Decided on March 28,2008



P.M. Jagtap, Accountant Member - (1.) THESE two appeals filed by the assessee against two separate order of learned CWT(A)-XVII, New Delhi dated 28.7.2005 for AY 2002-03 and 2003-04 involve common issues and the same, therefore, have been heard together and are being disposed of by this single consolidated order.
(2.) The main common issue involved in these appeals as raised in ground Nos. 1 to 3 relates to the assessee's claim for deduction on account of loans secured on the assets included in its net wealth for the purpose of computing net wealth. The assessee in the present case is a company which filed its returns of net wealth for AY 2002-03 & 2003-04 declaring a net wealth of Rs. 57,82,160/- and Rs. 49,72,354/- respectively. In the said returns, the value of industrial land situated at Harsaru and Mathura village and the value of office plot at A-3, Sector-1, Noida was declared by the assessee at Rs. 1,68,57,691/- and Rs. 1,97,20,600/- respectively. The assessee company had taken loan against security of the said lands from IFCI and State Bank of Patiala and the said loans upto the value of the said lands was claimed as deduction while computing its net wealth for both the years under consideration. From the perusal of relevant balance sheets of the assessee company, it was noted by the AO that the said loans were taken for packing credit and working capital. Since the lands in question belonging to the assessee company were acquired well before taking the said loans and the said loans were clearly availed by the assessee company for the purpose of its business and not for the purpose of acquiring the said lands, it was held by the AO that the same could not be said to be debts incurred in relation to the assets i.e. lands included in the net wealth of the assessee company. He, therefore, held that the said loans could not be deducted while computing the net wealth of the assessee company and disallowed the deduction claimed by the assessee company on this count.
(3.) THE matter was carried before the learned CWT(A) and it was submitted on behalf of the assessee company before him that the relevant loans being "secured on" the lands included in the net wealth, the same have to be considered as debt incurred in relation to the said assets and the value of such loans was deductible for computing its net wealth in accordance with the provisions of Section 2(m) as claimed. It was contended on behalf of the assessee company that the expression used in Section 2(m) is "debts...incurred in relation to the assets" and not "debts ...incurred for purchasing/acquiring such assets". It was contended that for allowing the deduction, there is thus no requirement that the concerned debt should be incurred for acquiring the assets. It was also contended that the words "debts...incurred in relation to" are of wide meaning and charge by way of "secured on" is one of the various modes of incurring debts in relation to the assets. Referring to the "notes on clauses" and "memorandum explaining provisions in the Finance Bill, 1992", it was also contended on behalf of the assessee before the learned CWT(A) that debts secured on the assets, which have been included in the computation of net wealth, are allowable as deduction.;

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