COMMISSIONER OF WEALTH TAX Vs. P R CHOCKALINGAM

JUDGEMENT

(1.) WE do not think, after going through the statement of the case and the order of the Tribunal, that any reference was required to this court at all, particularly when sufficient guidance is available to the WEalth-tax Officer in the majority judgment of a Full Bench of this court in CIT v. K.S.Vaidyanathan. The WEalth-tax Act has created a charge upon the "net wealth" which is defined under section 2(m) of the Act to mean 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--(i) debts which, under section 6, are not to be taken into account, (ii) 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 this Act, (iii) the amount of the tax, penalty or interest payable in consequence of any order passed under or in pursuance of this Act or any law relating to taxation of income or profits, or the Estate Duty Act, 1953 (34 of 1953), the Expenditure-tax Act, 1957 (29 of 1957), or the Gift-tax Act, 1958 (18 of 1958), (a) which is outstanding on the valuation date and is claimed by the assessee in appeal, revision or other proceeding as not being payable by him or (b) which, although not claimed by the assessee as not being payable by him, is nevertheless outstanding for a period of more than twelve months on the valuation date.

(2.) THERE are two Explanations to the definition. Explanation 1 says that a building or part thereof referred to in clause (iii), clause (iiia) or clause (iiib) of section 27 of the Income-tax Act shall be includible in the net wealth of the person who is deemed under the said clause to be the owner of that building or part thereof. Explanation 2 says that where a debt falling under sub-clause (ii) is secured on, or has been incurred in relation to, any asset which is not to be included wholly or partly in the net wealth by virtue of the provisions of sub-section (1A) of section 5, the amount of such debt shall, for the purposes of the said sub-clause, be limited to the value of the said asset which is not includible in the net wealth under sub-section (1A) of section 5.

(3.) THIS theory was rejected by this court and rightly so in T. C. No. 538 of 1976 (CIT v. M. N. Rajam. In this case, an argument was advanced on behalf of the Revenue that the debt contemplated under section 2(m)(ii) is indivisible, cannot be bifurcated and, therefore, it must be disallowed in whole even if it is secured on a partially exempted asset.