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Interpretation of s. 2(m)(ii) of the Wealth-tax Act regarding deduction of loan raised against exempted assets for acquiring taxable assets. Analysis: The second appeal was against an order passed by the Appellate Asstt. Commissioner of Wealth-tax regarding an assessment for the year 1971-72. The assessee raised a loan against agricultural lands, exempt from Wealth-tax, and claimed it as a deduction from taxable assets. However, the WTO rejected the claim citing s. 2(m)(ii) of the Act. The assessee argued that the loan was invested in taxable assets, thus should not be disallowed. The revenue relied on a judgment from the Allahabad High Court, while the assessee cited a Supreme Court judgment. The Tribunal found the Supreme Court judgment irrelevant but delved into the interpretation of s. 2(m)(ii) which states that debts secured against non-taxable property cannot be deducted. However, the Tribunal reasoned that if a loan is taken against an exempted asset to acquire a taxable asset, it should be allowed as a deduction to prevent double benefit. The Tribunal also referred to Rule 20 Sub rule (d) for clarification. Consequently, the Tribunal held that the loan used to acquire taxable wealth should be allowed as a deduction, overturning the AAC's decision and allowing the assessee's appeal. In conclusion, the Tribunal's decision was based on the interpretation of s. 2(m)(ii) of the Wealth-tax Act. It clarified that if a loan raised against an exempted asset is utilized to acquire a taxable asset, it should be considered as a deductible debt to prevent double benefit to the taxpayer. The Tribunal distinguished the case from the Allahabad High Court judgment and emphasized the need for a rational and proper interpretation in line with the Act's scheme. By allowing the deduction of the loan used for acquiring taxable wealth, the Tribunal rectified the AAC's misinterpretation of s. 2(m)(ii) and ruled in favor of the assessee, granting the appeal.
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