1987 (5) TMI 57 - AT - Wealth-tax

Summary

Issues:
- Appeal against the order of the Appellate Assistant Commissioner of Wealth-tax
- Claim of deduction of liabilities against the value of shares for assessment year 1979-80
- Interpretation of provisions of section 2(m)(ii) and section 5(1A) of the Wealth-tax Act, 1957
- Apportionment of debt between exempted and non-exempted assets
- Binding nature of circulars issued by the Central Board of Direct Taxes

Analysis:

The appeal was filed by the assessee against the order of the Appellate Assistant Commissioner of Wealth-tax, 'C' Range, Bombay. The assessee had taken a loan for the purchase of shares, and the issue revolved around the deduction of this liability against the value of shares for the assessment year 1979-80. The Wealth-tax Officer disallowed the deduction, stating that the liability represented debts secured on or incurred in relation to shares not chargeable under wealth-tax. The Appellate Assistant Commissioner upheld this decision, leading to the further appeal before the Appellate Tribunal ITAT BOMBAY-E.

The grounds of appeal highlighted that the Appellate Assistant Commissioner wrongly held that the assessee was not entitled to claim deduction of liabilities against the value of shares. The assessee argued that the provisions of section 2(m)(ii) were misconstrued and contended that the claim of deduction should have been considered against the value of taxable shares. On the contrary, the Departmental Representative cited a Full Bench ruling of the High Court of Madras, emphasizing the apportionment of debts secured on exempted assets. The Department supported its case based on the ruling and orders of the Wealth-tax Officer and the Appellate Assistant Commissioner.

The Tribunal analyzed the issue, noting the difference of opinion in the High Court ruling and the circular issued by the Central Board of Direct Taxes. Referring to Supreme Court precedents, the Tribunal held that circulars beneficial to the assessee were binding on revenue authorities. In this context, the Tribunal concluded that the assessee was entitled to the deduction of the debt incurred for the purchase of shares against the value of shares not exempt from wealth-tax and included in the net wealth. Consequently, the claim of deduction of the debt in working out the assessee's net wealth was allowed, leading to the allowance of the appeal.

In summary, the Tribunal allowed the appeal, overturning the decision of the Appellate Assistant Commissioner and holding in favor of the assessee regarding the deduction of liabilities against the value of shares, based on the apportionment principle and the binding nature of circulars issued by the Central Board of Direct Taxes.