1. Since a common contention is involved in the above appeals and they were also argued by Shri Radhika Ranjan for himself and for Shri Krishna Das with common arguments, they are disposed of by this consolidated order for the sake of convenience.
2. Both the above assessees are partners in the firm of Krishna Das Radhika Ranjan. Shri Krishna Das borrowed a sum of Rs. 70,000 from the above firm. Shri Radhika Ranjan on the other hand, borrowed Rs. 60,000 from the same firm. Both these persons kept these amounts in fixed deposits with the bank. On the securities of these fixed deposits, the firm Krishna Das Radhika Ranjan took overdrafts.
3. Both the above assessees claimed exemption from wealth-tax with regard to the fixed deposits which were also allowed. The WTO has wrongly noted the section of Wealth-tax Act, 1957 ('the Act') as 5(1)(xv). The exemption actually is allowable under Section 5(1)(xxvi) of the Act. At the same time, both these assessees also claimed that they be allowed deduction for the loans of Rs. 70,000 and Rs. 60,000, respectively. The claim was made under Section 2(m) of the Act. This section states that 'net wealth' means the amount by which the aggregate value of all the assets is in excess of the aggregate value of all the debts owed by the assessee on the valuation date. In other words, the claim of the assessees was that the debts of Rs. 70,000 and Rs. 60,000 should be allowed from the value of their assets. This claim was in addition to the exemption of the deposits made with the bank.
The WTO rejected the claim on the ground that the firm, which had advanced the amount to the assessees, had also taken advantage of the grant of overdrafts on the deposits made by the assessees.
4. Both the above assessees appealed to the AAC. The AAC allowed the claim with the short observation that the amount being a liability in the shape of loan, owed by the assessee, required to be allowed.
5. The department is now in appeal before us. We have heard the parties. We are of the opinion that the AAC had committed a legal error in admitting the assessees' claim. There is no doubt that under Section 2(m) net wealth of an assessee has to be computed by deducting all the debts owed by him from the value of all his assets. However, there are some exceptions to this method. One of these exceptions, as contained in Sub-clause (ii) of Section 2(m), is that the 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 Wealth-tax Act, are not to be deducted from the value of the assets. In the present case, it cannot be denied that the borrowings of the above assessees from the firm Krishna Das Radhika Ranjan are the debts which have been incurred in relation to the deposits made by them with the banks. Such deposits, as observed above, are not chargeable to wealth-tax as they have been exempted by the WTO himself. The debts due by the assessees are also, therefore, not allowable in the computation of their net wealth. A borrowing made for the purpose of acquiring or buying an excluded asset, such as a fixed deposit, cannot be deducted from the value of the assets in terms of Section 2(m). Our finding, therefore, is that the assessees are not entitled to the deduction of the debts of Rs. 70,000 and Rs. 60,000, respectively. The learned departmental representative referred to some of the authorities, including that of Allahabad High Court in the case of Jiwan Lal Virmani v. CWT  66 ITR 338. In our opinion, those authorities are not relevant on the point as they relate to debts which are secured on any property in respect of which wealth-tax is not chargeable. That is, however, not the case here. As discussed above, the case of the department is covered by the other segment of Sub-clause (ii) of Section 2(m) as discussed above. We, therefore, reverse the orders of the AAC in this regard and restore those of the ITO, though for reasons different that adopted by him for the purpose.