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TMI Blog1994 (12) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... be taken into account, (ii) debts which are secured on, or which have been incurred in relation to any property in respect of which wealth-tax is not chargeable under this Act, (iii) the amount of the tax, penalty or interest payable in consequence of any order passed under or in pursuance of this Act or any law relating to taxation of income or profits, or the Estate Duty Act, 1953 (34 of 1953), the Expenditure-tax Act, 1957 (29 of 1957), or the Gift-tax Act, 1958 (18 of 1958), (a) which is outstanding on the valuation date and is claimed by the assessee in appeal, revision or other proceeding as not being payable by him ; or (b) which, although not claimed by the assessee as not being payable by him, is nevertheless outstanding for a period of more than twelve months on the valuation date. There are two Explanations to the definition. Explanation 1 says that a building or part thereof referred to in clause (iii), clause (iiia) or clause (iiib) of section 27 of the Income-tax Act shall be includible in the net wealth of the person who is deemed under the said clause to be the owner of that building or part thereof. Explanation 2 says that where a debt falling under sub-clause (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (m)(i), (ii) and (iii). Section 2(m)(ii) speaks of debts which are secured on, or which have been incurred in relation to, any property in respect of which wealth-tax is not chargeable under the Act. Taking the entire scheme of the chargeability of assets to wealth-tax, the true meaning that can be given to section 2(m)(ii) can only be that the debts referred to therein shall only be debts which are secured on, or which have been incurred in relation to, any property which have not been taken into the reckoning for the purpose of arriving at the net wealth. From this, it must necessarily follow that the debts which are secured on, or which have been incurred in relation to, any property which has not been taken into the reckoning for the purpose of arriving at the net wealth have to be excluded and debts which are secured on, or which have been incurred in relation to, any property which has been taken into account have to be deducted from the aggregate value of the assets. No doubt, section 5(1) contemplates cases of assets, which are entirely excluded from being included in the net wealth of an assessee. There is no difficulty at all in excluding debts which are solely secured on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is secured on or which has been incurred in relation to that portion of the property in respect of which wealth-tax is not chargeable or payable under the Act. This conclusion will be in accord and in harmony with the scheme of the Act. The general rule as to deduction of debts in section 2(m) is that all debts must come into the reckoning. Clause (ii) excludes from the computation only debts which are secured on property in respect of which wealth-tax is not chargeable.... If in respect of an asset in entirety wealthtax is not chargeable, then the debt secured on such asset, as we have already seen, has to be excluded from the reckoning. In cases where an asset is only partially exempt from chargeability to wealth-tax, then it must necessarily follow that the portion of the debt secured on such portion of the asset or incurred in acquiring such portion of the asset has to be excluded from the reckoning. This construction will be in harmony with the scheme and purpose of the Wealth-tax Act as contended for by both Mr. Rangaswami as well as Mr. Jayaraman.... We, therefore, hold that when a debt is secured on several items of properties, one of which alone is exempted from wea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim the exemption under one or the other or proportionately under either. In fact if the assessee claims exemption from shares to the extent of Rs. 1,50,000 and returns only the balance as shares liable to tax and returns the entire value of agricultural land as liable to wealth-tax, he cannot be said to be wrong at all. Likewise, it would be open to him to indicate that he claims agricultural land to the extent of Rs. 1,50,000 held by him as exempt and returns for wealth-tax the entire value of the shares. It may be open to him also to claim exemption in respect of some shares and exemption in respect of a part of the agricultural land, of course, the total not exceeding Rs. 1,50,000. In fact in the return filed under the head ' Movable properties ' whereunder the share value is indicated the assessee has shown in annexure-C the value of shares at Rs. 2,31,000 approximately and deducting therefrom the exemption of Rs. 1,50,000 available under section 6(1A) taken the balance of Rs. 8 1,000 to the return under the head 'Movable properties'. Under the head 'Immovable properties' in annexure-1, the assessee returned the entire value of agricultural land totalling up to Rs. 3,25,000. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e kind of property. The procedure is well indicated in the judgment of the Full Bench. The first step to be taken in arriving at the net wealth of the assessee is to take the aggregate value of all his assets including those which are required to be included in his net wealth as per the provisions of the Act. Since the net wealth has to be computed in accordance with the provisions of the Act, the assets which are specified in section 5(1) have necessarily to be excluded in arriving at the aggregate value of all his assets for the purpose of section 2(m) of the Act. The aggregate value of all the debts thereafter will be deducted from the aggregate value of all the assets so arrived at. In computing the aggregate value of all the debts owed by the assessee, the debts covered by section 2(m)(i), (ii) and (iii) of the Act are necessarily to be excluded. Section 2(m)(ii) of the Act speaks of debts which are secured on, or which have been incurred in relation to, any property in respect of which wealthtax is not chargeable under the Act. This, it appears, has given the Revenue the misapprehension as to the extent of a proportionate deduction in the value of the immovable property of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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