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Madan Mohan Vs. Wealth-tax Officer. - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Chandigarh
Decided On
Reported in(1986)17ITD261(Chd.)
AppellantMadan Mohan
RespondentWealth-tax Officer.
Excerpt:
.....which is not chargeable to wealth-tax, has been secured in relation exempted to an asset, such a loan or debt should not be permitted to be deducted ...." in that case, facts were different. though the loan was taken against security of exempted asset, it was utilised for taxable asset.5. similarly, reliance of the learned counsel for the assessee on the case of spencer & co. ltd. (supra) is misplaced because of distinction in facts. there the issue involved was in respect of controlling interest in the company from whom loans were raised. in the instant case, it is not so. on the other hand, the action of the aac is in conformity with the gujarat high court decision in the case of apoorva shantilal (huf) (supra) in which their lordships dealt with identical arguments as raised by.....
Judgment:
Per Shri F. C. Rustagi, Judicial Member - The only issue in this appeal, preferred by the assessee, under the Wealth-tax Act, 1957 (the Act) is that an amount of Rs. 20,000 which was taken as loan for house construction by the assessee from the Government, should have been allowed as deduction out of taxable wealth of the assessee, though the total cost of the house which was exempt was only Rs. 30,000.

2. The assessee had taken a loan of Rs. 20,000 from the Government for construction of a house and the total cost of the house was Rs. 30,000 which too was exempt. The assessee in the course of wealth-tax assessment proceedings also claimed deduction of Rs. 20,000 on account of debt. The WTO rejected the contention of the assessee and observing that the reliance of the assessee on the case of CWT v. Spencer & Co.

Ltd. [1973] 88 ITR 429 (SC) and Chandigarh Bench decision in the case of Ishori Devi [WT Appeal No. 295 of 1975-76, dated 24-6-1977] is misplaced. When it came before the AAC she also confirmed the action of the WTO rejecting the contentions of those of the assessee.

3. While disputing his action, the learned counsel for the assessee Mr.

O. P. Maghan submitted before us the above stated facts in brief and thereafter attempted to deal with section 2(m), 2(e) of the Act, words chargeable and payable attached with tax under the Wealth-tax Act and finally relied on the cases of Spencer & Co. Ltd. (supra) and Ishori Devi (supra) whereas learned departmental representative relied on a Tribunal decision dated 8-9-1983 in the case of WTO v. Champalal Saraogi [1984] 7 ITD 18 (Cal.), T. V. Srinivasan v. CWT [1980] 123 ITR 464 (Mad.) and Apoorva Shantilal (HUF) v. CWT [1982] 135 ITR 182 (Guj.), besides order of two lower authorities.

4. After taking into consideration the rival submissions and carefully perusing the facts, we are unable to interfere in the finding of the AAC. There is no controversy about the fact that loan of Rs. 20,000 was taken and utilised by the assessee for construction of a house property worth Rs. 30,000, which was fully exempt. When these are the facts, even the Tribunals decisions relied upon by the learned counsel for the assessee, goes against him because the learned Members in the said case of Ishori Devi (supra) in para 3 observed : "...... The factual aspect that the loan raised by the assessee against her agricultural lands was invested in taxable assets is not controverted by the revenue." Further, the learned Members observed in para 4 after extracting section 2(m) (ii), as under : "On a plain reading of clause (ii) of section 2(m), it would appear that once a loan is taken or debts is secured on the properties which are not liable to be charged under the Wealth-tax Act, the debt cannot be deducted." Finally, the learned Members in later part of para 4 observed as under : "...... If a particular asset which is not chargeable to wealth-tax, has been secured in relation exempted to an asset, such a loan or debt should not be permitted to be deducted ...." In that case, facts were different. Though the loan was taken against security of exempted asset, it was utilised for taxable asset.

5. Similarly, reliance of the learned counsel for the assessee on the case of Spencer & Co. Ltd. (supra) is misplaced because of distinction in facts. There the issue involved was in respect of controlling interest in the company from whom loans were raised. In the instant case, it is not so. On the other hand, the action of the AAC is in conformity with the Gujarat High Court decision in the case of Apoorva Shantilal (HUF) (supra) in which their Lordships dealt with identical arguments as raised by the learned counsel for the assessee before us pertaining to the distinction of words chargeable and payable under the Act and came to the conclusion that the loan raised against insurance policy cannot be permitted to be deducted, since the LIC policy is exempt. This also came to confirm the Madras High Court decision in the case of T. V. Srinivasan (supra), in which their Lordships held as under : "...... (i), that on a proper reading of section 2(m) (ii) of the Wealth-tax Act, 1957, on the assessee was not eligible for the deduction of a debt which was secured on exempted property. Even in a case where the debt was taken on the security of the house property which exceeds the sum of Rs. one lakh, the assessee would not be eligible, for the deduction of the debt at any rate up to a limit of a lakh of rupees as it would be secured on a property which was exempt from assessment to that extent.

(ii) That, the loan borrowed on the security of the life insurance policy was similarly not deductible for the assessment year 1973-74, as the life insurance policy was exempted from wealth-tax." (p. 465) The Tribunals decision also in the case of Champalal Saraogi (supra) held that loan from LIC taken against security of insurance policy by the assessee cannot be deducted as insurance policy is exempt. In the light of above discussion and for the reasons given by the AAC in her order, her action is confirmed.


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