9911796707
TMI Blog1990 (7) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee owned a plot of land at Vile Parle. He constructed a house thereon during the previous year relevant to the assessment year 1970-71 by spending Rs. 1,43,789 which he withdrew from the partnership firm, Messrs. Vasant Kotak and Brothers, in which he was a partner. This amount appeared as debit balance in his name in the books of the partnership firm. In the next year, the assessee, it appears, spent more amounts on the construction of the house. Like in the earlier year, the amount was also withdrawn from the partnership firm. At the end of that year, the debit balance in his name in the books of the firm stood at Rs. 1,57,489. However, the value of the said "property" as on the two valuation dates was estimated by the Wealth tax Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case. For the assessment year 1971-72, the Appellate Assistant Commissioner followed his order for the assessment year 1970-71. Agreeing with the orders of the Appellate Assistant Commissioner, the Tribunal dismissed the departmental appeals. The disallowance out of the debit balance in the assessee's account in the books of the partnership firm was made by the Wealth-tax Officer under section 2(m)(ii) of the Wealth-tax Act to the extent of the amount of exemption, i.e., Rs. 1,00,000 in both the years. The Appellate Assistant Commissioner and the Tribunal, on the other hand, held that the provisions of section 2(m)(ii) were not attracted in this case. It is, therefore, necessary to refer to the provisions of section 2(m)(ii) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 2 (m) (ii) are worded, the answer will depend upon whether or not the said property is not chargeable to wealth-tax. For this purpose, it is necessary to bear in mind that the value of the property as on the two valuation dates was estimated at Rs. 1,85,000 and Rs. 1,99,000, respectively. The exemption available under section 5(1)(iv) at the material time was to the extent of Rs. 1,00,000. The property was, thus, charged to wealth-tax in respect of its value to the extent of Rs. 85,000 for the assessment year 1970-71 and Rs 99,000 for the assessment year 1971-72. The question involving the first part of the clause, namely, debts secured on property in respect of which wealth-tax is not chargeable, came up for consideration before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rising in the present case precisely came up for consideration before the Madras High Court in the case of T. V. Srinivasan v. CWT [1980] 123 ITR 464. In that case, an owner-occupied house valued at Rs. 85,000 had a subsisting mortgage on it which stood at Rs. 36,000 on the valuation date. It was held that the assessee's claim for reduction in respect of the debt went counter to the specific provisions of section 2(m)(ii) read with section 5(1)(iv) of the Wealth-tax Act. When a similar question again came up for consideration before the Madras High Court in the case of CIT v. M. N. Rajam [1982] 133 ITR 75, however, a contrary view was taken. The assessee had in that case raised a mortgage loan of Rs. 40,403 on the security of a residential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealth-tax, that portion of the debt which is attributable to the portion of the property exempted from wealth-tax cannot be deducted in the computation of the net wealth of the assessee." "The rule of strict construction applies only to charging sections and not to machinery sections. Section 2(m) of the Wealth-tax Act, 1957, is not a charging section and the rule of strict construction cannot be applied to it. The principle of 'purposive construction' has to be applied. This is a construction which will promote the general legislative purpose underlying the provision. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secured debt must be deducted." We have carefully considered the judgments referred to above. In our judgment, the language of the provisions, i.e., section 2(m)(ii), is clear and unambiguous. The question to be answered is whether the property in relation to which the debt is incurred is one in respect of which wealth tax is not chargeable. If the answer is in the affirmative, the debt must be held 'as hit by the provisions of section 2(m)(ii).' On the other hand, if it is not possible to answer that question in the affirmative, the consequence must necessarily follow and it should be held that the debt is not hit. The admitted position is that only a part of the value of the property is exempt. The property as such is chargeable and is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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