COMMISSIONER OF WEALTH TAX Vs. SANWARMAL SHIVKUMAR

JUDGEMENT

(1.) THIS is a reference under Section 27(1) of the Wealth-tax Act, 1957 (hereinafter to be called as "the Act"), made by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, at the instance of the Commissioner of Wealth-tax, Jodhpur, for answering the following question of law, namely ;

(2.) THE facts of the case giving rise to this reference may be summarised thus. THE case relates to the assessment year 1974-75. THE assessee is a Hindu undivided family. It was originally having 500 shares of the Bank of Rajasthan Ltd., the value of which was fully covered by the exemption under Section 5(1)(xxiii) of the Act. Subsequently, the assessee purchased 1,150 shares out of borrowed money. THE Wealth-tax Officer held that the borrowed money invested for the purchase of 1,150 shares cannot be allowed as a deduction in view of the provisions of Section 2(m)(ii) of the Act. On appeal, the Appellate Assistant Commissioner of Wealth-tax held that the amount of loan liability should be adjusted pro rata towards both the taxable value and the exempted value of the shares. THE Department preferred a second appeal before the Tribunal. THE appeal was dismissed and the cross-objections were allowed by the learned Tribunal by its order dated February 29, 1980, holding that the loan liability should be allowed in toto from the value of the taxed shares and not on proportionate basis as has been held by the Appellate Assistant Commissioner of Wealth-tax. Hence this reference.

(3.) THE order of the learned Tribunal dated February 29, 1980, is in conformity with the aforesaid circular. THE learned Tribunal has rightly held that the entire loan liability should be allowed as a deduction from the value of the taxed shares and not on pro rata basis. It has also been held so in CIT v. M. N. Rajam [1982] 133 ITR 75 (Mad) and CWT v. Ch. Satish [1982] 133 ITR 834 (Mad) even without reference to this circular. THEre is no reference to the aforesaid circular in CIT v. Vaidyanathan [1985] 153 ITR 11 (Mad) [FB] and Srinivasan v. CWT [1980] 123 ITR 464 (Mad) cited by learned standing counsel for the Department.