Law:

Section:

Section 2(m) of the Wealth-tax Act, 1957 - Net wealth - Debt owed - Assessment years 1986-87 to 1988-89 - Whether a debt, secured on or incurred in relation to property in respect of which wealth-tax is chargeable, would cease to be a debt or would change its character to one of a non-deductible debt merely because it is invested in an instrument which is not chargeable to wealth-tax - Held, no - Three assessees and their mother owned 1/4th share each in an immovable property which had been given to a bank on leave and licence basis in year 1982 - Under licence agreement, in addition to licence fees, owners obtained a refundable deposit - Whether while computing their individual net wealth, assessees would be entitled to deduct their 1/4th share in aforesaid deposit as 'debt owed' - Held, yes - Whether merely because a part of deposit obtained by assessees had been invested in Capital Investment Bonds which were not chargeable to wealth-tax, that by itself, did not change nature of debt - Held, yes CASES REFERRED TO Bishweshwarilal Chirawala v. CWT [1991] 187 ITR 118 /[1990] 52 Taxman 83 (Bom.) [Para 5] and CWT v. Narayandas J. Hemani [1983] 143 ITR 87 (MP) [Para 5]. Neeraj Shah and Rajesh Shah for the Applicant. P.S. Sahadevan and Mrs. Anuradha More for the Respondent. JUDGMENT R.S. Mohite, J. - The two questions of law which have been referred for our opinion under section 27(1) of the Wealth-tax Act, are as follows :- "1. Whether on the facts and in the circumstances of the case, the deduction on account of debt owed for the purpose of determining the net wealth as claimed by the assessee should be reduced by the investment made in Capital Investment Bonds? 2. Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that although the debt owed was incurred in relation to a property which was chargeable to wealth-tax, the full amount of the debt could not be allowed as a full deduction because of the investment made by the assessee in an asset exempt from wealth-tax?" 2. The facts on the background of which the two questions of law arise are as follows :- (a)The three applicants are sisters. Along with their…

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