appeal against a common order for two assessment years was sufficient. The delay was attributed to the need for separate appeals for each assessment year. The Tribunal, after reviewing the affidavit and considering the reasons provided, found the delay to be neither wilful nor wanton. The delay was condoned, and the appeals were admitted for hearing.

2. Disallowance of Claim for Deduction of Debts:
The assessee had claimed a deduction for debts incurred in relation to taxable assets from gross wealth. The Assessing Officer disallowed the deduction as the debts were not directly related to the assets forming part of the gross wealth. The assessee argued that the borrowed funds were utilized for acquiring leased vehicles, which were business assets. The Tribunal noted that the assessee had not provided sufficient evidence to prove that the borrowed funds were indeed utilized for the leased vehicles. The Tribunal directed the Assessing Officer to verify the details provided by the assessee and decide the issue afresh after allowing the assessee an opportunity to be heard. As a result, both appeals were partly allowed for statistical purposes.

In conclusion, the Tribunal addressed the issues of condonation of delay in filing appeals and the disallowance of deduction for debts incurred in relation to taxable assets. The Tribunal allowed the appeals partly, directing further verification by the Assessing Officer regarding the utilization of borrowed funds for acquiring leased vehicles.