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TMI Blog1980 (7) TMI 152X X X X Extracts X X X X X X X X Extracts X X X X ..... concern known as Sitalakshmi ginning Factory. The balance has been utilised for investment in the purchase of share and in the purchase of a house property for residential purposes. While completing the net wealth assessable to wealth-tax, the assessee claimed exemption on the value of the house property, which was valued at Rs. 70,583 and other assets like shares valued at Rs. 1,50,000. Thus the total exemption claimed was Rs. 2,20,583. The question that arose before the WTO was that when the borrowed assets, whether the borrow be treated as a debt within the meaning of s. 2(M) of the WT Act. The total wealth of the assessee disclosed was found to be of the order of Rs.20,00,654. The WTO thought that of the borrowed money, proportionate li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals. Aggrieved the Department has come up in appeal before us against these orders. 4. The ld. Depart. Rep. at the out set pointed out that the understanding of the Board's circular by the AAC is incorrect, secondly he misapplied it and thirdly the application even if held to be correct as well as the understanding, it was at variance with the decision of the Madras High Court in the case of T.V. Srinivasan vs. CIT (1) where the Madras High Court dealt with an identical issue and took a view contrary to the one expressed by the Board. He submitted that in view of the Madras High Court decision, not only the order of the AAC must be reversed but the assessment has to be enhanced by disallowing the entire liability., for this plea, he r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng upon the authorities below, that binding nature is confined to matters in the realm of administration but does not cover exercise of quasi judicial functions. When a judicial power of the WTO could not be controlled by any circular that might be issued by the Board, the Circular of the Board must be eschewed and once it is kept out of the field, then the interpretation as to what should be done in a matter of this nature is the decision of the Madras High Court, which is binding upon the Tribunal and, therefore, the decision of the Madras High Court must be applied. 7. Now we shall see what the Board has first stated in this matter and then refer to the decision of the Madras High Court. In the circular issued by the Board, it was state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advantage which is also the intention of the circular when it said that "the deduction for such debts has to be allowed in manner which is most beneficial to the assessee". 8. Let us now see what the Madras High Court has observed in this matter (123 ITR 464, at 468): "We are not concerned with a case where the house property exceeds the sum of rupees one hundred thousand. However, as rightly pointed out by the ld. Counsel, the interpretation that we have to place on the section would have to be uniform so as to cover cases where the value of the property exceeds the sum of rupees one hundred thousand. Sec. 5(1)(iv) provides for a ceiling on the exemption up to a sum of rupees one hundred thousand, and what is exempted is the property bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court has perhaps laid down the principle that deduction for the debt would be available if the debts exceeds the ceiling of exemption. This becomes clear from the following observation: "If so understood, then even in a case where the debt is taken on the security of the house property which exceeds the sum of rupees one lakh, the assessee would not be eligible for the deduction of the debt, at any rate up to a limit of a lakh, as it would be secured on a property which was exempt from assessment to that extent". By the use of the expression "which was exempt from assessment to that extent", the principle laid down by the Madras High Court appears to us to be that the deduction for the debt secured on an exempted asset would be ineli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced on behalf of the assessee cannot be accepted in the sense the circular issued by the Board is clearly at variance with the view taken by the Madras High Court, the view expressed by the Madras High Court must prevail. 10. But the point that eventually boils down to is, whether the Board, by this circular imposed any fetters on the judicial discretion or quasi judicial function of the WTO, or merely confirming a concession on the assessees as a matter of policy. If it is the former, then the Madras High Court's view should prevail and take precedence. But if it is the latter, then the policy of the State, conveyed through the Board by way of a circular, has to be implemented. Looking closely the language in which the circular is couched ..... X X X X Extracts X X X X X X X X Extracts X X X X
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