1983 (12) TMI 93 - AT - Wealth-tax

Summary

Issues:
- Deduction of debts incurred in relation to acquisition of shares
- Application of Board's circular on deduction of debts secured on exempt property

Analysis:

Issue 1: Deduction of debts incurred in relation to acquisition of shares
The appeals before the Appellate Tribunal ITAT BOMBAY-C involved the deduction of debts by the assessee for the assessment years 1973-74, 1974-75, and 1975-76. The debts in question amounted to Rs. 6,39,266, Rs. 6,63,304, and Rs. 7,00,233 for the respective years. The WTO disallowed a portion of these debts as they were deemed to be incurred in relation to the acquisition of shares. The disallowed amounts were Rs. 90,976, Rs. 97,266, and Rs. 1,26,225 for the three assessment years. The AAC of WT upheld the decision of the WTO, leading to the appeals before the Tribunal.

Issue 2: Application of Board's circular on deduction of debts secured on exempt property
The assessee argued that the debts should be fully deductible based on a circular issued by the CBDT, which stated that deductions for debts secured on or incurred in relation to partially exempt property should be allowed to the extent beneficial to the assessee. The assessee relied on various Supreme Court judgments to support the contention that such circulars were binding on Revenue Authorities. The Departmental Representative, on the other hand, contended that since the finding of fact by the WTO regarding the debts being related to shares was not challenged before the AAC, it could not be disputed at the Tribunal stage. However, the Tribunal noted the binding nature of beneficial circulars and allowed the deduction of debts for the assessment years 1973-74 and 1974-75. For the assessment year 1975-76, the disallowance was limited to the extent that the debt exceeded the value of the shares after statutory exemption.

In conclusion, the Tribunal partially allowed the appeals, permitting the deduction of debts for the relevant assessment years based on the principles outlined in the Board's circular and relevant legal precedents.