Pathak, Actg. C.J.
1. This is a reference under Section 27(1) of the W.T. Act, 1957 (hereinafter referred to as ' the Act'), made by the Income-tax Appellate Tribunal, Gauhati Bench, at the instance of the CWT arising out of the order of the Appellate Tribunal dated October 23, 1973, passed in Wealth-tax Appeals Nos. 65 (Gau) to 72 (Gau) of 1971-72 relating to the assessment years 1960-61 to 1967-68. The question referred reads :
' Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that agricultural income-tax is allowable as a debt and the provisions of Section 2(m)(ii) of the Wealth-tax Act, 1957, are not applicable to the same '
2. A brief narration of the facts leading to the present reference is as follows:
The assessee is an HUF of which Sri Banwarilal Chowkhani is the karta. The assessee owns shares in tea companies. The assessee is also a partner in the firms, M/s. Jorharmal Murlidhar & Co. and M/s. Bordubi Rice, Flour and Oil Mills, having 50% share in M/s. Jorharmal Murlidhar & Co. and 37% share in the other firm along with his mother, Shrimati Lachmi Debi Chowkhani, whose shares in these firms are also 50% and 37% respectively. The assessee is also a proprietor of M/s. Chowkhani Iron and Steel Works, Jaipur. While computing the interest of the assessee in the two firms the WTO considered the claim for deduction of agricultural income-tax liabilities in respect of the tea garden which is an asset of M/s. Jorharmal Murlidhar & Co.. This reason given by the WTO was that agricultural income-tax is a debt incurred in relation to agricultural assets in respect of which wealth-taxis not chargeable, He has further held that the tax was not paid within a period of one year. He, therefore, disallowed the claim of the assessee for the aforesaid assessment years.
3. On appeal by the assessee, the AAC held that it was an allowable expenditure. The Department, being aggrieved, preferred a further appeal to the Income-tax Appellate Tribunal which upheld the order of the AAC.
4. On these facts the present reference has come up. The answer to the question depends on a correct interpretation of Section 2(m)(ii) of the Act. The definition of net wealth in Section 2(m) at the relevant time was as follows :
'(m) 'Net wealth' means the amount by which the aggregate value computed in accordance with the provisions of this Act of all the assets, wherever located, belonging to the assessee on the valuation date, including assets required to be included in his net wealth as on that date under this Act, is in excess of the aggregate value of all the debts owed by the assessee on the valuation date other than-
(ii) debts which are secured on, or which have been incurred in relation to, any asset in respect of which wealth-tax is not payable under this Act.'
5. Clause (e) of Section 2 of the Act defines ' assets ' as follows :
'(e) 'Assets' includes property of every description, movable or immovable, but does not include-
(i) agricultural land and growing crops, grass or standing trees on such land......'
6. Under Section 3 of the Act, wealth-tax is charged in respect of the ' net wealth ' of the assessee. Section 4 lays down what net wealth includes. Section 5 provides what assets are to be excluded in assessing the net wealth. According to the definition, 'net wealth' is the aggregate value of all assets required to be included in his net wealth minus the aggregate value of all the debts. But Clause (ii) of Section 2(m) provides that debts which have been incurred in relation to any asset in respect of which wealth-tax is not payable cannot be deducted. Similarly, debts which are secured on assets in respect of which wealth-tax is not payable also cannot be deducted. Agricultural income-tax is, undoubtedly, a debt which is incurred in relation to assets, such as agricultural land and growing crops, which are not included in the definition of assets as defined in Clause (e) of Section 2. As agricultural land and growing crops are not included in net wealth as defined in the W.T. Act, wealth-tax has not to be paid on them. As such, Section 2(m)(ii) is applicable so far as the agricultural income-tax is concerned and the assessee will not be entitled to the deduction of the agricultural income-tax incurred by the assessee in arriving at the net wealth of the assessee.
A similar view has been taken by a Division Bench of this court in CWT v. Smt. Lachmi Devi Chowkhani .
8. In view of the aforesaid legal position, we answer the question referred to us in the negative, in favour of the Department and against the assessee.
9. The parties are left to bear their own costs.