Law:

Section:

section 2(m)(ii ) of the wealth-tax act, 1957-net wealth-debt owed-whether where debt is secured on property which is partially exempted from wealth-tax, i.e., a residential house exempt as provided under section 5(1)(iv) or certain cumulative assets to extent provided in section 5(1a), section 2(m)( ii) provides for apportionment of such debt as deductible to extent it does not relate to exempt asset and not deductible to extent it relates to exempt assets in order to determine net wealth of assessee-held, yes Facts Some of the assessees owned house properties, which were entitled to exemption under section 5(1)(iv) while the other assessees owned financial assets, which were entitled to exemption under section 5(1A). On these assets, the assessees had taken certain loans. For the purpose of wealth-tax in the assessment year 1972-73, the assessees claimed deduction of the entire amount of the loans. The WTO rejected the assessee's claim, holding that since a part of the house properties and financial assets would be exempt under section 5(1)(iv) and 5(1A), the proportionate loan would not be allowed in relation to the exempted assets. The AAC also upheld the WTO's order. On further appeal, the Tribunal, however, accepted the assessee's claim and held that the assessees would be entitled to the full deduction of the liability as claimed by them. On reference, the assessees relied upon the amendment brought about by the Finance Act, 1964, substituting the word 'chargeable' with the word 'payable' in section 2(m)( ii), and contended that there was a clear distinction between the word 'chargeable' used in section 2(m)( ii) and the word 'payable' in section 5(1). Therefore, any debt secured on or incurred in relation to any property mentioned in section 5(1) was not covered by section 2(m)( ii) and, consequently, the debts secured on or incurred in relation to any property mentioned in section 5(1) would have to be deducted from the aggregate value of the assets for finding out the net wealth of the assessee. It was also contended that the working out of section 2( m)(ii) , by apportionment of the debt between the part of the asset which was exempt and the part…

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