TMI Blog1976 (8) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... t the loan was secured on life insurance policies. The AAC agreed with the working of the WTO. 2. The assessee is on appeal before us. It has been stated that the assessee and one other person were partners in that firm. The life policies were that of the other partner Mr. Krishnamurthy. We were unable to ascertain from the assessee whether Krishnamurthy took the loan on the security of his life policies and gave that amount to the firm or whether the firm itself took the loan on the security of the partners life policies. Since this point has not been clarified by the assessee. We have to considered the question under both alternatives. 3. Let us taken the first alternative that the loan was taken by the partner in his personal capacit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmally shown in the balance-sheet or the exclusion of certain liabilities not shown in the balance sheet. It also provides for any adjustment of the value of the assets or liability already disclosed. None of these rules authorities the WTO to exclude a liability on the ground that the liability represents a loan secured on life insurance policies. So, while evaluating the net wealth of the firm which is but the first step in ascertaining the interest of the assessee partner, the WTO has to find out the net worth of the business as a whole without making any adjustment other than what is authorised under the rules. It may be clarified here that sub-r. (d) of r. 2-E will not be of any help to the WTO. That authorises the WTO to exclude from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be ignored. Business is conducted in such a manner that it is not possible to pair off a particular liability with a particular assets. All the assets and all the liabilities have to be considered together and the net excess asset over the liabilities found out. When the WTO is finding out the excess asset over liabilities he is only valuing an asset. He is not going to the question of allowability of any liability. The liability which is to be allowed in arriving at a the net wealth under s. 2(m) is not to be confused with the deduction of liabilities for the purpose of valuation. Valuation of all the assets of an assessee is the first step to be taken in ascertaining the net wealth. The assessee may have lands, buildings and busin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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