TMI Blog2003 (7) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... cer. 3. The ld. counsel appearing for the assessee submitted before us that the Assessing Officer has no jurisdiction under section 16(1) to make addition or to disallow any claim which is debatable and which is not in the nature of prima facie adjustment. It is argued that deduction of liabilities on pro rata basis has been approved by the ITAT, Mumbai in the case of Urmila Co. (P.) Ltd. [WT Appeal Nos. 367 and 368 (Bom.) of 1990 dated 4-3-1996]. A copy of the order has been compiled at page 12 of the Compilation of cases. It is submitted that the assessee's claim was allowable and in any case no adjustment is permissible under section 16(1). The Ld. counsel relied upon the following decisions of the Hon'ble Bombay High Court: i. Khatau Junkar Ltd. v. K.S. Patani, Dy. GT[1992] 196 IR 55 (Bom.) ii. Tanna Exports v. M.G. Kamat, Asstt. CIT [1993] 202 ITR 219 (Bom.) iii. Adamas Gem Industries Ltd. v. Smt. Neela Krishnan, Asstt. CIT [1993] 203 ITR 737 (Bom.) The ld. counsel submitted that the above-mentioned cases have been rendered in the context of section 143(1) of the IT Act and that these cases are fully applicable to section 16(1) of the WT Act as the provisions are p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been held by the Hon'ble Supreme Court that Tribunal can admit and decide such questions which are raised for the first time before the Tribunal. Accordingly, the additional grounds are admitted and are first dealt with. 8. With regard to additional ground No.1, the ld. counsel for the assessee submitted that the residential flat of the value of Rs. 7,60,52,519 is situated in Malabar Co-op. Housing Society Ltd. and such a flat does not fall within the category of an asset chargeable to wealth tax under section 2(ea) of the WT Act. The ld. counsel submitted that the legal owner of the flat is the Co-operative Housing Society and the assessee only holds five shares in the Society of Rs. 250 each. The ld. counsel submitted that such shares are in the nature of movable assets. The ld. counsel submitted that under section 2(ea) certain categories of assets only have been specified, value of which can be included in the net wealth of the assessee. It is submitted that ownership of shares in the co-operative housing society cannot be equated to a building and that such movable assets are outside the purview of section 2(ea). The ld. counsel relied upon the following ITAT, Mumbai benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovable property and cannot be categorized as a building or land appurtenant thereto. Similarly view has been adopted in the ITAT decisions which are all on the interpretation of the relevant provisions of section 40 of the Finance Act, 1983 which was omitted by the Finance Act, 1992 w.e.f. 1-4-1993. The aforesaid section 40 contemplates levy of wealth tax on closely held companies. As per sub-section 3 of section 40 of the Finance Act, 1983, wealth tax was levied on eight categories of assets. As per sub-section (5), it is stipulated that section 5 and clause (d) of section 45 of the WT Act and part 2 of Schedule 1 to the WT Act shall not apply for the purposes of levy of wealth tax in pursuance of the provisions of section 40 of the Finance Act, 1983. It is also stipulated that all other provisions of WT Act shall be construed so as to be in conformity with the provisions of section 40 of the Finance Act, 1983. As mentioned above in the cases cited, various Benches of ITAT were concerned about the interpretation of section 40 of the Finance Act, 1983. By virtue of sub-section (5), it was held that section 4(7) of the WT Act has no applicability to section 40 of the Finance Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not pressed by the ld. counsel for the assessee and is therefore, rejected as such. 11. Reverting back to the original grounds of appeal, the ld. counsel for the assessee submitted that for the purposes of WT Act, the assessee owns motor vehicles and residential flats being Urvashi Flats and Borivali Flats and these assets have been acquired by the assessee-company by utilizing borrowed funds as under: (Rs.) (Rs.) i. Value of Motor vehicles 31,64,403 (Less) H.P. finance 27,97,292 3,67,111 (Balance) ii. Value of Urvashi Flats 7,60,52,519 (Less) Borrowed Funds 5,00,00,000 iii. Borivali Flats (Balance) 2,60,52,519 (Balance) 9,39,520 2,73,59,150 It is submitted that in addition to the direct finances utilized, the assessee also utilized other borrowed funds for meeting the remaining cost of the assets. However, complete details have not been maintained regarding specific lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cquiring the assets. In identical circumstances, it has been held by the IT AT, Mumbai Bench in the case of Urmila Co. (P.) Ltd. that liabilities can be deducted on pro-rata basis. This view is also supported by the Hon'ble Madras High Court decision in the case of K.S. Vaidyanathan. We, therefore, hold that under section 2(m), the debts owed by the assessee have to be allowed on pro-rata basis. The Assessing Officer is accordingly directed to allow appropriate deduction in this regard. Appeal No. 47 - Assessment year 1997-98 14. The grounds of appeal are identical as for the Assessment year 1995-96 in WTA No. 884. Further, identical additional grounds have also been raised which have been reproduced while deciding the assessee's appeal in WTA No. 884. The original grounds of appeal pertain to disallowance of liabilities claimed on pro-rata basis. In view of our findings, the Assessing Officer is directed to allow such liabilities on pro-rata basis. 15. The additional ground No. 1 pertains to the claim that value of flat in co-operative housing society is not includible in the net wealth. On the basis of the findings already recorded by us, this ground of appeal is reject ..... X X X X Extracts X X X X X X X X Extracts X X X X
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