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TMI Blog1990 (2) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount in the construction of a house property. The value of the house property was taken by the WTO at Rs. 2,18,081. Exemption u/s 5(1)(iv) of the Wealth-tax Act was allowed in respect of the house property to the extent of Rs. 1 lakh. It appears that the assessee had claimed liability on account of the loan of Rs. 42,096, which amount was borrowed from the abovementioned firm and was invested in the construction of the house property. This claim was not accepted by the WTO. In the assessment order, he specified no reason for disallowing the assessee's claim. 3. The assessee appealed before the Deputy Commissioner (Appeals). The Deputy Commissioner (Appeals) was of the opinion that since Rs. 1,18,081 is includible as wealth, the liability on account of the loan of Rs. 42,096 is not hit by the prohibition, and the entire loan is deductible from the assessee's wealth as there was a nexus between the said liability and the house property. In taking this view, he drew support from CIT v. M.N. Rajam [1982] 133 ITR 75 (Mad.). He, therefore, directed the Wealth-tax Officer to allow the entire liability of Rs. 42,096. Dissatisfied by that order, the Revenue is in appeal before the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding to him, circulars are issued only in regard to the administrative aspects and cannot extend to the judicial aspects of the administration of the Act. In support of this contention, reliance has been placed on A.L.A. Firm v. CIT [1976] 102 ITR 622 (Mad.). A decision of the Delhi High Court in Delhi Flour Mills Co. Ltd. v. CIT [1974] 95 ITR 151 has also been cited for the same view wherein it has been held that decisions of the Central Board are not binding upon the courts. They are meant only for guidance of the Departmental authorities. It was also held in that case that if these Departmental decisions are not in accordance with the provisions of the statutes, they have to be disregarded. 8. The undermentioned decisions were also cited in support of the contention that circulars of the Board are not binding on the authorities or on the courts : (1) Kanpur Agencies (P.) Ltd. v. CIT [1968] 70 ITR 337 (All.) (2) Geep Industrial Syndicate Ltd. v. CBDT [1987] 166 ITR 88 (Delhi) (3) Bela Singh Daulat Singh v. CIT [1966] 62 ITR 250 (All.). 9. It was also argued by the learned Departmental Representative that the circular cited on behalf of the assessee is contrary to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar being executive in character cannot alter the provisions of the Act. It was also held that circulars cannot detract from the Act. In order to judge whether the Board's circular in question is contrary to law or against the judicial pronouncements, it would be relevant to have a look, a little assiduously, on the relevant circular and the relevant provision of law. 12. Circular No. 1070 dated 28th June, 1977 issued by the Central Board of Direct Taxes (printed at page 1427 of Taxman's Direct Tax Circulars, 1985 edition) is as follows : " The Board have also examined the question as to how the deduction in respect of debts which are secured on, or have been incurred in relation to, any property, which is partly exempt under section 5(1) is to be allowed. The Board are of the view that in the absence of any clear indication in the Act, the deduction for such debts will have to be allowed in the manner which is most beneficial to the assessee. Accordingly, if, for instance, a debit of Rs. 1 lakh has been secured on a house property, the value of which is Rs. 1,50,000 and exemption of Rs. 1 lakh is allowed under section 5(1)(iv), the debt will have to be allowed to the extent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouse of the value of Rs. 1,00,000 or certain cumulative assets referred to in sec. 5(1A) to the tune of Rs. 1,50,000. Even though the section by itself does not expressly contemplate apportionment of the debt as between the portion of the asset taken into account for the purpose of arriving at the net wealth and the portion of the asset excluded from the net wealth, the purposive approach as enunciated by Lord Diplock would demand that the Court would be within its limits in so interpreting sec. 2(m)(ii) as to permit such an apportionment. In fact, a literal interpretation of sec. 2(m)(ii) as it stands would permit two plausible situations. One would be, as the Revenue contended before this Court on an earlier occasion, that when a debt is secured on a property, a portion of which is not included in the net wealth, while the other portion is included in the net wealth, then the entirety of the debt should not be deducted in arriving at the net wealth of the assessee. This theory was rejected by this Court and rightly so in T.C. No. 538 of 1976 [CIT v. Rajam [1982] 133 ITR 75 (Mad.)]. In this case, an argument was advanced on behalf of the Revenue that the debt contemplated under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that arises for determination is whether the circular relied upon on behalf of the assessee is contrary to the judicial decisions and, therefore, not binding. According to the learned Departmental Representative, the circular runs counter to the decision rendered by the Hon'ble High Court of Madras in the case of K.S. Vaidyanathan and, therefore, it cannot operate as binding. In this connection, reliance was placed on Geep Industrial Syndicate Ltd.'s case wherein the High Court of Delhi had held that in fields which are covered by the judicial decisions, the circular will not be conclusive even so far as the ITO is concerned. We are unable to accept this argument of the Revenue. In the case of K. S. Vaidyanathan the aforesaid circular was not brought to the notice of the Hon'ble High Court of Madras. That Court did not consider the said circular. This circular was considered by the High Court of Rajasthan in the case of Sanwarmal Shiv Kumar and on consideration of the same, it was held that the said circular is binding on the authorities. In the circumstances, we are unable to accept the Revenue's contention that the circular runs opposite to the pronouncement of the Madras High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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