9911796707
|
Home
Issues Involved:
1. Inclusion of Compulsory Deposit in net wealth. 2. Deduction of debt owed in computing net wealth. Issue-wise Detailed Analysis: 1. Inclusion of Compulsory Deposit in Net Wealth: The first objection concerns the inclusion of the Compulsory Deposit amounting to Rs. 1,17,840 in the appellant's net wealth for the assessment year 1984-85. The Wealth Tax Officer (WTO) included this amount, believing it was not exempt from wealth tax. The Commissioner of Wealth Tax (Appeals) [CWT (A)] relied on the Compulsory Deposit Act, which was retrospectively amended with the introduction of section 7A effective from 1-4-1975. This amendment deemed the Compulsory Deposit as a deposit with a banking company, thus subject to exemption under section 5(1A) of the Wealth-tax Act. The appellant's counsel argued that the deposit was made under statutory compulsion and should not be included in the net wealth. However, the Departmental Representative supported the CWT (A)'s decision, citing section 7A of the Compulsory Deposit Act. The tribunal upheld the CWT (A)'s direction, stating that the Compulsory Deposit is deemed a deposit with a banking company and thus correctly exempted under the amended provision. Consequently, the appellant's objection was rejected. 2. Deduction of Debt Owed in Computing Net Wealth: The second issue involves the disallowance of a Rs. 5 lakh debt owed by the appellant to Shri Balu Alagannan in computing his net wealth under section 2(m) of the Wealth-tax Act. The WTO disallowed this deduction, reasoning that the debt was incurred in purchasing capital investment bonds, which were not assessed to wealth tax and did not exist on the valuation date. The appellant contended that the liability was still outstanding on the valuation date and should be deducted from the net wealth. The CWT (A) upheld the WTO's decision, stating that debts incurred in relation to non-chargeable assets are not deductible under section 2(m)(ii) of the Act. The appellant's counsel argued that the debt should be deducted as it was owed on the valuation date and did not fall within the exclusion clause of section 2(m)(ii). He cited the Madras High Court decision in A. & F. Harvey Ltd. v. CWT, asserting that the exclusion clause aims to prevent double deductions for exempt assets, which was not the case here. The Departmental Representative supported the CWT (A)'s decision, citing the Full Bench decision in CIT v. K. S. Vaidyanathan. The tribunal examined the contentions and authorities cited. It agreed with the appellant, stating that the debt was not incurred in relation to a property exempt from wealth tax as the capital investment bonds were gifted away before the valuation date. The tribunal relied on the Madras High Court decisions in Spencer & Co. Ltd. and A. & F. Harvey Ltd., which clarified that debts related to non-chargeable assets should not be excluded if the assets do not belong to the assessee on the valuation date. The tribunal concluded that the appellant is entitled to the deduction of the Rs. 5 lakh debt as it was owed on the valuation date, thus allowing this part of the appeal. Conclusion: The appeal is partly allowed. The tribunal upheld the inclusion of the Compulsory Deposit in the net wealth but allowed the deduction of the Rs. 5 lakh debt owed by the appellant.
|
