MILKHI RAM AND BROTHERS vs COMMISSIONER OF WEALTH-TAX.

S. S. SODHI J. - The matter here concerns the extent to which exemption is to be granted to the assessee in respect of the loan taken by him for the purchase of agriculture land. It appears that, during the three assessment years 1974-75, 1975-76 and 1976-77, some amount taken as a loan for the purchase of agriculture land was returned. the question arises as to whether the balance of the loan is to be adjusted only against the value of agriculture land or also against the other assets of the assessee ? In this context, the two questions referred for the opinion of this court are :

"(1) Whether section 2(m)(ii) is applicable in respect of agricultural land considered to be an asset liable to wealth-tax u/s 2(e) but which is totally or partially exempt u/s 5(1) read with section 5(1A) of the Wealth-tax Act, 1957 ?

(2) Whether, u/s 2(m)(ii), debts incurred in relation to purchase of agricultural land are not deductible wholly from the aggregate value of all the assets as to find out the net taxable wealth under the Wealth-tax Act ?"

The matter raised here clearly falls within the purview of Circular No. 1070, dated June 28, 1977, of the Board, which is in the following terms :

The Board have also examined the question as to how the deduction in respect of debts which are secured on, or have been incurred in relation to, any property which is partly exempt u/s 5(1) is to be allowed. The Board are of the view that, in the absence of any clear indication in the Act, the deduction of such debts will have to be allowed in the manner which is most beneficial to the assessee. Accordingly, if, for instance, a debt of Rs. 1,50,000 and exemption of Rs. 1 lakh is allowed u/s 5(1)(v), the debt will have to be allowed to the extent of Rs. 50,000 being the value of the house property which is otherwise includible in the net wealth."

The view taken by the Board in this circular appears to be correct and in accordance with law. A reading of the order of the Tribunal shows that it has upheld the order of the Wealth-tax Officer which is in conformity with the position as explained and clarified in the circular of the Board. In other words, the Wealth-tax Officer had correctly decided the matter before him.

Both the questions posed are, consequently, decided in favour of the Revenue and against the assessee and this reference is disposed of accordingly.