Law: Wealth Tax Act, (XV of 1963)

Section: 2(1)(16)(ii)

(a) Interpretation of statutes--- ---- Principle that "where two equally reasonable constructions are possible, one strict and other beneficial to the assessee, the later should be preferred in a taxing statute---Cardinal principle of interpretation of a fiscal statute that all charges upon the subject are to be imposed by clear and unambiguous words, would apply only to charging sections and not to machinery sections or to the provisions which give relief to the taxpayer. 1993 PTD 69; PL D 1977 Lah. 292 and 1993 SCMR 274 = 1993 PTD 69 ref. (1985) 153 ITR 11 rel. (b) Wealth Tax Act (XV of 1963)---S. 2(1)(16)(ii)---Net wealth---Debt owed---Admissibility---Loan obtained against foreign currency US dollar account in respect of which wealth tax was not payable under the law---Such amount was claimed as debt owed being the amount out of which advance was made to a company and assessee declared such advance as taxable asset in the return---Assessing Officer rejected the claim of the assessee on the ground that assessee had obtained loan by offering foreign currency account as security and since this asset was exempt from wealth tax, the loan obtained against the same was not deductible---First Appellate Authority set aside the assessment for de novo decision on the ground that claim of liability had been rejected without proper rebuttal of the arguments of the assessee ---Validity ---Asset against which loan from the Bank was secured was the foreign currency US dollar account in respect of which wealth tax was not payable under the Wealth Tax Act, 1963--­Assessee could not be given double benefit by allowing such loan as a deductible debt and maintaining the tax-exempt status of the foreign currency account which also gave further benefit to the assessee in terms of appreciation/profit on US dollar remaining exempt under Part I of the Second Sched. to the Wealth Tax Act, 1963---Liability to the extent of assets created out of the Bank loan also could not be granted---If the said liability is allowed, then the asset created out of Bank loan will not become taxable but would be offset against the corresponding liability thus neutralizing the effect of taxation in…

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