9911796707
TMI Blog1982 (2) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... each assessment year from the value of an urban asset, namely, "Mangalbag Bungalow" and thus the levy of additional wealth-tax had been undercharged. The amount of Rs. 3,75,000 deducted was of a loan which was obtained from Harshavadan Mangaldas Investment Co. on the mortgage of the aforesaid urban asset. This debt was claimed by the assessee as deduction against the value of immovable property, i.e., "Mangalbag Bungalow", and the same was allowed by the WTO for the three years. The amount of loan was utilised by the assessee for making advances to Aryodaya Mills Ltd. and Victoria Mills Ltd. The Commissioner was of the view that as the loan obtained against the pledge of the immovable property has been lent out for the purpose otherwise th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the mortgage loan amount. It was next contended that the deduction of mortgage loan will be a part of arriving at the value of a mortgaged immovable property which is an asset by itself under section 7 of the Act and it is not a deduction of the type which is referred to in rule 2 of Schedule I. He also relied on the Gujarat High Court's decision in CWT v. Smt. Shirinbanoo [1976] 102 ITR 735, where the scope of this rule was considered in the context of a mortgaged property as the revenue had referred to rule 2 under consideration here. 4. On behalf of the revenue, it was contended that the view taken by the Commissioner was correct and attention was invited to Paragraphs A and B of Part I of Schedule I. It was submitted that the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usually is to ascertain the market price on the particular valuation date of the asset without encumbrance and deduct therefrom the value of encumbrance and, thus, arrive at the value of the encumbered asset. In other words, even for the purposes of determining the value under section 7, the true nature of the asset belonging to an assessee will have to be considered and if such an asset is encumbered by a mortgage, what is to be valued is the encumbered asset itself. It can also be said that what is to be valued in such a case is the property rights in an immovable property, which in the eye of law belong to an assessee. If such rights are less than that of full ownership as known to law, then only value of rights belonging to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of encumbrance thereon. On a plain reading of rule 2(a) of Paragraph B, which has been made effective from the assessment year 1971-72, it is clear that it permits deduction of any debt incurred for purposes of acquiring, improving, constructing, renewing or reconstructing an urban asset while valuing such asset. It does not provide for the inclusion of any debt which is secured on property. It provides for inclusion of any debt which is incurred for the above purposes irrespective, of the fact whether it is charged on the property or not. In that view of the matter, therefore, the contention of the revenue that exclusion of a debt charged on the property is not permissible while evaluating an encumbered property is not well-founded. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above discussion, we hold that the treatment accorded by the WTO in the three assessment orders is correct in the eye of law and the view taken by the Commissioner is erroneous. Consequently, we set aside the combined order of the Commissioner under section 25(2) and restore the assessment orders passed by the WTO. 7. The assessee's counsel also had objected to the Commissioner's order setting aside the whole assessment when only a specific issue according to him needed modification. Relying on the Delhi High Court judgment in Addl. CIT v. J.K. D'Costa [1982] 133 ITR 7, it was contended that the total setting aside of the assessment orders was unwarranted. The argument of the assessee's counsel on this score also is sound but we need no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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