COMMISSIONER OF WEALTH TAX Vs. BANWARILAL CHOWKHANI

JUDGEMENT

(1.) THIS is a reference under S. 27(1) of the W. T. Act, 1957 (hereinafter referred to as "the Act"), made by the Tribunal, Gauhati Bench, at the instance of the CWT arising out of the order of the Tribunal dt. 23rd Oct., 1973, passed in WT Appeals Nos. 65 (Gau) to 72 (Gau) of 1971 -72 relating to the asst. yrs. 1960 -61 to 1967 -68. The question referred reads:

(2.) ON appeal by the assessee, the AAC held that it was an allowable expenditure. The Department, being aggrieved, preferred a further appeal to the Tribunal which upheld the order of the AAC. On these facts the present reference has come up. The answer to the question depends on a correct interpretation of S. 2(m)(ii) of the Act. The definition of net wealth in S. 2(m) at the relevant time was as follows :

(3.) UNDER S. 3 of the Act, wealth -tax is charged in respect of the "net wealth" of the assessee. Sec. 4 lays down what net wealth includes. Sec. 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 cl. (ii) of s. 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 cl. (e) of S. 2. As agricultural land and growing crops are not included in net wealth as defined in the WT Act, wealth -tax has not to be paid on them. As such, S. 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 vs. Smt. Lachmi Devi Chowkhani (1979) 117 ITR 736.