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TMI Blog2013 (4) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... and sell the property in exercise of it's mortgage right and recover the arrears which was more than double the actual amount paid under one time settlement to release the charge. So much so, the debt incurred directly for releasing the mortgage over the property can safely be treated as debt incurred in relation to the property. We, therefore allowed the deduction and uphold the finding of the Tribunal in this regard - The Revenue's appeal is dismised . - W.T.Appeal Nos. 10, 22, 25, 27, 32 & 38 of 2009 - - - Dated:- 1-3-2012 - MR. C.N. RAMACHANDRAN NAIR MR. BABU MATHEW P. JOSEPH JJ. APPELLANT(S): BY ADVS. SRI. P.K.R. MENON, SR.COUNSEL, GOI(TAXES) SRI. JOSE JOSEPH, SC, INCOME TAX SRI. GEORGE K. GEORGE, SC, INCOME TEX RESPON ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors, the assessee settled the bank loan and lifted the mortgage on the property. In the wealth tax returns filed for assessment years 1996-96 to 2001-02, the assessee claimed deduction for the amount borrowed from the directors for settling the mortgage debt due to the bank as a deduction in the computation of net wealth. The Assessing Officer disallowed it stating that the debt which the assessee owed to directors are not incurred in relation to the land and so much so the same is not allowable. Even though the first appellate authority confirmed the disallowance, on second appeal, the Tribunal by giving a wide meaning to Section 2(m) allowed the claim against which revenue has filed these appeals. 3. We have considered the controvers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. Roshanbabu Mohammed Hussein Merchant [275 ITR 235], the Senior Counsel for the Revenue contended that the debt incurred by the assessee to its directors is not a debt incurred in relation to the asset. However, on going though these decisions, we find these are rendered in the context of considering deduction under Section 48(i) of the IT Act for the purpose of computation of capital gains. In our view, these decisions have no application to consider the scope of Section 2(m) of the Wealth Tax Act. 6. The position canvassed on behalf of the revenue is that debt was incurred for the purpose of arranging working capital and it is not for acquiring land for the purpose of retaining it. Admittedly, funds borrowed by the assessee from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount paid under one time settlement to release the charge. Therefore, what the assessee company had done by borrowing funds from the directors and by settling mortgage debt is to release the property and thereby to protect the property and retain it to the assessee. So much so, the debt incurred directly for releasing the mortgage over the property can safely be treated as debt incurred in relation to the property. We, therefore, uphold the finding of the Tribunal in this regard. However, it is needless to mention that the deduction called for is only the amounts used from out of borrowed funds for releasing the mortgage over an extent of land within the urban area, which was only brought to wealth tax. In other words, whatever portion o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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